blog2008: December 2008 Archives

December 31, 2008

Neighborhood metamorphosis (5/5)

By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 31, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Opponents, backers of gas wells take up life-altering battle

Jennifer Cole stared at the letter in her hands. No matter how many times she read it, it didn’t make sense, she recalled. The letter, which appeared in her mailbox just after Thanksgiving 2007, said that a Houston company planned to conduct seismic testing so it could drill on the land behind her Argyle-area home.

Cole recalled feeling baffled. The company that was supposed to drill there, Reichmann Petroleum, was tied up in bankruptcy. Even if Reichmann had emerged from its financial hole, the city of Denton still had a pending lawsuit against the company — a lawsuit that demanded compliance with city codes before workers could move as much as an anthill. Prodded by Cole and her neighbors on Britt Drive, the city sued the would-be driller in 2006 for building a planned well site behind Cole’s home without approved plans, among other alleged violations.

But Reichmann never held the leases for that well. A Denton County lawyer, Tom McMurray, held them during Reichmann’s involvement with the site, which kept the well out of the court proceedings. McMurray pooled the leases and, on June 4, 2007, sold them to Carrizo Oil and Gas Inc., a Houston-based energy company with a multimillion-dollar budget and wells scattered throughout the Barnett Shale region.

Reading the letter, Cole said, she felt a familiar dread spread over her — the one that consumed her thoughts and stirred her prayers the day a bulldozer first moved earth behind her home. She recalled picturing the gas rig, how it would loom over her backyard — and the workers, who would see her over the fence when she was home alone. Her husband’s gas grill flashed through her mind — the grill where her boys sometimes roasted marshmallows. There it was, sitting by her backyard fence. Sometimes it sparks, she thought.

Cole and her next-door neighbor, Jana DeGrand, had led their neighborhood’s fight against the well site for two years. It was wearing on her — the hours of research and worry, days spent staring blurry-eyed at a computer screen, searching for one ordinance or state law that would stop the drilling — but Cole resolved to continue.

Not for her, but for her two boys.

“If this is where I’m called,” she said, “this is what I have to do.”

Many residents who never before felt a call to activism have been thrust to the front lines of the Barnett Shale fight. Kathy Chruscielski became concerned about her own well water when a southwestward flank of drilling rigs marched into Parker County two years ago.

After researching both hydraulic fracturing and underground injection disposal, she was asked by neighbors what she’d learned and where she’d learned it. She didn’t want the leadership role, she said, but people kept turning to her for help and she couldn’t walk away.

Fort Worth artist Don Young was willing to speak to radio, television and newspaper reporters on behalf of many neighbors who were privately alarmed when drilling rigs were set up in the city’s most pristine prairie. He pointed to long-standing problems where drilling began several years before, cautioning Tarrant County residents to look at Wise and Denton counties, likening them to canaries in the coal mine.

In Wise County, Sharon Wilson kept a diary of poor practices she saw around her home on her blog, titled Bluedaze. A Wise County neighbor who’d told her story to the Texas Observer had been threatened, so Wilson said she tried to stay anonymous. But her blog grew increasingly popular — its site meter showing that certain people inside the industry, the Texas Railroad Commission and elsewhere were logging on every day to read what she had to say. Determined, those readers who disagreed with her opinions eventually revealed her identity.

Two months ago, Chruscielski, Wilson and Young joined Dish Mayor Calvin Tillman in a site visit with several staff members of the Oil and Gas Accountability Project. The Colorado nonprofit was visiting Texas to learn more about the impact of urban drilling and, in turn, the other four were learning how to get more action out of state regulators.

OGAP had kept up public pressure until the Colorado Oil and Gas Conservation Commission rewrote rules to better protect human health and the environment — rules that were adopted in December.

OGAP executive director Gwen Lachelt said the group intends to write a manual for other communities trying to get ahead of shale development, including the Fayetteville Shale in Arkansas, the Marcellus Shale in upstate New York and Pennsylvania, the Haynesville Shale in Louisiana, the Woodford Shale in Oklahoma and others.

Yet, like Franz Kafka’s protagonist in The Metamorphosis, local critics are frequently marginalized by the industry, even called names, in an attempt to starve them of their role in the broader conversation.

“We at the Powell Barnett Shale Newsletter try not to pay much attention to radical opponents of urban gas drilling,” managing editor Will Brackett wrote in July. “After all, publicity is exactly what they want and they seem to get plenty of it from the mainstream media, often to our chagrin.”

In the November 2007 issue, Gene Powell, founder of the newsletter, awarded Young his publication’s first Biggest Turkey in the Barnett Shale Award. Young says he can’t remember all the names he’s been called.

In a poignant self-description on her blog, Wilson describes how, in her journey to get the best deal for her mineral rights, she learned how her land would be used — and possibly abused. As she became more vocal, others increasingly marginalized her — until, as she writes, “without changing my core political beliefs, I became known as a radical, far-left lunatic with a political agenda.”

“If you are frustrated, angry, depressed, apathetic, horrified or just generally concerned about natural gas drilling in North Texas, mark your calendar …” Jana DeGrand read the e-mail and chuckled. It was July 30, 2008, and over the past three years she’d felt most of those emotions.

The e-mail invited DeGrand to the “Just Say Whoa!” rally in Fort Worth organized by the Coalition for a Reformed Drilling Ordinance. It came by way of Don Young.

DeGrand, whose neighborhood ordeal had consumed so much of her time, was ready to branch out.

“Don,” she replied. “I do feel that it is past time for communities across Texas to unite their efforts to reform this out of control industry. Has anyone looked into joining forces? I am willing to help.”

For a while, the industry appeared ready to answer some of the nagging doubts first articulated by opponents of urban drilling. Devon, Chesapeake and others formed the Barnett Shale Energy Education Council, which provides basic information on its Web site, www.bseec.org.

This year, Chesapeake Energy also published and distributed a glossy, 72-page magazine about the shale. The company rolled out an intensive campaign of television and billboard advertisements in the spring, admonishing residents to “get behind the Barnett Shale.” The campaign has since scaled back, amid news reports that actor Tommy Lee Jones was no longer participating. After hiring local news anchor Tracy Rowlett and trumpeting its planned Shale.tv, Chesapeake abruptly abandoned its plans for the Web-only broadcast, citing budget concerns. The concept lost its backing before any segment ever aired.

Although Jana DeGrand continued to follow happenings in the industry, she didn’t lose sight of her main objective: stopping the well in her neighborhood. She and Jennifer Cole continued digging, poring through deeds, contracts, anything they could use to thwart Carrizo’s bid for drilling permits. “The whole neighborhood — they’ve spoiled us,” said Cynthia Greer, another Britt Drive neighbor. “They have done so much research. So much research.”

DeGrand tried all kinds of ways to stop the drilling. In May, she’d sent a letter to four neighborhood mineral owners whose leases were expiring, urging them not to sign extensions. “Signing bonuses now range from $3,000 to more than $20,000 per acre,” she wrote. “It would be mutually beneficial to all of us if we work together.” She later explained the letter as an appeal to the recipients’ greed, in order for her to buy more time.

Later, DeGrand noticed that Carrizo’s state permit application listed the Whitespot well, named for landowners Steve and Vanessa White, as a single lease. In fact, the site was a pooled unit, comprising multiple leases, and the company had failed to submit plans showing unpooled and unleased mineral interests. The Texas Railroad Commission, which had issued a drilling permit in July, revoked it Oct. 3 after the company failed to amend its plans on time.

Later that month, DeGrand claimed in a letter to a railroad commission attorney that most of the mineral leases associated with Whitespot had expired. What’s more, she wrote, many of those who had signed might not want to renew. The man who had secured many of the leases, Jerry Pratt, was in court defending his business methods.

A one-time business partner, Robert Dunlap of Fort Worth, sued Pratt in October 2006, claiming Pratt had violated the terms of their partnership by not disclosing all of his dealings, withholding certain financial records and failing to reimburse Dunlap’s investment. Dunlap also alleged that Pratt’s many business aliases — NASA Energy Corp., NASA Energy Co., NASA Exploration Co., Command Capital Corp., Royalty Reserve Corp. — were a “sham,” saying in the lawsuit that Pratt ran all of the businesses from his Lantana home. Pratt settled the case this October, agreeing to pay Dunlap $700,000.

An attorney for Pratt, Eric C. Freeby of the Fort Worth law firm Brown Pruitt Peterson & Wambsganss P.C., declined to comment on the case. But in a letter to the railroad commission, Freeby said the lawsuit was “of no consequence” to the Whitespot permit and called DeGrand’s allegations unfounded.

Not long after sending the letter invoking Dunlap’s lawsuit, DeGrand received a letter from another of Pratt’s attorneys. Pratt would sue, the letter said, if she did not “cease and desist” all communications regarding him.

Known as a “strategic lawsuit against public participation,” a SLAPP suit is meant to intimidate, exhaust and silence critics. Widely considered an affront to the First Amendment, 26 states and one U.S. territory have adopted some kind of statutory protection against SLAPP suits. Courts in two other states also adopted such protections. Texas is not among them, as Oprah Winfrey learned after criticizing the Texas beef industry.

Although Carrizo often faces opposition to urban drilling, the Britt Drive neighbors’ level of intervention is unusual, company spokesman Michael Grimes said. Efforts to reach out to the neighbors have foundered — a reality Grimes partly blamed on the tumult preceding Carrizo’s involvement.

“Carrizo inherited the circumstances there,” he said. “In other places, we’ve been able to work through these issues.”

As officials in Austin considered Carrizo’s permit for the Whitespot well, Denton city officials worked to process the company’s application for a gas well plat, which showed the potential for four wells on the pad site. On Nov. 4, the Britt Drive neighbors made a final appeal to the City Council to deny the company’s plans.

Since they first spoke before the council in September 2006, many key officials had turned over, including the mayor, the city manager, the planning and development director and Ed Snyder, the city attorney who initiated the Reichmann lawsuit. Most critically to the neighbors, Quentin Hix had left his job as the city’s gas well inspector in April 2007 to manage the town of Copper Canyon. Denton never filled Hix’s position, choosing instead to shift his duties to the fire marshal’s office and other city departments. The change left the city without a coordinator for the departments that deal with gas drilling.

To Jennifer Cole, Hix stood alone among all the government representatives she and Jana DeGrand had appealed to. He was the one who listened, who at least tried to enforce the rules. Without him, she felt like the momentum for their cause had vanished. “It’s like starting the process over,” she said.

Despite their pleas, the city did not demand a water flow study. City planner Chuck Russell, who was handling the case, told the Coles that the law didn’t require one because the pad site was outside of a flood plain. An engineering review predicted that rainwater runoff would be “minimal” from the site because workers had added a compost berm and reserve pits.

Months before, Russell had reviewed Carrizo’s application and expressed concern about the wells’ proximity to homes. The application shows multiple houses within a 500-foot radius, including the Whites’, which is about 300 feet from the closest wellhead. But the city could not legally enforce its 500-foot setback rule in the subdivision, which is outside the city limits and only loosely falls under Denton’s jurisdiction, Russell said.

After subjecting Carrizo’s application to two rounds of review, the city approved the company’s plans Nov. 14. Now only state approval stood in Carrizo’s path.

DeGrand could only express her dismay. “Obviously,” she wrote Russell, “there is a complete lack of concern for the health and safety of our neighborhood.”

Steve White stood on the edge of a gaping pit, skipping stones across shallow water left over from the last rainstorm. The rectangular crater, which consumes the center of White’s 12-acre home site, was supposed to be gone months ago, replaced by horse stables, a barn and freshly planted trees. That was the plan, anyway, before his neighbors on Britt Drive interfered.

The pit was a temporary evil, set up to collect sludge from a gas well White thought would be drilled long before he moved his family into a custom-built home here just before Christmas 2007. Now, a year later, the well still isn’t drilled. “This has taken way longer than it should have,” he said, scanning the landscape for another stone to chuck.

To White, the neighbors’ talk of flooding is unfounded. His property is the one with a berm and detention pond. If anyone’s land is likely to flood, he said, it’s his.

His wife, Vanessa, sees her neighbors as well-meaning but misinformed. “It’s easier for them to think of us as the evil people on the hill and not get to know us for who we are,” she said. In her view, the delays in drilling only made matters worse for everyone. Each holdup allowed the dispute to fester like an open sore.

Vanessa White envisions a time when the well is drilled, the workers are gone and grass is budding where the gravelly pad once stood — a time when emotions are no longer raw and she can invite her neighbors over for a crawfish boil. In her dream, the neighbors are all friends willing to write off the past three years. “Wow,” they might say, shaking their heads, grinning, she says. “What a crummy way to get to know each other.”

Steve White isn’t so sure. He cuts off talk of a crawfish boil with a curt “Maybe.”

Gene and Jennifer Cole, mindful of the well that seemed ever more likely to drill behind them, put their home up for sale this year. People liked the house, but the pad site was a deal-breaker. They took it off the market after 30 days. “It hasn’t even drilled, and there’s still a stigma,” Jennifer Cole said. Still, the couple plans to find somewhere else to live temporarily during the drilling. They won’t have their two boys so close to it.

For the DeGrands, it’s hard to even think about moving. Everything about their home reminds them of family.

Aaron, their eldest son, died in a car wreck in January 2006. Darrin’s father, “Papa” Charlie, died nine months later.

Both were there alongside Jana and Darrin, clearing brush from their acre site when they bought it 12 years ago.

The neighbors struggle to come to terms with the thought that their efforts may be in vain. Jana DeGrand has talked about starting a Web site to share the things she’s learned, one that would save people hours of legwork and give them a sense of direction in their own battles with backyard gas wells. “But sadly,” she said, “even with that information I can’t say that it will help them.”

The ordeal has darkened Jennifer Cole’s views of the institutions she thought would protect her. She feels naive to have ever thought that she, a housewife and PTA volunteer, could beat back the gas industry, she said. Recently, a friend lamented about landowners not bothering to research their rights. “Maybe they don’t care,” Cole said, “because it doesn’t make a difference.”

At times, Cole seems resigned to the well’s arrival. After three years of prayer, of writing to her elected officials, of digging for a silver-bullet ordinance, she’s done all she knows to do.

There is no one left to appeal to.

There is nowhere else to go.

Postscript

Carrizo’s drilling permit for Whitespot remained pending Wednesday.

According to railroad commission spokeswoman Ramona Nye, the commission is asking the company to clarify which tracts are part of the pooled unit and to what extent, if any, the tracts are not leased. “Carrizo has responded to this request in part,” Nye said by e-mail.

“If Carrizo can provide some additional information required by the commission, the permit may be approved administratively, and no hearing would occur. If these issues cannot be resolved administratively, then a hearing would be required.”

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

BEHIND THE SHALE: A story of urban drilling

Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.

Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.

Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.

Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.

Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.

Posted by Arthur Caldicott at 10:16 PM

Voicing the silence (4/5)

By Peggy Heinkel-Wolfe and Lowell Brown
Denton Record-Chronicle
December 31, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Observations, studies show subtle, long-term effects of gas drilling

For a while, Kim Couch thought her children hadn’t noticed the effect of the natural gas drilling in their neighborhood along Britt Drive.

“You think they are just in their own little world, running around and carefree,” Couch said.

Her view changed when television news cameras descended on their Argyle-area neighborhood after the first well was drilled three years ago. Couch realized that she was the one running from home to car, busy with her life and unaware of the profound changes that had come to their neighborhood. Her 10-year-old daughter, Kristen, surprised her when she answered a question about what had changed the most.

“It’s like it scared all the birds away,” Kristen said. “I can’t hear the birds sing anymore.”

Forty-six years ago, biologist Rachel Carson opened her monumental book Silent Spring with the fable of a small town ravaged by the indiscriminate use of chemical pesticides. Historians credit the best-seller with inspiring both the modern environmental movement and President John F. Kennedy, who, in response, convened a scientific commission that would become the Environmental Protection Agency.

Carson cautioned readers that her fable was not true. No single community had suffered such an aggregate of losses. However, each loss — stream banks lined with dead fish, plagues of insects bursting forth and then dying, skeletal trees and their understory silent of birdsong — had occurred somewhere in the world.

Since 2005, some residents of Britt Drive have been fighting Whitespot, a proposed gas well planned for less than 250 feet from the back door of one home on their street.

For neighbors Jennifer Cole and Jana DeGrand, the cause became a full-time job. They check in with each other almost daily, keeping track of not only developments in their own neighborhood but also developments of the urban drilling paradigm.

Each new revelation of how the oil and gas industry is regulated, as well as the short-term and long-term impacts of drilling, convinced the two women that, despite pledges by the industry to be “good neighbors,” a high-pressure gas well, condensate tanks and pipelines don’t make good neighbors.

Since Carson’s book was published in 1962, a host of federal statutes have been passed to protect the public health by ensuring clean air and water, including the Clean Air Act of 1963; the Clean Water Act of 1972; the Safe Drinking Water Act of 1974; the Resource Conservation and Recovery Act of 1976; the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, known as “Superfund”; and the Emergency Planning and Community Right to Know Act of 1986, known as the Toxics Release Inventory.

Industry lobbyists made sure oil and gas exploration and production were exempted from key provisions in all of them (I).

And prior to the Barnett Shale boom, the industry also sought and received exemptions for hydraulic fracturing — the process that pumps sand, water and chemicals to crack layers of rock, releasing the gas (II).

The oil and gas industry, which generated a total production value of $65 billion in Texas for 2007, is considered among the state’s top moneymakers, pumping funds into the economy and creating an estimated 226,000 jobs, according to the Texas Alliance of Energy Producers.

Oil and gas exploration and employment comprises about 10 percent to 12 percent of the state’s economy and is estimated to account for more than 20 percent of all state taxes.

The estimated number of drilling permits for oil and gas wells issued statewide for the year as of October 2008 is estimated at 21,330, up 26.7 percent from the same time last year.

But with the economy slowing, many drillers are idling their drilling rigs.

A Baker Hughes report this month showed 646 active rigs in Texas last week. That was down 15 from just the week before.

With the economic outlook for 2009 indicating a continued downturn nationwide, the oil and gas industry could continue to see a mixed forecast with the question of consumer demand.

The up-and-down projections could cause a slowdown — a slowdown that might provide additional time for a closer review of regulations surrounding the urban drilling paradigm.

Barnett Shale producers point to oversight by the Texas Railroad Commission as sufficient (III). Even their permit fees pay, in part, to a shared cleanup fund for operations that go belly-up.

But a crescendo of criticism — including last year’s finding by the State Auditor’s Office that the Texas Railroad Commission failed to do basic, routine inspections — suggests some troubles may be a repetitious riff of history (IV).

At the beginning of the 20th century, the Texas Legislature authorized the Texas Railroad Commission to regulate oil and gas development.

The move came with the erratic development of the oil fields around Burkburnett in the 1910s and 1920s, which had triggered colossal waste of the oil and huge economic losses.

It took years for the agency to develop a working relationship with the industry, but its weak regulatory muscles barely survived the East Texas oil boom of the 1930s.

At one point, Gov. Ross Sterling sent in the National Guard to restore order (V).

While the latest paradigm shift covers a vast, urban drilling landscape, the railroad commissioners continue to view their public mission as one of conservation — not of ecology, but of economy for the state’s oil and gas reserves.

In December 2007, an appeals court judge ruled that the railroad commission did not consider the public interest when it permitted an injection well in a Wise County neighborhood.

Since the court’s decision, the railroad commission has not written any new rules or policies to address the public interest. Instead, the railroad commission, with industry backing, petitioned the Texas Supreme Court to consider the case, which remains pending.

Before the boom, the railroad commission permitted just 75 new gas wells in 1999. More than 14,800 Barnett Shale wells have been permitted since then. In September, the commissioners, noting that the agency was buckling under the workload, redirected about $750,000 of the cleanup money to hire more people.

The money functions like a mini “Superfund,” cleaning up and plugging abandoned oil and gas wells.

Because of the commission’s weak regulatory history, previously unmapped wells are still being discovered, sometimes plugged with everything from dirt and rocks to old oil field equipment.

Those wells become underground pathways for pollution when operators are working nearby, either drilling for more oil and gas or disposing of their production waste. The migrating saltwater and hydrocarbons cause a host of environmental problems, complicating the operation of active wells around them and contaminating drinking water supplies (VI).

Perhaps the biggest potential threat of that migration comes from the underground disposal of production waste.

The Texas Railroad Commission has the largest inventory of injection wells in the nation (VII). And nearly 60 percent of the state still relies on groundwater sources for drinking water (VIII). The same process that makes groundwater safe to drink — its slow movement through rocks and sand — also makes it nearly impossible to clean once it’s contaminated (IX).

Local EPA scientists Philip Dellinger and Ray Leissner watch over the railroad commission’s regulation of more than 50,700 injection wells. Their evaluation notes each year a small but persistent level of non-compliance by some operators, as well as some catastrophic failures.

Wise County residents predicted one such failure of a proposed injection well near Chico when protesting its permit. The railroad commission allowed Hydro-FX to inject until Devon Energy reported problems at a nearby production well in early 2007. That failure followed a string of shallow injection well failures in Wise County, often reported to the agency by others.

The railroad commission has 83 inspectors, one for every 3,259 of the 270,526 active wells in the state. Although the railroad commission closed the well until Hydro-FX fixed the problem, the failure prompted an intervention by the EPA scientists concerned about drinking water supplies in Wise County (X).

Railroad commission inspectors recently closed injection wells in Parker (XI) and Wise (XII) counties after nearby residents reported failures.

In December 2007, they closed a well in Greenwood after a resident filed a complaint just weeks after another inspector gave the site a passing grade.

Railroad commission spokeswoman Ramona Nye said that operators sometimes have problems that come up after the inspection. However, after this incident, the local office decided to assign one inspector just to disposal wells, and this has increased compliance, Nye said.

Dellinger and Leissner have pressed the railroad commission to stop permitting shallow injection wells for Barnett Shale wastes, insisting that the program would be safer if drilling waste is disposed at least 8,000 feet below the surface.

“We prefer they dispose into the Ellenburger Formation,” Dellinger said. The Ellenburger, a porous limestone layer saturated with salty water, lies below the shale, locked in by the impermeable Viola Formation.

But the federal agency has not launched a full-court press for another rule change, one that would widen the area of review.

Currently, operators can calculate for quantities and pressure based on quarter-mile radius, even though a group of EPA scientists found that injected waste — once it escapes its confinement zone — has traveled up to a mile away (XIII).

U.S. public health officials have depended on the broad rules of the Clean Air Act and the Clean Water Act to protect human health for many years, according to Dr. Roxana Witter of the Colorado School of Public Health. But the shift to urban drilling means the rules of the game have changed.

Witter and her colleagues recently published a research study and a white paper on the human health effects of oil and gas development.

Their study, which was a review of all relevant medical studies and funded by the National Resources Defense Council, found that people living in active drilling fields could be at risk for a host of adverse health effects, from reproductive and neurological problems to cancer as well as psycho-social ills.

Accustomed to dealing with human health in relation to mining in other countries, the World Health Organization advocates that regulators use health impact assessments to address risk (XIV).

This month, Colorado adopted new rules requiring the industry to consider risks to human health and wildlife before drilling in sensitive areas.

While more research is needed to assess those risks, Witter said volatile organic compounds churned into the atmosphere by the industry present risks that are well-known.

The Powder River Basin in Wyoming has a smog problem, not because of traffic, but because of intensive natural gas mining.

A new Southern Methodist University study found gas drilling and production in the Barnett Shale to be a significant source of air pollution, much greater than generated at area airports and by motor vehicles.

By 2009, residents can expect 620 tons of smog-forming compounds each day from the Barnett Shale, including 33 tons per day of toxic compounds like benzene and formaldehyde and 33,000 equivalent tons of greenhouse gases — all produced in order to mine and process clean-burning natural gas (XV).

As it bounced back from near extinction, the American bald eagle did not have nearly the public relations problem as some of Earth’s creatures have had in the political arena. Skeptics trot out the spotted owl, or the blind salamander, or the banana slug, for example, to get an easy laugh at environmentalists’ expense.

The soil, teeming with tiny life-forms, may be the least understood of Earth’s life-sustaining gifts. The soil nourishes and nurtures, particularly when fed with decaying organic matter.

But decaying inorganic materials are another matter. Radium-226 and radium-228 are the most likely radioactive daughters to stow away with natural gas and its condensate as it comes up the hole. And once allowed to contaminate the soil, they begin their deadly decay (XVI).

Jennifer Cole’s husband, Gene, with his crisp shirts, pressed pants and hair meticulously gelled and combed, fussed about the dirt in his pool from the gas pad behind his home strongly enough that the drilling company paid someone to come clean it out for him and his family.

But once the gas well is in, Gene Cole says he knows, deep down, that dirt settling at the bottom of his pool is the least of his problems.

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

FOR REFERENCE

I. “Exemption of Oil and Gas Exploration and Production Wastes from Federal Hazardous Waste Regulations,” a publication of the Environmental Protection Agency; and “Oil and Gas at Your Door? A Landowner’s Guide to Oil and Gas Development,” 2nd edition. Durango, Colo.: Oil and Gas Accountability Project, 2004.

II. “Evaluation of Impacts to Underground Sources June 2004 of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs,” June 2004, EPA (Environmental Protection Agency) 816-R-04-003, www.epa.gov/OGWDW/uic/wells_coalbedmethanestudy.html.

III. Carrillo, Victor. “Riding the Shale Road,” in The Barnett Shale: The Official Magazine of Thriving on the Shale, published by Chesapeake Energy, summer 2008.

IV. Keel, John. “Inspection and Enforcement Activities in the Field Operations Section of the Railroad Commission,”Austin: State Auditor’s Office, August 2007.

V. Childs, William. “The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century,” College Station: Texas A&M University Press, 2005.

VI. “Drinking Water: Safeguards are not preventing contamination from injected oil and gas wastes,” General Accounting Office Report, July 1989.

VII. FY 2007 EPA Region 6 End-of-Year Evaluation of the Railroad Commission of Texas (RRC) Underground Injection Control (UIC) Program, Sept. 1, 2006–August 31, 2007.

VIII. Texas Water Development Board, Groundwater Resources Division, www.twdb.state.tx.us/GwRD/pages/gwrdindex.html.

IX. Ibid., “Drinking Water,” July 1989.

X. Ibid., FY 2007 EPA Region 6 End-of-Year Evaluation.

XI. Lee, Mike. “Saltwater disposal well shut down for spills, leaks,” in Fort Worth Star-Telegram, Oct. 31, 2008.

XII. Evans, Brandon. “Injection Well Shut Down,” in the Wise County Messenger, March 13, 2007.

XIII. “Does a fixed radius area of review meet the statutory mandate and regulatory requirements of being protective of USDWs (underground drinking water)?” Environmental Protection Agency, Region 10, Nov. 5, 2004.

XIV. Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A White Paper.” Denver: Colorado School of Public Health, 2008; Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A Literature Review (2003-2008).” Denver: Colorado School of Public Health, 2008

XV. Armendariz, Al. “Emissions from Natural Gas Production in the Barnett Shale Area and Opportunities for Cost-Effective Improvements: a peer-reviewed report.” Austin: The Environmental Defense Fund, 2008.

XVI. Otton, James K. et al. Effects of produced waters at oilfield production sites on the Osage Indian Reservation, northeastern Oklahoma, U.S. Geological Survey, open file report 97-28.

BEHIND THE SHALE: A story of urban drilling

Posted by Arthur Caldicott at 12:34 PM

December 30, 2008

Culture clash (3/5)

By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 30, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Texas in tug-of-war between valuable resources underground and the people who live above

Gene and Jennifer Cole stood in the backyard of their Argyle-area home, staring up at the mountain of rocks behind their fence, and then turned to a stranger in a black pickup.

“What’s the problem?” the stranger asked.

It was not a simple question. For months, the Coles and their next-door neighbors, Jana and Darrin DeGrand, had fought a gas company’s plan to dig a gas well from the dirt-and-rock plateau where the stranger stood. They had a problem with how the pad site, more than 6 feet tall, could change the flow of rainwater in their flood-sensitive neighborhood. They had a problem with the recent explosions at other North Texas rigs. They had other problems, too, but the man’s tone on that day in 2006 made them think he wasn’t interested in hearing them.

The stranger was Tom McMurray, a Denton County lawyer working with an energy company to get a rig in the ground. Because of the Coles and DeGrands, McMurray’s work had been a headache. The city of Denton cited the energy company with code violations, and the neighbors’ griping attracted media attention. When McMurray drove up, the Coles and Jana DeGrand were talking with a company engineer about how to ease their flooding concerns. The tension rose as their gaze fixed on McMurray.

“Well,” Gene Cole answered, “you’re moving so much dirt that I’m afraid that it’s going to push over into my pool.” McMurray tried talking about mineral rights with the neighbors, but the tension was so thick, he gave up.

“Welcome to Texas, Mr. Cole,” McMurray said.

For more than 100 years, the relationship between Texas landowners and the energy companies had been cordial. Even though both pay the same taxes, Texas laws have always favored the mineral interest over the surface, particularly when the property rights are severed. But the Barnett Shale’s urban drilling paradigm has wrought a Texas-sized culture clash over the rights of property owners, their neighbors and corporations.

“Where do you draw the line?” McMurray said in an interview. “That’s being debated around kitchen tables all around the Barnett Shale.”

Shari Skaggs, left, Jana DeGrand and Jennifer Cole, pictured in July 2006, helped organize their neighbors to urge the city of Denton to enforce its gas drilling rules in their neighborhood, which lies between Denton and Argyle. One proposed gas well is within 300 feet of the homes of DeGrand and Cole. (DRC file photo/Gary Payne)

And all around its government board rooms. For want of better regulation, cities have been drawing lots of lines, in part because the Texas Railroad Commission persists in saying it satisfies its duty to the public interest by conserving the state’s oil and gas resources.

After well explosions in Brad in 2005 and Forest Hill in 2006, some cities increased their “setback rules.” Many required somewhere between 300 and 600 feet between wells and homes or other buildings. Some city councils, otherwise poised to require longer distances, buckled as mineral owners threatened to sue for taking their property rights. But several cities upped the requirement to 1,000 feet between a well and a home or building — 250 feet more than the width of the burning crater in Brad.

As other issues emerged — crushed roads and collapsed bridges; roaring compressors and obnoxious fumes; multiple, redundant pipelines that rendered prime, developable property useless — cities sought more rules to protect the health, safety and welfare of their residents.

After workers began moving dirt behind their homes on Britt Drive between Denton and Argyle, Jana DeGrand and Jennifer Cole quickly learned that the railroad commission would offer them little help. The commission has no setback requirement (I).

City setback rules don’t apply in unincorporated areas like Briarcreek Estates, the subdivision where the two families call home. In fact, the well pad site, now known as Whitespot for landowners Steve and Vanessa White, would be illegal in both Denton and Argyle without affected landowners’ permission because the Coles’ home is within 250 feet. Outside city limits, people are generally at the drillers’ mercy — a discovery that incensed the Briarcreek neighbors.

“Our lives and our safety are not any less valuable because we don’t live in a corporate limit,” Jana DeGrand said.

State law offered one glimmer of hope. Jana DeGrand learned that cities are charged — in limited cases — with protecting the safety of residents in their “extraterritorial jurisdiction,” areas just outside city limits. After several phone calls, she and Jennifer Cole learned their neighborhood fell under Denton’s jurisdiction. Better yet, Denton’s gas well inspector agreed to investigate their concerns.

“It was like the heavens opened,” Jennifer Cole said.

Quentin Hix joined the city of Denton staff in 2002, ready to help with the city’s new gas drilling rules. As a former 13-year employee of Lone Star Gas Co., now Atmos Energy, with a degree in city management, Hix was uniquely suited for the job of gas well inspector. City rules required all drillers, even those in the extraterritorial jurisdiction, to turn in their plans for review. Some drillers skipped this step — whether out of ignorance or arrogance, Hix wasn’t sure — but he’d never seen one refuse to comply after he sent out a violation notice.

In December 2005, at Jennifer Cole’s request, Hix inspected the Whitespot well site and found violations. Reichmann Petroleum of Grapevine hadn’t filed any plans, and Hix ordered the work stopped until they were turned over and approved. By month’s end, Hix discovered the company had drilled five other gas wells, bypassing city rules for erosion control, drainage, security and well maintenance. Reichmann had also failed to get the required development permits from Denton County for the same sites. The city had no idea where pipelines were being installed, meaning anyone with a backhoe, including city utility workers, might rupture them and spark an explosion.

In a Dec. 28 letter to Reichmann, Hix threatened “further enforcement action” if the company didn’t comply.

It wasn’t Hix’s first run-in with Reichmann. In early 2005, the company took over a well north of Country Club Road. Hix inspected the site and found violations. Reichmann then started on another well before it abruptly abandoned the platting process.

As Hix learned, Reichmann had a pattern of perplexing government regulators.

Reichmann started as Richman Petroleum Corp. in 1994, a creation of Dyke R. Ferrell and F. Erik Doughty. By 2006, as the company’s fight with Denton and the Britt Drive neighbors escalated, the railroad commission had fined the company twice for state drilling violations, and had five more enforcement cases pending in various counties.

“A good operator shouldn’t have any [cases] go to enforcement,” railroad commission spokeswoman Stacie Fowler said, “because we do try to give an operator an opportunity to come into compliance with our rules.”

In 2006, as spring gave way to summer, Denton leaders faced a crossroads. Reichmann questioned their power to enforce drilling rules outside the city limits, but city leaders believed state law was on their side. Sensing an impasse, the city sued Reichmann in state district court, saying the company’s refusal to follow city rules at seven pad sites was threatening public safety. “If they’re not willing to voluntarily comply, we have no choice but to take action to force them to comply,” City Attorney Ed Snyder said of the unprecedented lawsuit.

Reichmann executives wouldn’t say much publicly, but they denied the city’s claims.

Meanwhile, Whitespot sat silent. A wood fence, roughly 8 feet tall, now separated it from Jennifer Cole’s backyard. In mid-July 2006, she told a visitor she hadn’t seen a worker there in weeks. The pressure, she said, was starting to pay off. Besides contacting the gas well inspector, she and her neighbors also sent a petition with nearly three dozen signatures to the City Council warning that failure to crack down on Reichmann’s code violations would embolden other drillers.

The neighbors scored another concession when Hix said he would require a water-flow study for Whitespot. His inspections convinced him that the dirt work had changed the runoff. Not long after the pad site went up, a 2-inch rainfall left a stream of ankle-deep water between the Cole and DeGrand homes, Jana DeGrand recalled. The volume was unusual for that amount of rain, she said.

In late September 2006, the neighbors heard that Reichmann planned to settle the lawsuit out of court. On Sept. 25, the company filed maps for most of its sites, but not for Whitespot. Company officials told the city they weren’t sure what was required. “That leaves us flapping in the wind on the one that’s the biggest issue right now,” Hix vented.

The move also left city leaders unsure of how to handle the pending lawsuit. Snyder, the city attorney, said he still wanted to send a message to other drillers to ignore the rules at their peril.

Still, the neighbors sensed that Reichmann was slowly slipping off the hook.

Since construction on the pad site started in late 2005, landowners Steve and Vanessa White had experienced their own frustrations. Steve White told a dirt mover to preserve an ancient oak tree; the man bulldozed it before his eyes, he recalled. The pad site was only supposed to cover 3 acres; workers used 4. And then there was Reichmann. The code violations embarrassed them greatly. It was sloppy, inexcusable, Vanessa White said. But a deal was a deal. “The day you sign your name to that lease is the day you don’t really have any control either,” she said.

At the same time, the Whites believed their neighbors were harassing them. More than once they said they found trash dumped into their yard. Early on, someone apparently cut through the barbed-wire fence on the north end of their land and hauled off dirt in a wheelbarrow. One neighbor kept whacking golf balls into their yard, even after Steve White asked him to stop. Others threw things at their horses, they said.

The Whites believed they hadn’t done anything wrong and sometimes resented the neighbors’ meddling. Neighbors recalled some of the alleged occurrences but doubted the Whites were the targets of concerted harassment.

Any chance to settle the feud vanished on Sept. 26, 2006, when the Britt Drive neighbors went before the Denton City Council to urge the city not to ease pressure on the newly repentant Reichmann. Waiting in their seats to address the council, some of the neighbors blithely suggested suing the Whites, who were seated nearby and overheard the remark. The neighbors later claimed they didn’t know the Whites were there, but the damage was lasting. After the meeting, several neighbors offered to sit down, to talk things out, but the Whites refused. Everyone was too agitated, they thought.

Just before Christmas, Denton city leaders discovered Reichmann had filed for Chapter 11 bankruptcy, throwing the lawsuit into limbo. They’d have to wait until an automatic stay was removed before pressing on, the city attorney said.

Hearing the news, Jennifer Cole worried the bankruptcy would keep the neighbors from resolving their flooding concerns. “I just hope that … they are ultimately held responsible,” she said.

The following spring, the neighborhood’s fears were realized. On April 24, 2007, the heavens opened and relentless rain turned Briar Creek into a churning, rushing torrent, cutting off the neighborhood from Hickory Hill Road for hours. Uphill, the dirt-and-rock plateau for Whitespot helped push the runoff helter-skelter over Britt Drive.

When Renae Lorentz finally got home that night, after the water receded, her Suburban was gone.

Runoff washed the vehicle off her driveway and left it nose down in the creek bed, a jagged tree branch lodged through the windshield where a passenger’s head would be.

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

FOR REFERENCE

I. Despite a common perception that the Texas Railroad Commission has a 200-foot setback rule, the commission has no setback requirements. However, the misperception may come from a long-standing law in the Texas Government Code, Section 253.005(c), “A well may not be drilled in the thickly settled part of the municipality or within 200 feet of a private residence.”

BEHIND THE SHALE: A story of urban drilling

Posted by Arthur Caldicott at 12:18 PM

December 29, 2008

Perils afoot (2/5)

By Peggy Heinkel-Wolfe and Lowell Brown
Denton Record-Chronicle
December 29, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Gas boom brings potential dangers closer to homes

Natural gas bubbled from the frostbitten ground around the well for several hours before the earth erupted about 1:45 a.m. on a December morning in 2005, tossing truck-sized boulders into the air. John Ritchie’s land erupted in a grassfire so large that a neighbor thought the sun was coming up over the scrub and cedar trees. A worker sitting in a vehicle nearby watched in horror as flames engulfed him.

Emergency workers scrambled to control the blaze near Brad, in Palo Pinto County, but soon discovered more gas leaking out of fissures in the ground on the other side of U.S. Highway 180. While the worst-case scenario never materialized — more explosions on both sides of a major thoroughfare and a much larger conflagration — the gas-fed fire burned uncontrollably for several days within a 750-foot-wide crater that ranged from 30 to 60 feet deep.

While blowouts and well control problems are uncommon, records with the Texas Railroad Commission show that they have occurred, and continue to occur, in the Barnett Shale.

Most have been in Palo Pinto County and, except for the Brad explosion, no one reported a gas blowout that also resulted in fire or injuries. Stoval Operating lost control of a well on June 18, 2002. Two other operators lost control just before the explosion in Brad. On Sept. 29, Jilpetco had drilling mud blow out and into the reserve pit.

A Devon Energy worker fell about 90 feet from the top of this drilling platform off Hamilton Drive in Argyle in February 2007. He survived with broken bones. (DRC file photo/Gary Payne)

A month later, McCown Engineering had a blowout during drilling. Palo Pinto County operators didn’t report any more problems to the commission until April 25, 2007, when Upham Oil & Gas lost control of a well while its employees were adding pipe.

Until December 2005, any problems operators had in this sparsely populated area of the Barnett Shale escaped the attention of city dwellers who still thought of natural gas drilling as a rural enterprise. Telesis Operating Co.’s loss of control in Brad injured only one worker, the man who was sitting in his vehicle at the time of the blast. He suffered only minor flash burns and returned to work that day.

The events coincided with energy companies trying to convince thousands of property owners in the Barnett Shale to sign on to their plans for urban drilling.

Jennifer Cole turned on her television and learned of the destruction in Brad, 100 miles away from her well kept home near Argyle. She gasped. The devastation confirmed her worst fears about urban drilling

For weeks, Cole and her next-door neighbor, Jana DeGrand, had been fighting a gas company’s plan to erect a rig less than 300 feet from their back doors. A bulldozer appeared in the empty lot behind them and started building a pad site, a scant few feet away from their back fences. Worried all the dirt moving would alter runoff in their flood-prone subdivision — an additional concern for the Britt Drive neighborhood — they called and wrote their elected officials but found little help. Government agencies lacked the power or the will to investigate their concerns.

Maybe the explosion in Brad would make a difference, DeGrand recalled thinking. Maybe now people would take her concerns seriously. After all, if the same explosion happened at the pad site behind her, creating the same 750-foot crater, she and her neighbors could be dead.

The effort was becoming a full-time job for DeGrand and Cole, leaving little time for leisure. Cole, a stay-at-home mom, and DeGrand, an event marketer, spent hours online and at the county courthouse, researching deeds, contracts, laws — anything that might help their cause. They also scanned the media for industry news, with each report of lax regulation, explosions or environmental harm hardening their opposition to urban drilling. They wondered if an industry that was accustomed to drilling in pastures should really be trusted in areas with no room for error.

“No one wants to live in fear that when the rig comes in, what if an explosion happens?” Cole said. “What if there is a gas leak? What if there is a blowout? It should not be put in the middle of a neighborhood where the homeowners have these issues to deal with.”

Four months after the Brad explosion, one Fort Worth neighborhood dealt with those very issues. An explosion at a Forest Hill wellhead on April 22, 2006, killed XTO employee Robert Gayan, 49, and forced nearby residents to evacuate their homes.

That incident, as with most other fires and explosions at drilling and disposal sites, tank batteries, pipelines and compression stations, was not the result of a blowout. But the problem underscored the difficult and dangerous work of prying the volatile matter from Earth’s grip and harnessing it into usable energy.

When compared with workers in other industries, oil and gas workers are hurt and killed on the job with disproportionate frequency. According to the Bureau of Labor Statistics from 2003 to 2006, the most recent data available, occupational fatalities occurred at a rate of 4 per 100,000 workers for all workers. Not only are oil and gas workers getting killed on the job at nearly eight times that rate, but the fatality rate has increased since the uptick in exploration and production nationwide: from 30.5 deaths per 100,000 workers in 2003 to 31.9 per 100,000 in 2006 (I). On July 2, 2003, employees of Felderhoff Brothers Drilling were setting up a rig west of Fort Worth when Terry Bressler, 43, was pinned between a housing section and the floor of the drilling rig. The others could only watch as he was crushed and killed (II).

On April 19, 2005, as a Patterson Drilling crew prepared to drill a new horizontal well near Decatur, Tab Stewart Dotson, 46, backed his forklift into the old well. The tire knocked off the well cap, igniting the gas into a flash fire that trapped him inside the cab. Fellow employees of Patterson Drilling extinguished the fire only to watch Dotson die (III).

On July 14, 2006, Charles Mannon, 38, died after falling 90 feet from the top of a Cheyenne Drilling Co. rig in Saginaw. As when Gayan was killed 14 months before in Forest Hill, local media reported that XTO Energy blamed the employee for the accident, claiming that the industry has strict safety procedures (IV).

In addition to a higher risk of dying on the job, oil and gas workers face risk of serious injury or illness at work. From 2003 to 2006, the nationwide incident rates for on-the-job injuries in the mining sector were worst for those involved in drilling, at a rate of 5.3 per 10,000 full-time employees. Those in well-servicing jobs face comparatively less risk, at 3.1 per 10,000, with 2 per 10,000 injured in extraction jobs. However, because of differences in reporting among different labor sectors, comparing oil and gas occupational injury and illness rates with rates in non-mining jobs is meaningless, according to a September 2008 report by the Colorado School of Public Health.

On Feb. 12, 2007, a Devon Energy employee working on a rig between Denton and Argyle fell 90 feet from the top of a drilling rig, a fall that is usually fatal. The employee, who was wearing a hard hat, managed to land on his feet on the metal platform below and survived with broken bones (V).

Argyle Fire Chief Mac Hohenberger noted that whenever paramedics are dispatched to help with injuries at a gas well site, “it’s always pretty bad.”

This physically risky work, born in a fiscally risky environment, foments a rough-and-tumble culture that frequently doesn’t play well to outsiders.

At the beginning of the boom, two employees killed a fellow worker Nov. 25, 2003, in an initiation prank at a rig near Argyle. Teddy Garland and Louis Goodman intended to string Shawn Davis up with a line used to move heavy pipe. Instead, the line became entangled in the machinery, dragging Davis headfirst through a door and slamming him around and around. The men unhooked the line from Davis’ belt, washed off the blood and concocted a story to cover their ill-fated prank. It was all a fluke, they’d told authorities; Davis entangled himself in the chain accidentally.

The next day, a co-worker went to the sheriff’s office and revealed the truth of what happened. At trial, Goodman testified that initiations and horseplay were simply part of the roughneck’s life. Davis “more or less played along with it,” Goodman testified. “He was laughing.”

A jury found Goodman guilty of manslaughter and sentenced him to 18 years behind bars. Four months later, Garland pleaded guilty to the same charge and accepted a five-year prison sentence.

The brutal episode so close to her home haunted the thoughts of Jennifer Cole. She tried not to picture the trailers and drilling equipment arriving just beyond her back fence. Trailers that would fill up with workers. Workers who would know when her husband left for work, when she was alone with her boys. She tried to bat the thoughts away, to believe that she was worrying too much. But they came anyway. What kind of people would do such a thing, she recalled wondering, replaying the details of Davis’ death in her mind. Is that what she should expect from them? These would-be neighbors?

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

FOR REFERENCE

I. Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A Literature Review (2003-2008),” Denver: Colorado School of Public Health, August 2008.

II. Compiled from Tarrant County Medical Examiner and Occupational Safety and Health Administration records.

III. Compiled from court documents, Dotson vs. Encana Oil & Gas, Cause No. 06-05-357.

IV. Mosier, Jeff. “Gas firm blames worker for blast in Fort Worth,” in The Dallas Morning News, April 26, 2006.

V. Board, Jay. “Man injured in fall from rig in Argyle,” in the Argyle Messenger, Feb. 12, 2007.

RISKY WORK

A Colorado School of Public Health review found that the fatality rate among oil and gas workers was 31.9 per 100,000 workers in 2006. According to another report, differences in reporting among different labor sectors make it meaningless to compare oil and gas occupational injury rates with rates in non-mining jobs.

The Bureau of Labor Statistics released a preliminary analysis of on-the-job fatalities for 2007 in October. The agency will release final numbers for 2007 in April 2009. Listed are fatality rates per 100,000 workers.

TOP 10 MOST DANGEROUS JOBS

1. Fishers and related fishing workers, 111.8

2. Logging workers, 86.4

3. Aircraft pilots and flight engineers, 66.7

4. Structural iron and steel workers, 45.5

5. Farmers and ranchers, 38.4

6. Roofers, 29.4

7. Electrical power line installers and repairers, 29.1

8. Drivers/sales workers and truck drivers, 26.2

9. Refuse and recyclable material collectors, 22.8

10. Police and sheriff’s patrol officers, 21.4

BEHIND THE SHALE: A story of urban drilling

Posted by Arthur Caldicott at 12:07 PM

December 28, 2008

Eminent dominance (1/5)

By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 28, 2008

EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.

Expansion of natural gas industry into Barnett Shale leaves Argyle families little recourse

Jennifer Cole stepped across the parched ground of a North Texas autumn, past her dirt-caked backyard swimming pool, inching closer to a roaring machine. She watched it force its way through the earth, pushing dirt from side to side in waves like an ocean’s tide. Day by day, the bulldozer was remaking the lot behind her home on Britt Drive near Argyle, changing a sloped meadow dotted with oak trees and cattle into a flat and lifeless expanse. She shivered when she thought about what would fill the void.

Since the dirt-moving process began, dust clouds became so thick that her boys couldn’t make sense of them. “Mom, look! A sandstorm,” one said. Her sons didn’t understand why she wouldn’t let them use the pool or play outside after school. She looked down at the pool where a layer of grime clung to the bottom like black frosting, then back to the rolling bulldozer on the other side of the barbed-wire fence.

Cole didn’t know that what was happening behind that fence would consume the next three years of her life. She did know what the bulldozer meant, though. A gas rig was coming. It was Dec. 4, 2005 — a Sunday.

“Sunday,” she said above the roar, “is no day of rest.”

Jennifer Cole makes bark candy with her boys Jared, 12, left, and Gentry, 9, for a Christmas party. Cole has struggled to maintain a normal home life for her sons amid her neighborhood’s ongoing battle against a pending gas well behind their Argyle-area home. (Denton Record-Chronicle/Barron Ludlum)

Cole and her neighbors were among many visited that year by energy land men, deal-makers slowly blanketing North Texas after one company proved a decade ago that it could release the “sweet gas” — typically 95 percent methane, with small amounts of ethane and propane — of the Barnett Shale with a sand-and-water fracture.

But the thousands of natural gas wells and miles of high-pressure pipelines unfolding into a massive industrial zone would never be aggregated by government regulators. The latest federal rules continue the practice of exempting oil and gas that began in the 1970s.

In its publications, the Environmental Protection Agency details industry exclusions from federal environmental laws that touch nearly everyone else, from the neighborhood dry cleaner and the horse rancher to the gravel yard and the truck manufacturer.

Texas agencies flex few regulatory muscles over the industry, deferring to the Texas Railroad Commission, which, a century ago, assumed responsibility to maximize oil and gas production, not address the host of concerns that have come with the new urban drilling paradigm — a paradigm where once rural drilling has shifted into the heart of neighborhoods amid cities.

Faced with the eastward march of tank batteries and pipelines, cities of the Barnett Shale began exercising powers granted to them by the Legislature. The energy companies then resisted local rules meant to protect public health and safety, land use planning and economic development by filing a spate of lawsuits in the past year.

Meanwhile, the industry grabbed the biggest hammer in government’s exemption toolbox — the power of eminent domain — by forming their own utility companies. With it, they began connecting their gas wells like a giant dot-to-dot game across lawns and schoolyards.

Oil and natural gas are the decayed remains of organic matter that became trapped under layers of stone and sand long ago, said EPA scientist Philip Dellinger. In the case of the Barnett Shale, that decay took place more than 300 million years ago during the Mississippian Age, and the gas has been trapped ever since. Geologists found outcroppings of the black, organic-rich shale a century ago in San Saba County and named it after John W. Barnett, a settler there.

Some longtime residents knew of the shale’s potential in North Texas. Jana DeGrand, Cole’s next-door neighbor, remembers how her father, a tenant farmer, drilled for water, and natural gas would come up with it.

Energy speculators knew about it, too, but the tight rock held fast to its riches. As late as 1983, a Carrollton energy man resisted the urge to explore in Denton County.

“Every time I get the urge to look for gas, I just lay down until the urge passes,” Doug Durham said to a newspaper reporter then.

But another energy man, George Mitchell, believed decades ago that the shale could be broken. Energy workers speak emotionally, almost reverently, of Mitchell’s determination to unleash 26.7 trillion cubic feet of natural gas (I) bubbling beneath the feet of more than 3 million North Texas residents (II).

Once Mitchell’s company proved the work could be done with a solution that began with cheap, fresh water and sand, the drilling boom began. Thousands of vertical wells were dug between 1999 and 2005, primarily in Wise and western Denton counties.

Improvements in horizontal drilling followed. Operators turned their drill bits through the shale while watching a computer screen, like joy sticks on a video game, capturing gas thousands of feet from the well head and turning modest producers into multimillion-dollar holes.

With horizontal drilling under their command, the industry set its course for the more populated parts of Denton County and the mother lode of Tarrant County, where geologists believed some of the richest deposits lie. One Encana engineer, Jim Kramer, his eyes focused down the well holes as the company worked its way into Tarrant County through Keller, imagined out loud in 2006 about having the entire city of Fort Worth picked up and moved over so the company could drill.

The letters from land men in summer 2005 promised the Coles, the DeGrands and their Britt Drive neighbors a chance to cash in on the North Texas gas boom. Several rigs popped up near their Briarcreek Estates subdivision south of Denton that year — enough for some neighbors to question whether the towers of industry belonged so close by.

Earlier that year, Jana DeGrand and her husband, Darrin DeGrand, were driving home when they encountered a foot of mud on a road leading into the neighborhood. Trucks hauling dirt to a pad site on Fincher Road left a trail of debris, and heavy rains made the road nearly impassable. When the couple finally made it home, they recalled, mud clung to every inch of their car’s undercarriage.

Later, drilling at the same site rattled windows on Britt Drive a quarter-mile away. The noise continued nonstop for weeks. Darrin DeGrand recalled lying in bed at 3 a.m. many times, unable to sleep through the cacophony of mechanical grinding and squealing. His wife finally called the sheriff’s office to complain one day, remembering that a deputy once threatened to fine her daughter for playing her guitar too loudly.

“Can’t they stop between 10 and 6 so we can sleep?” she asked.

No, the answer came. It’s for the greater good.

In November 2005, a state inspector found oil-stained soil at a well site off Hickory Hill Road. Jana DeGrand, whose complaint spurred the inspection, said the stench was overpowering.

So the DeGrands were wary when a Lantana-based energy company started asking the Britt Drive neighbors to lease their mineral rights to allow more drilling in the area. The company, NASA Energy Corp., arranged an evening meeting to convince the neighbors to sign on. Huddled around a conference table inside a Denton bank, nearly a dozen neighbors peppered land man Jerry Pratt with questions.

“What happens if you damage our homes?” Darrin DeGrand asked, worried that vibrations from drilling or seismic testing would damage foundations. Where will the wellhead be? Others wanted to know.

The DeGrands believed that Pratt, who’d brought a jar of fracing sand for show and tell, initially tried to sidestep the questions. Pulling out a map, he pointed to spots where rigs might be. The DeGrands knew one of the spots instantly. It was right behind their house.

A few neighbors accepted Pratt’s offer of a $250 sign-on bonus (later increased to at least $500). But others asked to hold off until the DeGrands could research the matter.

“There’s always one crazy person in the neighborhood,” Darrin DeGrand recalled Pratt saying.

“Well,” he remembered replying, “I guess we’re it.”

Because the Energy Information Administration estimates the average well costs about $1.9 million to drill (III), land men know that acquiring the mineral rights from landowners can be the least expensive part of the deal. But media reports of payouts to landowners for signing the leases show the amounts can be highly variable. Similar to Pratt’s offer to the Britt Drive neighbors, residents of one Fort Worth neighborhood — primarily poor, black and elderly — received $200 checks to sign on the spot, in addition to a 20 percent royalty in 2006 (IV ). Two years later, residents in affluent areas of Johnson and Tarrant counties got more than 50 times that payout, with $25,000 to $30,000 per acre, averaging about $10,000 for each household simply to sign. Their agreements included royalty payments that varied from 25 percent to 25.5 percent (V).

Mineral rights run with the land in Texas, unless a previous owner retained them when selling, or has already leased them. In Dish, near the birth of the Barnett Shale boom, relationship problems between the landowner and the industry are like a family science study. Some landowners remain comfortable in their marriage to the industry as it goes into its second decade. Tiffany Pennington’s family negotiated a deal with Devon Energy that keeps them comfortable, she said, struggling to understand why others complain. Next door, Jim and Judy Caplinger bought their home on land with mineral rights already separated, leaving them without access to the underground riches. When the industry gets hungry — needing additional pipeline access or more land for another well — the couple watch as their nest egg shrivels, sometimes through eminent domain.

Their case is similar to many other families who, until recently, bought land in a Barnett Shale county not knowing that living in Texas, with its laws and rules covering mineral rights, can still pit neighbor against neighbor.

Some landowners negotiate more for the signing bonus than the royalty payout, which can last for three decades or more. One industry analysis found the average Barnett Shale homeowner would net about $775 per year for 30 years (VI). In their negotiations with landowners, energy companies went along with the splashy, upfront payouts for about a year. But after the credit meltdown this September, energy companies, including Chesapeake, Vantage, XTO and Titan, announced publicly that they would no longer be making those news-making payouts (VII).

The Briarcreek Estates subdivision, tucked into the Cross Timbers between Denton and Argyle, winds all the way along the creek that cuts through it, served only by a narrow, curving road off Hickory Hill Road that ends in a cul-de-sac. Britt Drive offers the only entrance and exit to the three dozen families who live in the neighborhood. They flocked here for the large lots — many are an acre or two — and the country feel. Hordes of birds, cardinals, finches and mockingbirds sing from the trees, and raccoons, opossums and armadillos search for food along the creek bed. Neighbors share fruits and vegetables from each other’s gardens and look after each other’s pets when they’re away. They gladly serve iced tea to guests, and strangers driving through are likely to be greeted with a wave and a nod.

Darrin and Jana DeGrand were among the first to build in the neighborhood. In 1996, the couple, with their three children and his parents, grabbed pickaxes and a lawn mower and cleared the acre lot themselves, beating back briars and underbrush. Darrin, a data technician for a telephone company, and Jana, an event marketer, designed the house on their home computer and built much of it themselves.

Gene and Jennifer Cole moved in next door to the DeGrands in 2002. Gene, a manager at a car dealership, and Jennifer, a stay-at-home mom and PTA volunteer, wanted their two young boys to grow up in the Argyle school district.

Like many of their neighbors, the Coles and DeGrands hurried to research their mineral rights once NASA Energy started dangling contracts in 2005. The DeGrands, who own adjoining lots and claim at least partial mineral ownership of one of them, refused to sign, hoping to keep any driller as far away as possible. The Coles dug out their house’s title policy, which shows they own three-fourths of the minerals on their lot, but they quickly learned that meant little.

Denton County lawyer Tom McMurray, who took over the area leases from land man Jerry Pratt, did his own title check and claimed the Coles owned no minerals. McMurray, through his CMC Exploration Co., was working with Grapevine-based Reichmann Petroleum to develop the well site behind the Cole and DeGrand homes. In a letter to the Coles in late 2005, McMurray offered a concession. The landowners decided to erect a wood fence along the property line to cut down on dust and noise and deter children from wandering into the site, he explained. “We do want to be good neighbors while also developing the assets of the mineral owners,” McMurray wrote. “Please understand that we follow the law and instruct our employees to do the same.”

Before the end of 2005, NASA Energy dropped a contract at the Coles’ door despite the disputed mineral rights. It went unsigned. Other neighbors joined the Coles and DeGrands in rejecting the land men’s offers. “We were told that it would work out to about $100 a month [in royalties] if things went really well,” neighbor Shari Skaggs said. “They told us we could get a free trip to Wal-Mart. No thank you. Definitely not worth that.”

The refusals would inconvenience future drillers, but the land men had already secured a deal with the mineral owners who mattered most: Steve and Vanessa White.

The four-wheeler zoomed across the field with a teenage boy and preteen girl behind the wheel. Gene and Jennifer Cole watched them through the barbed-wire fence from their backyard hot tub and waved when they caught the children’s attention. It was the summer of 2005, and the Coles had heard someone bought the 12-acre lot behind their home.

“Did you buy the property?” Gene Cole recalled asking, worried it might become a subdivision.

“Yes,” the children said. “We’re moving from Southlake.”

The Coles were relieved to hear the family planned to build a single house on the land.

Across the field, as their children met the Coles, Steve and Vanessa White sat on the bed of a pickup and popped the cork off a champagne bottle. They’d searched for a rural escape from Southlake and found it here, on an L-shaped lot with a creek running through it and plenty of space for their three kids and 12 horses to roam. “It had a nice marriage of wooded area and pasture for our animals,” Vanessa White recalled. “When we looked at building a home that would be comfortable and enjoyable for our children, it seemed like the optimal spot.”

The Whites said they didn’t buy the land with plans for a gas well, but they consented when the chance arose months later. Vanessa White is the president and chief operating officer of Discovery Geo Corp., an oil and gas exploration company based in Grapevine. Representatives of Reichmann Petroleum, a company with which she once shared office space, approached her about drilling on her family’s lot. The Whites agreed to allow a gas rig on three of their 12 acres. They assumed the drilling would be done by the time their house was built, but said they told the drillers to make the site as safe and unobtrusive as possible for their new neighbors.

Unaware of the Whites’ new plans, the Coles and DeGrands were perplexed, then increasingly alarmed when the bulldozer arrived to level the ground behind their homes. The pad site grew taller by the day. The workers arrived before dawn and left after dusk. Dirt hung in the air like a gritty fog.

As the sloped pasture behind them lost its shape, the neighbors started worrying about flooding. The neighborhood sits on the edge of a flood plain. Rainwater flowed downhill from the land behind them on its way to Briar Creek, which runs through the subdivision. Could the pad site reroute the runoff into our yards and homes? they wondered.

Jana DeGrand and Jennifer Cole called their elected officials to ask for help and were surprised to find little. Their county commissioner, Jim Carter, told them Denton County lacked the authority to get involved. The Texas Commission on Environmental Quality and Federal Emergency Management Agency passed them off to other agencies, they said. Their state senator, Jane Nelson, said they’d have to rely on the Texas Railroad Commission, which oversees the oil and gas industry. The commission’s then-chairwoman, Elizabeth Ames Jones, said she understood their concerns but had “very limited authority” over the location of gas rigs and other drilling equipment. DeGrand vented her frustrations in a column published in The Cross Timbers Gazette that fall. “There are no laws or ordinances in place to protect us,” she wrote.

The neighbors dealt with the stress of the looming problems in different ways. The DeGrands found time to work in their yard or on projects around the house — work that tired the body but enlivened the mind. Some nights, after they got their boys to bed, the Coles would sit on their bed and play Skip-Bo.

Jennifer Cole wipes away a tear while discussing a gas well that is planned to go up within 250 feet of her home. The prospect of a well so close by is stealing her sense of security, she says. (DRC/Bj Lewis)

In her darker moments, Jennifer Cole cried out to God to stop the drilling. Then, ashamed by her lack of faith, she repented because she knew her fear wasn’t from God.

“Lord,” she recalled praying instead, “I’m giving this to you. You can protect my children. I can’t.”

LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.

FOR REFERENCE

I. According to the U.S. Geological Survey, “Assessment of Undiscovered Oil and Gas Resources of the Bend Arch-Fort Worth Basin Province of North-Central Texas and Southwestern Oklahoma, 2003.”

II. Tabulated from North Central Texas Council of Governments 2008 county population estimates for Denton, Ellis, Erath, Hood, Johnson, Parker, Palo Pinto, Somervell, Tarrant and Wise counties.

III. Energy Information Administration, “Costs of Crude Oil and Natural Gas Wells Drilled, 1960-2006.”

IV. Pillar, Dan. “Leases give boost to an old neighborhood,” in the Fort Worth Star-Telegram, July 1, 2006.

V. Fuquay, Jim. “Lake Worth neighborhoods working on record gas lease,” in the Fort Worth Star-Telegram, Aug. 6, 2008.

VI. Powell, Gene. “OK, How much will my well pay?” in The Barnett Shale: The Official Magazine of Thriving on the Shale, published by Chesapeake Energy, summer 2008.

VII. Fuquay, Jim. “Another big neighborhood group sees its gas leasing put on hold,” in the Fort Worth Star-Telegram, Oct. 21, 2008.

BEHIND THE SHALE: A story of urban drilling

Posted by Arthur Caldicott at 11:57 AM

December 26, 2008

The Nightmare in Fort Worth

Fort Worth is a city of 700,000 on the west side of the Dallas/Fort Worth Metroplex, with a combined population of over six million. It is sited on the Trinity River, which flows through northeast Texas to the Gulf of Mexico southeast of Houston.

A fort was built here in 1849, one of a line of forts proposed by General Worth to defend US territory from Mexicans and Indians. In Texas and American folklore, this is glorious history, a telling which avoids mention that the land was seized from Indians and Mexicans, and avoids talking about imperialism, arrogance, and racism.

Later cattle drives heading north to railheads in Kansas on the Chisholm Trail passed by Fort Worth. The railroad arrived in 1876, and Fort Worth became "cowtown", a major US stockyard centre. With the consequent economic and population growth, came corruption, crime and violence. The city had arrived.

Barnett Shale

Fast forward to the present. US energy policy and unprecedented energy prices have stimulated an intense North American hunt for more oil and gas. Natural gas is known to be in abundance in the Barnett Shale in north Texas, and also in shales in northeastern BC. Both places have experienced a phenomenal drilling and production boom.

Click here for larger image.

Same operators in BC

Wikipedia's entry on the Barnett Shale contains a variety of interesting maps and tables. The table listing the top ten operators shows company names like Devon, Encana and Burlington Resources. No surprise that these companies are also among the top producers in northeastern BC.

Click here for larger image.

Not like producing conventional gas

Shale is a more challenging host for natural gas than conventional plays. Production is more expensive and has greater environmental impacts than conventional gas. With conventional gas, gas is retained underground under considerable pressure, and once a well is drilled into the substrate, gas essentially shoots out of the ground. At times, production can be enhanced by stimulation - fracturing the substrate ("fraccing"), a process whereby muds or fluids are forced down the well and into the host geology to break it up and increase the release of the entrapped gas. Fraccing materials are highly suspect by critics of the industry - companies like Halliburton sell patented and secret mixtures of chemicals, in a mix either of diesel or nitrogen. Industry claims it is all benign. But fraccing fluids are toxic, the use of water competes with other water uses, and fraccing can contaminate groundwater.

Fraccing has come into its own with shales, as the shale doesn't give up its gas easily - as with coalbed methane. Nearly continuous fraccing takes place. Of course, this is a dreamy situation for companies like Halliburton. Like a pharmaceutical company getting a society hooked on flu shots or tranquilizers or beta-blockers, our addiction to oil and gas has created a dependency on fraccing fluids.

With shale gas, horizontal drilling has become the preferred production method. A single vertical well is drilled, and at the desired depth, a number of horizontal laterals are then drilled away from the centre.

Drilling and fraccing in shales are water and energy intensive activities. Water use and greenhouse gas emissions produced are significantly greater than emissions from conventional production.

Drilling in the middle of Fort Worth

In BC, most drilling activity is some distance removed from residential areas, although coalbed methane threatens a number of towns, including Campbell River, Princeton, and Telkwa. In fact, conventional and coalbed methane activity is already commonplace in Hudson's Hope.

But it's nothing like what's happening in Fort Worth. The city sits right on a desirable chunk of the Barnett Shale, and the city government has leased over 2400 acres of public land to drilling operators. As you would expect, the city is divided: on the one side, the companies (mainly Chesapeake Energy), those who argue the city will benefit from the revenues and those who directly benefit from deals with the company, versus residents who are concerned about the livability, ecology, and safety of their homes and city.

This from the New York Times: "Under golf courses, schools, parks, libraries, airports and dozens of neighborhoods, some of the nation’s leading independent energy companies are scouring the city in search of the best locations to recover one of the largest concentrations of natural gas in the United States."

Drilling rig and the Fort Worth skyline, from the New York Times

Havenwood Apartment Complex, Fort Worth.

March 12, 2007 explosion west of downtown Fort Worth.

Tommy Lee Jones promotes gas drilling in Fort Worth.

I'm not sure what British Columbians can learn from the Fort Worth experience. Where government and industry see eye-to-eye, residents and citizens are viewed as impediments. If you can't be bought off, then you're ignored. Be vigilant, I suppose.

Related reading

Barnett Shale
Wikipedia
http://en.wikipedia.org/wiki/Barnett_Shale

Blum Shale Maps
http://blumtexas.blogspot.com/

Fort Worth, Texas
Wikipedia
http://en.wikipedia.org/wiki/Fort_Worth

Rigs on the Skyline and Gas Far Below
Clifford Krauss, New York Times, 27-Oct-2006
http://www.nytimes.com/2006/10/27/business/27drilling.html

Fort Worth Flatulence
Eyes on Texas
http://durangotexas.com/eyesontexas/fortworth/barnettshale.htm

Posted by Arthur Caldicott at 02:53 PM

December 23, 2008

LNG armada could revolutionize industry

COMMENT: Given recent news that the LNG "boom" is bust, none of these floating LNG factory ships will ever get built. That notion is expressed toward the end of this article, and it may be realistic.

There's an interesting context for BC. A second Kitimat LNG project crept into BC quietly this year. LNG Partners is proposing to take surplus BC gas, ship it through the Pacific Northern Gas (PNG) pipeline and liquify it on one of these floating LNG ships, which would be anchored near Kitimat in Douglas Channel. The LNG would then be offloaded to LNG tankers for shipment to Pacific Rim and perhaps other markets.

The company had a deal with PNG approved by the BCUC in November, and was going to secure capacity on the PNG system on December 15, 2008 with a $1.5 million option payment. The payment hasn't happened, and PNG's one reason for optimism in recent years appears to have leaked away, as yet another LNG project slinks out, as quietly as it came in.

An Energy Solution in the (Compressed) Air?

COMMENT: Some interesting ideas here, making more productive use of intermittent wind energy, but there's an expectation and dependence on cheap nighttime coal-fired electricity, too, and the context is in eastern North America and the southern US, where summertime air conditioning is a huge power load. The compressed air concept finds its analogue in British Columbia in pumped water storage which the articles don't mention - matching wind energy with hydro reservoirs by pumping water back up into reservoirs when the wind is blowing but electricity demand is low.

By Kate Galbraith
New York Times
December 23, 2008

Schematic of a compressed air storage system. (Image: Sandia National Laboratories)

The wind doesn’t blow all the time, so the electricity it produces is also intermittent. A solution to this problem could be pulled from the air, literally, using a technology known as “compressed air energy storage,” or C.A.E.S.

Compressed air storage essentially involves using electricity to compact air and force it underground. Then, when the air is released and burned with natural gas, it expands, driving turbines and creating electricity.

The compressing is done when there is an excess of cheap electricity — at night, for example, when the wind is blowing but nobody has their lights on. Then it can be released when there is strong demand for electricity — in the middle of day, for example, when air conditioners are humming.

Compressed air is one of several innovative storage technologies — including ice — that my colleague Matthew Wald wrote about last year. (see below)

Several states are exploring it, including Iowa, Texas, Ohio and, as my colleague Ken Belson recently reported, New Jersey. The technology is already used at a power plant in Alabama, where compressed air is stored in a salt dome. Germany also has a compressed-air plant. Xcel Energy, a Western utility that uses substantial amounts of wind power, is also studying compressed-air storage in conjunction with the Electric Power Research Institute, according to Steve Roalstad, Xcel’s media-relations director.

Ontario’s Ministry of Natural Resources is evaluating the technology, too, as it adds wind turbines, according to a recent article in the Toronto Star. Andrew Hewitt, the ministry’s manager of the petroleum resources center, is especially interested in the compressed-air and wind combination as the province shutters coal plants, according to the paper.

So what’s the downside? Samir Succar, an energy analyst with the Natural Resources Defense Council, who co-authored this paper on compressed-air storage for Princeton University, said there are several reasons the technology has not caught on. These include what he described as a “culture of risk-aversion among utilities,” as well as complications in how electricity markets are structured.

The rise of wind power, however — which increases the need for storage — is helping spur new interest, Mr. Succar added.

Storing Sunshine

By Matthew L. Wald
New York Times
July 16, 2007

No matter how much scientists and engineers lower the cost of electricity produced from sunlight — or from the wind, the other widely available renewable source — the energy's value is less than electricity made from coal or natural gas, because it is less reliable and, in utility lingo, not "dispatchable," meaning a customer cannot order it turned on or off at will.

And neither resource is a good match to handle the load of a typical grid. Wind tends to be strongest at night and in the winter, while peak load is usually on summer afternoons. Solar production is strongest in the afternoon but ends long before the peak does, since high temperatures persist when the sun is very low in the sky or below the horizon.

Storage technologies are emerging, though none are in common use and all have disadvantages.

One method is batteries. They may use technology similar to car batteries, using chemicals that react either to absorb electrons or give them off. But these batteries are set up differently, with vastly larger quantities of those chemicals.

VRB Power Systems, of Vancouver, B.C., sells "flow batteries," with tanks to hold hundreds of gallons of the chemicals, called electrolytes. The company has sold one installation at a solar power farm in Germany, and has announced sales to Australia.

The battery system costs $500 to $600 to store a kilowatt-hour, the quantity of electricity that sells for an average of 10.5 cents in the United States. And the system has a "round-trip efficiency" of 65 to 75 percent, meaning that it loses 25 to 35 percent of the electricity put into it. At a solar thermal installation, that has the potential to raise the price per kilowatt-hour, already a multiple of the market price, by another 50 percent or more.

Still, said Simon Clark, a spokesman for the company, the technology can be useful if it makes the output of a wind or solar farm more steady. A battery can be a "shock absorber" for a system that is a mix of solar, wind and diesel, he said.

Two other storage systems are in use in the United States, although at first glance a visitor might not recognize the thing being stored as energy.

One is compressed air. In 1991 the Alabama Electric Cooperative opened a plant in McIntosh, Ala., consisting mostly of an underground cavern, created by using water to hollow out a natural salt formation, and a modified gas-fired power plant on the surface. At night, when power is cheap, the cooperative buys power to run compressors and pump up the cavern.

In the afternoon, the compression becomes an ingredient of making electricity. Conventional natural gas turbines, like jet engines on airplanes, work by burning gas under pressure, and they typically compress that gas by using some of the power they produce. If something else does the compression, the gas can produce far more energy.

Samir Succar, a researcher at Princeton University, said the McIntosh plant can make a kilowatt-hour of electricity on a peak day from two-thirds of a kilowatt-hour delivered the night before, plus 4,000 B.T.U. of natural gas. This is only about two-thirds as much natural gas as a conventional plant requires.

But the technology has not found wide commercial acceptance.

Another form of energy storage is ice, typically a 500-gallon block in the basement of a large building with a big cooling load. The idea, said Frank R. Ramirez, the chief executive of a company called Ice Energy, is that all air conditioners gather heat from within a building and dump it outside, but that moving it outside gets progressively harder as the outdoor temperature rises.

His company installs the ice storage system and runs it at night, when electricity is cheap and when making ice is easy, because the outdoor temperature is lower. Then during the day, the compressor in the building air conditioning system rejects its heat to the cold block, instead of to hot air, sharply lowering the electric demand on hot afternoons.

Unlike the battery, ice storage can break even, or better, Mr. Ramirez said. For every kilowatt-hour put in at night, the system will return a kilowatt-hour of savings the next day, assuming the nighttime temperature is at least 17 degrees cooler than the daytime. In many places, though, the daily temperature swing is larger; if the swing is 35 degrees, which is common in some climates, then three-quarters of a kilowatt-hour deposited will yield a full kilowatt-hour the next day.

Ice Energy markets the system in California, where electricity generated at night creates fewer smog-forming pollutants than electricity made during the day. But if the system saves electricity, it also saves greenhouse gases, he said, and it reduces peak-hour load on transmission and distribution systems.

"What we don't do is store electrons," he said. His system sells for $166 a kilowatt-hour, less than a third of the battery system.

Like the battery and the compressed air, the ice system does not care where the off-peak power comes from.

The compressed air system in Alabama runs on electricity from coal, according to officials of the cooperative. That has an ambiguous effect on carbon emissions. It could allow coal plants to run at night and substitute for conventional gas plants during the day. Since coal plants emit twice the carbon dioxide of natural gas plants for a given amount of power, greenhouse gas emissions could rise.

In California, the Ice Energy system runs on natural gas, and some of the nighttime production is more efficient than daytime production. In many parts of the country, wind is strongest at night, and could be used for storage, experts say.

Posted by Arthur Caldicott at 12:07 PM

Russia warns Europe it could face gas shortages

COMMENT: Russia and Ukraine have a long-running dispute over natural gas. Russia's biggest market is Europe, but all the pipelines that get it into Europe run through the Ukraine. The last time this row flared up was three years ago, sending at least two kinds of chill - economic and thermal - across Europe.

The other point of interest in this article is the conference being hosted by Russia, leading to a natural gas OPEC.

Three years ago we noted both these issues in two unconnected articles. Now they've come together in one article, from the Guardian.

A Natural Gas OPEC?

Russia and Ukraine Reach Deal on Gas, Ending Dispute

Terry Macalister and David Gow
The Guardian
December 22, 2008

Britain was given a sharp reminder of the dangers to its energy supplies today when Gazprom warned western Europe could be hit by gas shortages. The Russian gas provider said a long-running row with Ukraine could disrupt supplies to Europe this winter.

The fears were raised just 24 hours before Russia hosts a meeting of the world's major gas suppliers to set up an Opec-style production cartel that could also push up the price of energy in the UK and elsewhere.

Energy experts warned that the two events demonstrated Russia was using energy as a political weapon and argued Britain should fast-track its switch to renewable power to reduce its dependence on unpredictable carbon fuel suppliers.

Russia first triggered fears of an energy "Cold War" two years ago and again last year when it threatened to cut off gas first to the Ukraine and then to Belarus.

This time Russia is threatening Ukraine over an alleged $2bn of arrears. Although Russia exports a relatively small amount of gas to Britain, such difficulties could push up prices for alternative supplies from Norway or elsewhere.

Viktor Zubkov, who is Russian first deputy minister as well as chairman of Gazprom, said: "We cannot rule out that the position of the Ukrainian side and certain steps, which are linked to gas transit through Ukrainian territory, could lead to a disruption of supply stability to Europe."

The Moscow company said it offered to let Kiev redeem its debt by allowing Gazprom to offset it against transit fees for next year. "So far no solution has been found because of the non-constructive position of the Ukrainian side," Zubkov said.

Some 80% of Russian gas exports to Europe flow through Ukraine, which insisted it would ensure the transit of supplies to European Union countries over 2009. "Ukraine is ready to give guarantees of uninterrupted gas supplies in 2009 to European gas consumers," said Oleksander Shlapak, chief economic aide to the Ukrainian president, Viktor Yushchenko.

The promise did little to reduce tensions. Andris Piebalgs, EU energy commissioner, indicated he was ready to travel to Moscow early in the new year for emergency talks with the Russians and said he was "very worried."

Meanwhile, a loose grouping of gas producers, known as the Gas Exporting Countries Forum, is to meet in Moscow tomorrow to sign a charter to formalise the organisation, officials at the Russian energy ministry said.

More than a dozen gas-exporting nations from around the world have been meeting since 2001, but the body has no formal membership or management. Experts from member states met last month to discuss the draft charter, and ministerial representatives are expected to sign it at the meeting, which has been driven by Russia in cooperation with Iran and Qatar.

The three countries, which together account for nearly a third of the world's natural gas exports, agreed this year to form a "gas troika" for joint exploration and production, in a move that sent shock waves through importing nations.

Russian deputy prime minister Igor Sechin said last week the forum would work along similar lines to Opec, but that it would be wrong to see it as an attempt to corner the market and to force up prices.

"The work that it does will be similar to that of Opec, but I want to stress that there is no talk now about any specific deals. It is simply a question of protecting the interests of producers and coordinating their work," said Sechin at the Opec ministerial meeting in Oran, Algeria, last week.

David Clark, a former UK government adviser and chairman of the Russia Foundation thinktank, said he was concerned Russia and its energy allies were trying to carve up the market and further develop the use of energy as a political weapon.

"Despite the downward trend of oil and gas currently the long-term supply-demand picture suggests that prices are going to rise and this is going to be a continuing problem," he said.

"Britain and the European Union need to collectively pressure Russia to stand by its existing commitments to act as a responsible energy partner.

"But it also points up the need for countries such as Britain and North America to work together to find the kind of scientific fixes that will enable them to build a post-carbon future."

Posted by Arthur Caldicott at 11:42 AM

December 16, 2008

Who's dishing real oilsands propaganda?

By David Schindler
Edmonton Journal
December 15, 2008

Gov't decries environmentalist agenda, but refuses to subject data to non-partisan scientific scrutiny

This week, Alberta Environment Minister Rob Renner is in Poland, expected to defend the oilsands from being considered as a source of "dirty oil." I don't envy him. In the past, international criticism has been largely based on the high emissions of greenhouse gases from mining the oilsands. This is changing rapidly in recent weeks.

In the past several days, two reports, one on losses of boreal birds as the result of habitat disturbance and another on seepage from tailings ponds, have been released by groups of scientists who are supported by environmental groups. A casual inspection of the reports' bibliographies reveals that many, if not all, of their claims are based on peer-reviewed papers in reputable scientific journals. Yet industry and Alberta government spokespeople have dismissed both reports as "environmentalist propaganda," although they have provided no real evidence to support their criticism. We are expected to be reassured by explanations that any seepage from toxic tailing ponds is caught in ditches and pumped back into the ponds (just who will pay for this after the companies leave?)

We are supposed to believe that industry-sponsored studies done by the Regional Aquatic Monitoring Program (RAMP) and the Cumulative Effects Management Association (CEMA). But neither of the latter organizations has issued any peer-reviewed publications or public reports that shed light on the state of the environment in the oilsands area. RAMP was the subject of a scathing peer review by three prominent federal scientists in late 2004, and has shown very little evidence of having taken corrective measures since then. Its data bases are considered to be proprietary, so they are not available for scientists at large to scrutinize. CEMA has been boycotted by most of the original members from aboriginal communities and NGOs, who resigned in protest that the group's decisions were dominated by industry and government. The expected report on the "instream flow needs" to maintain the Athabasca River that was promised in 2005 was not ready, and has been replaced by ad hoc measures for the next several years. In short, industry and government might claim that unfavourable reports are "propaganda" but their own lack of real evidence clearly shows that they are themselves in the propaganda business.

Another discouraging recent report calls into question the widely touted carbon capture techniques being promoted to justify continued expansion of the oilsands. This report is by recognized experts. Indeed, many of the greenhouse gas emissions from

oilands activity will emanate from monster trucks and other mobile emitters. One doesn't need to be an expert to know that such sources are not easily amenable to carbon capture. Perhaps a more reasonable solution would be to make the oilsands developers neutralize their greenhouse gas emissions by paying for carbon capture at stationary sources, such as coal-fired power plants.

More trouble for Renner is certainly ahead. Several peer-reviewed scientific papers and government reports already document serious declines in caribou and large carnivorous mammals in the oilsands area. It is only a matter of time until someone summarizes these in a public report. Papers on acid rain are in preparation. The claims of people living downstream of the oilsands that they are being poisoned by chemical releases from the oilsands mines are unresolved, with government and industry claiming that all of the pollutants in the river are "natural." The real answer certainly lies somewhere between thes polar positions, but no detailes study has been publicly released, only more assurances.

Fortunately, the veracity of propaganda claims from either side about environmental destruction in the oilsands is easy for citizens to check for themselves: Google Earth is accessible on most home computers. It is easy for anyone to see that enormous areas are being rapidly stripped of forest, mined, or covered by tailings ponds. It is also easy to tell that reclamation efforts are very small by comparison. In short, propaganda is not effective in the electronic world. Citizens should expect something better than hollow assurances from government. Both industry and green groups should be expected to back their claims with data and reviews by their scientific peers.

The Google Earth inspection makes it very clear that the stakes for Albertans are very high. What appears to be profitable now may not appear like such a good deal after the 20 per cent of the province underlain by bitumen deposits has been exploited, left with polluted waters and unrecoverable ecosystems. All Albertans should be worried about the state of the province that will be left for their grandchildren. Exploited carefully, the oilsands should provide a good living for at least three generations of Albertans. Google Earth reveals that recent expansions have not been careful.

There is an out for the minister. It is time for an inquiry into oilsands operations, done by a panel of experts independent of petroleum companies. RAMP, CEMA and other studies relevant to sorting out the real cost of development should be required to submit their data to the inquiry panel. The panel's report should analyze the long-term environmental and financial costs of several scenarios based on different rates and methods of development and reclamation, and spell out issues that must be addressed to protect and reclaim the environment before further expansions are approved. The report should be publicly released, so that all Albertans can view the issues for themselves. The stakes are simply too high to rely on the conflicting claims of polarized groups.

Dr. David Schindler is Killam Memorial Chair and professor of ecology at the University of Alberta.

Posted by Arthur Caldicott at 10:03 AM

December 15, 2008

End of the oil sands' building frenzy?

Claudia Cattaneo
Financial Post
Friday, December 12, 2008

Oil sand is a mixture of bitumen (a thick, sticky form of crude oil), sand, water and clay.Courtesy of Suncor EnergyOil sand is a mixture of bitumen (a thick, sticky form of crude oil), sand, water and clay.

CALGARY, Alberta -- Canadians have grown accustomed to the flow of multi-billion oil sands investments from all corners of the Earth, turning Canada's currency into a petro-dollar and pumping economic prosperity.

But as the sector struggles with its first downturn since the rush started 11 years ago, there's increasing discussion this is not a short-term pullback, but the end of the oil sands' building frenzy.

The economic crisis and collapse in oil prices have pushed the sector to the brink, resulting in the delay of some $40-billion in new projects, taking 800,000 barrels a day of expected production growth -- about half of what had been expected -- off the table, according to CIBC World Markets.

Meanwhile, existing projects are close to losing money at today's oil prices. According to a recent Merrill Lynch report, many oil sands projects need US$38 a barrel oil to break even. Oil prices settled at US$46.28 a barrel on Friday, keeping projects in the black for now, but curtailing developers' ability to fund expansion.

Industry watchers say companies that scaled back won't be rushing to jump back in, even if oil prices recover above US$90, the level many say is required to build new projects.

Other problems would have to be resolved: mounting costs, tight financing and, of course, environmental challenges. The oil sands' poor image could lead to even tougher environmental legislation.

The implications of a no-growth period for the oil sands are grim, not just for Alberta, but the entire country. The oil sands boom has been Canada's economic engine over the past decade. The country's rise as a major global oil producer would stall and the United States would see its energy security options reduced.

The effects of those cancellations are already being felt. Contracts are being cancelled. Construction jobs in Fort McMurray are drying up. The construction industry slashed its workforce requirements estimate by half for 2010 -- to 22,000 from 44,000 jobs -- in what was to be a peak building year. Workers in Calgary are being sent home.

Oil sands pioneer Jim Carter is clearly concerned for the sector's future. The mining engineer and former president and chief operating officer of Syncrude Canada Ltd., who retired in May, 2007, after nearly three decades in the business, sees two possible scenarios unfolding.

With a much-needed break from years of explosive growth, he says the oil sands would have the opportunity to "recalibrate" -- get inflation under control, lower everyone's expectations and integrate technologies to improve environmental performance.

The other is that development of the oil sands stalls.

Bob Dunbar, president of Strategy West, a Calgary oil sands consulting firm, says the risk of a no-growth period in the oil sands is high.

"If we have a prolonged financial economic crisis, then I think this industry is coming to a halt, other than startup and completion of projects that are already underway," says Mr. Dunbar, who was one of the oil sands' first regulators three decades ago with the Alberta government.

He sees oil sands production growing to 2-million barrels a day, from the current 1.3-million barrels a day, as projects under construction are completed by 2010-2011.

Then, the pipeline dries up. The industry's goal was to produce about 3.5-million barrels a day by 2015.

Not even a short-lived financial crisis greatly improves the picture, he adds. Growth may resume, but at a more moderate pace. "A lot of people in the industry will have received pretty serious body blows, and a lot of people are really going to lose the capability to turn around quickly."

It's not easy to restart projects that take years to plan and build, including obtaining regulatory approvals, assembling huge work forces and manufacturing complex pieces. Those best positioned, he says, would be the developers that have well-established operations. Those at earlier stages would be looking at a long road back.

He also points to U.S. president-elect Barack Obama as another possible impediment to growth. Canada's "dirty oil" could be in for a rougher ride if he takes a harder line on greenhouse gas emissions.

Peter Tertzakian, chief energy economist at ARC Financial Corp. and author of the best-seller A Thousand Barrels a Second says the oil sands frenzy of the last few years is history.

He says growth will moderate significantly from earlier projections. "Companies, when they make their investment decisions going forward, will weigh all the issues, including the cost inflation that arises from aggressive overinvestment in a province that only has three million people, in a remote area that has got a lot of environmental baggage."

Those deciding whether to expand in the business will be more sensitive to the potential for an oil crash, one of the lessons of the financial crisis, Mr. Tertzakian says.

And they will also be thinking harder about whether they want to be in a business with such a poor image.

"The environmental lobby has done a marvelous job of disadvantaging the oil sands from an environmental perspective," Mr. Tertzakian says. "That is the reality. It's damaged goods and it is a high-cost producer."

There is no question a slowdown in the oil sands would take the edge off Canada's economic growth, Mr. Tertzakian says. "Is that a bad thing? Maybe not, because the country was becoming excessively concentrated on resources."

While the Alberta government would be among the biggest losers if the oil sands stall, that possibility was not discussed in a provincial energy strategy announced Thursday. The strategy assumes growth will continue.

Alberta Energy Minister Mel Knight played up the silver lining of a slowdown in lowering costs and easing labour shortages.

"There are a number of issues, the global economic picture is one of the largest ones," Mr. Knight said. "We are certainly feeling that the price of the commodity is not conducive to any new investment at this point. But one of the major problems now, besides the economic issue, is the situation around regulatory uncertainty. They are looking for some alignment with respect to emissions regulations."

Mr. Knight acknowleges that if Alberta's projected revenue stream from the oil sands deteriorates, the provincial budget would be adjusted.

The attitude adjustment would have to include bringing back some of the conditions that kicked off the oil sands frenzy 11 years ago.

When Suncor announced its $2.2-billion Millennium expansion in 1997, and Syncrude followed with a $6-billion plan, the reaction in the markets and elsewhere was exuberance. At Suncor, executives ran a betting pool over how much the stock would rise. CEO Rick George bet $1. The stock jumped $7.

Canada's oil sands production at the time was about 300,000 b/d. Suncor had started its plant in 1967, Syncrude opened in 1978 and Imperial Oil Ltd.'s thermal operation at Cold Lake started in 1985.

The new investments were made possible by major changes: After years of trying, Suncor and Syncrude improved costs and productivity by adopting new technologies and phasing out bucketwheels and conveyor belts that were prone to breaking down in favour of trucks and shovels, the method that remains in use today.

Operating costs came down from as much as S$40 a barrel to about $11 to $12. Another change was convincing the investment community of the oil sands' potential; so little was known of the deposits that talk about their size was met with disbelief.

The most significant change, however, was an improvement in fiscal terms, the outcome of the 1995 National Oil Sands Task Force.

The initiative pulled together all levels of government, as well as developers, trade unions and suppliers, and got them to buy into the benefits of working together at a time of weak employment and economic growth.

"Because that process engaged so many people, it enabled us to set the table for success," Mr. Carter says. "And we began to see the investment happening. It made believers even out of those who might not have been."

Alberta, under Premier Ralph Klein, agreed to a generic royalty regime that reduced payments substantially, to a minimum 1% before project payout and 25% of net revenue after payout.

The federal government, under Liberal Prime Minister Jean Chretien and Natural Resources Minister Anne McLellan, pitched in with a fast write-off of capital investment through the Accelerated Capital Cost Allowance.

As it turned out, the task force underestimated how much spending would pour into oil sands development -- $21-billion to $25-billion over 25 years. Before oil prices collapsed, the oil sands were on course for $150-billion in spending.

But those diverse interests splintered in the ensuing years as oil prices soared and the oil sands became a target of oil multi-nationals shut out from other basins by governments nationalizing their oil industries.

The federal government, under Tory Prime Minister Stephen Harper, cancelled the Accelerated Capital Cost Allowance in 2007. The Alberta government, under Premier Ed Stelmach, is increasing oil sands royalties next month to a base rate of 1% when the oil price is $55 a barrel and 9% when oil is at $120 a barrel or higher. The post-payout rate starts at 25% when oil is at $55, increasing to 40% when oil is at $120 or higher.

Both levels of government have added further costs to mitigate greenhouse gas emissions. And more environmental costs are coming as the industry installs technology to capture and store carbon and clean up its tailings ponds.

Meanwhile, labour costs have skyrocketed, both as a result of union agreements and competition between developers for scarce staff. Service providers, from engineering firms to labour camp builders, have also increased their prices.

The result is that the cost of adding a barrel of capacity has risen from the $20,000 estimated by Suncor in 1997, to $180,000 this summer for Petro-Canada's Fort Hills project. Petro-Canada has cancelled part of the project and put the rest on hold, while trying to renegotiate contracts.

Mr. Carter is confident the sector is resilient enough that it will find an affordable way to reduce its environmental footprint. As the chairman of the Carbon Capture Council of Alberta, a team from industry and academia assembled by the province to guide carbon capture and storage projects with the help of $2-billion in provincial funding, Mr. Carter is keen to help the oil sands continue.

Still, he sees how fragile it all is. "Sometimes things are taken for granted after they have been so strong for so long," Mr. Carter says.

"We need to remember that this is expensive oil."

Posted by Arthur Caldicott at 12:32 AM

December 11, 2008

Rio wasn't the only loser in Alcan deal

KONRAD YAKABUSKI
Globe and Mail
December 11, 2008

MONTREAL -- Not long ago, Alcan chief executive Dick Evans hinted that he might have sold out too soon when he signed the record-setting, mid-2007 deal to surrender the Canadian icon to Rio Tinto PLC for $38.1-billion (U.S.). Only months later, he figured Alcan was already worth more than that.

It seemed overly optimistic, considering that BHP Billiton - which then still had an offer for Rio Tinto on the table - was pegging Alcan's worth at only $20-billion. Now, we know it was.

Almost every independent observer now concedes Rio Tinto overpaid for Alcan when it put up $101 a share in cash, a 66-per-cent premium over the price the stock was trading at before it had been put in play by an earlier, hostile bid from Alcoa Inc.

The price was a windfall beyond all contemplation for Alcan's shareholders, including top management, who rightly took advantage of multiple suitors' willingness to outbid each other for the company.

But the $39-billion in debt (almost all of it from that deal) on Rio Tinto's balance sheet - an amount that now surpasses Rio's own market capitalization - will now force Alcan to cut jobs, production and capital spending in Canada. Rio unveiled the bad news yesterday.

It means a host of long-promised projects - from Kitimat, B.C., to Saguenay, Que. - are in limbo.

Alcan says "it remains committed" to the expansion of its Kitimat smelter and will "honour all the obligations" of an agreement with the Quebec government that grandfather the company's vast and lucrative hydro operations in the province in exchange for jobs and investment. We just don't know when we'll ever see the money.

"Whenever anyone says 'we commit' it doesn't mean 'we've spent,' " notes one long-time Alcan observer in British Columbia. "They can change their minds, and they have many times in the past." So far, Alcan has "committed" only $500-million to the Kitimat modernization - a project expected to cost upwards of $2.5-billion. Should the overhaul be delayed much longer, the new smelter likely would not be up and running before the current 54-year-old facility dies of old age.

Many in Kitimat and on Bay Street alike think that would suit Alcan - and Rio, if it manages to hang on to its aluminum division - just fine. Alcan owns its own hydro generating facilities in B.C., and produces far more power than it needs to make metal. It sells the surpluses to BC Hydro. Even at lofty aluminum prices, its margins on energy sales surpass those earned in smelting.

As in Quebec, Alcan was initially granted the water rights by the B.C. government to produce power in exchange for building smelters that provide hundreds of jobs. But though you might make the case that Alcan has a moral obligation to proceed with the Kitimat expansion, B.C. courts have established that it has no legal one.

So, if it hasn't done so in the first quarter century since a new smelter was promised, what are the odds it will do so in the next?

As long as Rio Tinto is rationing capital, if not fighting for its life, the odds aren't high. Besides, instead of fetching the $4,000-a-tonne Mr. Evans was projecting just last spring that aluminum could command in the near term, the price of the lightweight metal is currently hovering at a five-year low of about $1,500.

Cheap hydro power makes Canada a great place to make aluminum, since, globally, energy accounts on average for about one-third of smelting costs. The near-free electricity Alcan produces for itself here means that it has an unbeatable advantage over competitors. But if Alcan can sell electricity to government-owned utilities, why, with capital already scarce, would Rio tie up new funds in more smelter capacity?

There are constraints on power sales - transmission capacity is restricted in B.C. (for now) and a more vigilant provincial government in Quebec seeks to protect the 6,000 Alcan jobs in the Saguenay region. But Rio Tinto's dire straits have given Alcan an excuse to buy time with governments.

In Quebec, that means the $3.5-billion (Canadian) that Alcan touts in slick TV ads that it is investing in the province will now be spent at a snail's pace, if at all. Premier Jean Charest can be thankful Rio Tinto waited until two days after the provincial election to drop the news. The government has extended advantages to the company that sell well in the Saguenay, but which are heavily criticized by economists in Montreal and beyond.

The Alcan deal remains the biggest corporate takeover the country has seen. It was a boon for the hundreds of lawyers and investment bankers working for Rio Tinto, Alcan, Alcoa and four other would-be buyers who kicked the tires. Shareholders were obviously winners. But as we're now finding out, there were losers, too.

Posted by Arthur Caldicott at 11:27 AM

First Nations band claims oilsands land

BOB WEBER
Edmonton Sun
11 December 2008

Says permits province sold to Shell are invalid

An aboriginal band has threatened the very basis of Alberta's oilsands industry by filing a court challenge to the province's system of granting land tenure.

A notice filed yesterday in Edmonton Court of Queen's Bench by the Athabasca Chipewyan First Nation claims that a series of oilsands permits the provincial government sold to Shell Canada and other companies are invalid.

Selling off rights to explore the land without consulting area aboriginals breached the Crown's duty to consult, say legal documents prepared by the First Nation.

"(Alberta) breached the duty to consult the (Athabasca Chipewyan First Nation) by failing to consult the ACFN, adequately or at all, prior to granting the challenged tenures," the document reads.

CALL FOR CONSULTATION

The First Nation is asking the court to either quash the permits or order the companies to stop further development until consultation has occurred.

"It's a big question," said Monique Ross, a researcher at the University of Calgary's Institute of Resource Law. "(The government) would have to revisit the way they deal with the industry."

The Alberta government has long argued that, because no actual development occurs when an exploration permit is sold, no consultation is necessary. Alberta Energy regulations specifically state that consultation does not take place before such rights are granted.

But the notice argues that when permits are sold, companies are obliged to begin work on them within a certain time or risk losing them.

The tenures were sold in 2007 and 2006 to Shell Canada, Standard Land Company, Saskatoon Assets Inc. and Canadian Coastal Resources. All are within 20 kilometres of the band's reserve.

Ross points out that the Supreme Court has compelled British Columbia to consult with aboriginal groups before allocating forestry tenure.

"It's not enough to consult at the stage when forestry activities are occurring," she said.

The First Nation points out that the land in question is extensively hunted, trapped and fished by the members of the band.

LANDS CHANGED

"Parts of our traditional lands have been completely changed by industry," Chief Allan Adam said in an affidavit. "These lands were once hunting and trapping grounds, but now they are covered by oil and gas wells and blanketed by seismic lines roads and pipelines."

Adam said the band is particularly concerned about an area near the reserve called the Richardson backcountry, which is important for both hunting and spiritual practices. He wrote the provincial government has repeatedly granted oilsands exploration permits in the area despite the band's concerns.

"It is deeply troubling to our First Nation that Alberta has granted these tenures within our traditional lands and set the stage for exploration and potentially massive oilsands production without any consultation with our First Nation before the grants of tenure."

A preliminary date for the first hearing on the motion has been set for Jan. 13 in Edmonton.

Posted by Arthur Caldicott at 11:19 AM

Good intentions gone wrong with city fuel order

JOHN BARBER
Globe and Mail
December 11, 2008

'The tar sands is one of the greatest ecological crimes in North American history," declares Councillor Gord Perks, a veteran environmental activist now serving as the uncompromising green conscience of Mayor David Miller's city hall.

So why did the City of Toronto just go out of its way, following the strictest environmental protocols, to buy $17-million worth of tar-sands oil to run its large, allegedly green fleet of vehicles?

The answer is a parable of good intentions gone, if not awry, certainly wide of the intended mark - one that keeps moving as industry, activists and government wrestle over the meaning of green.

Everybody wants to do the right thing, says Matt Price of Environmental Defence Canada, which protested against what it considers to be a dirty-oil deal.

"But it's unhelpful when you have people with good intentions coming up with unfortunate results."

Good intentions in this case date back almost a decade, when the city decided to specify low-sulphur diesel fuel, then a rare commodity in Canada, in its tenders.

Since then, new federal regulations have come into effect, phasing out more polluting fuel.

"Once again, the City of Toronto set a benchmark and all the other governments ran to catch up," Mr. Perks boasts.

Then the city ran even further ahead, demanding its supplier deliver diesel fuel laced with maximum amounts of vegetable oil, called biodiesel, and gasoline diluted with the maximum amount of ethanol, which is also derived from vegetable sources.

The stated aim is to reduce airborne pollution and lower greenhouse gas emissions relative to unblended fossil fuels.

While the federal government has promised to mandate a minimum 5-per-cent ethanol content in gasoline, the city specified a blend containing 10 per cent.

Put your latest good intentions out to tender and what do you get? A single bidder for the 2009 fleet fuel contract, Suncor Energy Products Inc., a company that describes itself as "strategically focused on developing Canada's Athabasca oil sands."

It also so happens that Suncor is Canada's leading producer of ethanol, having opened a $220-million plant near Sarnia two years ago, with more than $30-million in provincial assistance.

This summer it announced a $120-million expansion that will boost the plant's production to 400 million litres a year.

But the problem here, according to environmentalists, is not just a matter of accepting some bad with the good. Current opinion says that there is nothing green about biofuels, and indeed that no fuel could be more destructive to climate than that harvested from farm fields and tar sands
- the very blend our green-minded city just ordered a vast amount of.

The truth of the ethanol debate depends on which factors one includes in the "life-cycle analysis" of its use as fuel.

Previously unaccounted-for deforestation caused by ethanol demand has tipped the balance, according to Mr. Price, with the latest models now predicting that using the fuel will lead to higher emissions than straight fossil fuels.

"Arguably you could get a better carbon outcome simply by going with Shell instead of Suncor at this point," Mr. Price said.

The climate argument doesn't even consider the effect of widespread ethanol production on food prices - a concern that inspired Ontario Premier Dalton McGuinty this summer to abandon a promise to mandate provincewide use of the same 10-per-cent ethanol blend the city just ordered.

But what really queers the deal is the origin of the main ingredient:

According to the same life-cycle analyses that now condemn biofuels, tar-sands oil has three times the carbon impact of conventional oil.

Less conscientious cities will hardly burn any of the stuff. But do-gooding Toronto will be swimming in it.

Posted by Arthur Caldicott at 09:28 AM

December 08, 2008

'Killing the pipeline' with delays

NORVAL SCOTT
Globe and Mail
December 8, 2008

'High degree of incompetence' of government-appointed joint review panel is putting Arctic jobs, exploration in jeopardy, critics say

CALGARY The fate of the $16.2-billion Mackenzie gas pipeline, which would open up Arctic gas reserves for development and provide a huge economic boost for Canada's North, is hanging by a thread as a new set of regulatory delays could mean the project never gets built.

"I'm really quite concerned," Northwest Territories Premier Floyd Roland said in an interview. "It's a delay on another delay, and we've not got a clear answer as to why. ... It's shaken the confidence of the business community."

The government-appointed joint review panel (JRP) last week said it would release its environmental impact report on the pipeline in December, 2009, instead of spring, 2009, as previously expected. While project operator Imperial Oil Ltd. hasn't yet said how the new setback could impact its construction schedule, the pipeline's expected completion date of 2014 could now be pushed back even further.

The setback is the latest in a series of unexplained delays by the JRP, which was formed in 2004 to evaluate the potential impact of the Mackenzie project. The pipeline, if constructed, would connect gas fields in the Arctic to North American markets.

The line would open up a new production region and breath life into Arctic economies.

The seven-member JRP, headed by federal civil servant Robert Hornal, was originally supposed to make its report by November, 2007, but has said it has too much information to analyze.

Stakeholders say the new delays would have an enormous effect on activity in the North, creating a loss of pipeline construction work and dissuading Arctic gas exploration.

"It's devastating. It's incomprehensible that a process like this would take so long," said Nellie Cournoyea, chairwoman of the Inuvialuit Regional Corp. "The jobs and contracting opportunities will come to a total standstill. ... Everyone is shaking their heads."

"Indirectly, they are probably killing the pipeline and the activity that is taking place in our region," she added. "There's certainly quite a high degree of incompetence in [the JRP]."

Brendan Bell, former NWT Industry Minister, said the mood in the region was one of "disappointment and outrage" and that people increasingly believe the JRP "is incapable or uninterested in ever producing a final report."

"At a time when many are crying for more infrastructure projects, this project is a natural fit [for Canada]," he said. "We need fiscal stimuli for the country, but this regulatory distress is jeopardizing the whole thing."

Imperial Oil had once planned to finish building the Mackenzie pipeline by 2009, but has been hit with a series of frustrating hurdles that have set back its plans to bring Arctic gas to North American markets. Even as the JRP process has ground on, Imperial has yet to resolve aboriginal land-access issues or the financial terms for constructing the pipeline with the government.

"The report needs to be brought to a conclusion and given to the parties so that they can get on with their side of the work," Mr. Roland said. "We need clarity from [the JRP]. This is a project that industry is willing to make a huge investment in that benefits the rest of Canada."

Posted by Arthur Caldicott at 10:00 AM

December 02, 2008

Talk of Alaska: Oil Spills and the Culture of Law

From Alaska Public Radio Network
Oil Spills and the Culture of Law
December 2, 2008

Audio track here:
www.sqwalk.com/media/APRN_TalkOfAlaska_RikiOtt_20081202.mp3
(Big file, 27 mb, if it won't stream for you, it's a heck of a download.)

Nice irony, this program is sponsored in part by BP Alaska "where training Alaska's future work force is a priority."

In addition to the Exxon Valdez, two other oil spills were mentioned on the program:

Exxon Valdez, 22-Mar-1989, Prince William Sound, Alaska,
- carrying 191,000 tonnes (1,264,000 barrels) of crude oil, spilled 38,800 tonnes (257,000 barrels or 11 million gallons)
- en.wikipedia.org/wiki/Exxon_Valdez_oil_spill

Hebei Spirit, 07-Sep-2007, east coast of South Korea,
- carrying 260,000 tonnes of crude oil, spilled 10,800 tonnes
- en.wikipedia.org/wiki/Hebei_Spirit_oil_spill

Selendang Ayu, 08-Dec-2004, Unalaska Island, Alaska
- carrying soybeans from Seattle to China
- spilled 1100 tonnes (8333 barrels, 350,000 gallons) - 80% of the Bunker C and diesel fuel oils on board
- en.wikipedia.org/wiki/Selendang_Ayu

One caller makes this point: "That guy that shot the holes in the pipeline. How much time is he doing? How much of a fine did he get?"

Daniel Lewis is his name. He's from Livengood, Alaska, believe it or not. He was drunk on October 4, 2001 (as was Joseph Hazelwood when last in command of the Exxon Valdez). "A jury found him guilty of criminal mischief, assault and drunk driving, all felonies, and the misdemeanor counts of oil pollution and misconduct involving a weapon, and causing 285,000 gallons of crude to coat a forested area has been ordered to pay over $17 million in restitution for the act." Lewis is in jail in Fairbanks serving a 16-year sentence. In 1978, about 670,000 gallons of oil spilled after a hole was blasted with explosives near Fairbanks. No one has ever been arrested or charged for that incident.
www.solcomhouse.com/trans.htm

Talk of Alaska: Exxon ‘Valdez’ Oil Spill of 1989

Tue, December 2, 2008

Are we on guard against another major oil spill? As the checks finally go out to those damaged by the Exxon Valdez oil spill — nearly 20 years after it happened — “Talk of Alaska” will take a look at lessons learned, and lessons still UN-learned, from that event and its aftermath.

HOST: Steve Heimel, APRN

GUESTS:

Dr. Riki Ott, author of Sound Truth & Corporate Myth$: The Legacy of the Exxon Valdez Oil Spill and Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill
Marc Galanter, Professor of Law emeritus, University of Wisconsin and author of Lowering the Bar: Lawyer Jokes and Legal Culture

Posted by Arthur Caldicott at 03:38 PM

Edison's rooftop solar project powers up

COMMENT: The "consumer activists" critical of this program are not critical of this program. Their criticism is of who is expected to pay for it. Their argument is that Edison, a for-profit utility corporation, should be footing the capital bill, not expecting its ratepayers to pay the cost. But won't all costs ultimately be recouped from ratepayers?

Edison estimates power from the rooftops project will cost 27 cents a kilowatt hour, compared with an average of 8 cents a kilowatt hour from conventional generation.

Solar panels atop ProLogis’ warehouse in Fontana can power about 1,300 homes. The building is the first of 150 that Edison hopes to outfit with panels. (Gina Ferazzi / Los Angeles Times)

The utility's ratepayer-financed plan to outfit 150 buildings with the panels is cheered by business owners but criticized by consumer activists.

By Marla Dickerson
LA Times
December 2, 2008

Southern California Edison on Monday unveiled its newest power plant: 33,700 solar panels atop a warehouse in Fontana that will feed green energy directly into the grid.

It's the first piece of what the utility says could become the largest rooftop solar installation in the world, a swath of photovoltaic panels spanning two square miles.

The 600,000-square-foot warehouse rooftop, owned by logistics firm ProLogis Inc., is the first of 150 commercial buildings that Edison is looking to outfit with solar panels over the next five years. Collectively, solar panels on all those roofs would provide 250 megawatts of electricity, enough by Edison's reckoning to power more than 160,000 homes when the sun is shining.

Gov. Arnold Schwarzenegger was on hand to flip a mock switch on the 2-megawatt Fontana system, which cost $10 million and can light about 1,300 homes.

"I am a fanatic about renewable energy, and I have been trying to push the power companies . . . to create more," said Schwarzenegger, who urged Edison to move even faster on its proposed plan.

If approved by state regulators, Edison's photovoltaic project would be the largest ever attempted by a U.S. utility; 250 megawatts roughly equals the capacity of all the solar panels manufactured in the United States last year.

The massive size reflects the pressure California's investor-owned power companies are under to meet state mandates requiring them to boost the use of clean energy. It also underscores an evolution in solar financing. Rather than pay for their own panels, companies such as ProLogis are increasingly leasing out their roofs to utilities or striking long-term power contracts with third parties, which own, install and maintain the panels.

The approach is a hit with business owners who are finding their roofs to be unexpectedly valuable real estate. Urban solar is also popular with environmentalists because it can be linked to existing transmission lines and it transforms barren industrial space into platforms for clean power.

"This is exactly what all the energy companies should be doing," said Terry Weiner, conservation coordinator for the San Diego-based Desert Protective Council. She said the solution to global warming "is right there on the roof."

But not everyone is enamored of Edison's plan. The Rosemead-based utility, a subsidiary of Edison International, wants its customers to pick up the nearly $1-billion tab for the proposed 150-roof project.

Consumer activists object. They say Edison should be looking to cheaper sources of renewable power, such as large solar and wind farms and geothermal plants. They contend that Edison International shareholders, not utility ratepayers, should finance the company's huge bet on photovoltaic rooftop solar, one of the most expensive forms of clean energy.

Edison used so-called thin-film panels on its first rooftop project. Supplied by Tempe, Ariz.-based First Solar Inc., that technology is significantly cheaper than traditional silicon-based solar cells. Still, Edison estimates that electricity from the Fontana facility costs about 27 cents a kilowatt hour, compared with an average of 8 cents a kilowatt hour from conventional generation.

"This is not the most cost-effective renewable they could invest in," said Sepideh Khosrowjah, policy advisor for the Division of Ratepayer Advocates of the California Public Utilities Commission. The independent advocacy operation has asked the commission to reject the ratepayer-financed plan. Others fear that Edison would drive up the cost of solar panels by gobbling a limited supply and that the utility would have an unfair advantage over private-sector solar providers, which don't have a captive group of ratepayers to fund their operations.

"This is a solar monopoly that will eliminate its competition," said Michael Boyd, president of the nonprofit Californians for Renewable Energy Inc., in a filing with utility regulators.

Edison executives said their entry into the market would help to lower solar panel prices for everyone because of economies of scale. The company's big orders would help manufacturers improve designs, increase efficiency and ultimately cut prices, said Ted Craver, chief executive of Edison International.

Edison is complementing, not competing, he said, with the private-sector firms that are thriving under California's existing Million Solar Roofs Initiative. That program provides hefty state incentives to homeowners and businesses that install systems less than 1 megawatt in size.

Craver said Edison's photovoltaic project aimed to install systems ranging from 1 megawatt to 2 megawatts on commercial rooftops.

"It fills a gap," Craver said.

California law requires Edison, PG&E Corp.'s Pacific Gas & Electric Co. and Sempra Energy's San Diego Gas & Electric Co. to procure at least 20% of their electricity from renewable sources by 2010. Schwarzenegger wants to boost that minimum to 33% by 2020. Edison is currently at 16%.

Edison already is the nation's largest purchaser of solar power with 354 megawatts under contract. Much of that comes from large-scale solar projects located in remote desert areas, which take years to permit and build.

Craver said Edison wanted to add urban rooftop solar to the mix because it can be rolled out rapidly, getting more clean megawatts online sooner. The Fontana project was completed in a few months.

Edison on Monday announced its second rooftop project atop a 458,000-square-foot industrial building in Chino that is slated for completion in early 2009. Craver said it would probably be Edison's last if the state Public Utilities Commission didn't approve its proposal.

Dickerson is a Times staff writer.

marla.dickerson@latimes.com

Posted by Arthur Caldicott at 10:03 AM

Alaska marine biologist makes an impassioned case
against oil at all costs

By SILJA J.A. TALVI
Seattle Post Intelligencer
December 1, 2008

Dr. Riki Ott has a special response to Alaska Gov. Sarah Palin's ardent push for oil drilling in the Arctic National Wildlife Refuge.

From her hometown in Cordova, Ott is sending the former vice presidential nominee a copy of her book, "Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill" (Chelsea Green Publishing, 327 pages, $21.95).
In the same package, Ott will include several rocks from Prince William Sound. Rocks covered with oil. The same oil that bled out of the Exxon Valdez tanker in 1989, gushing its black poison into a pristine Alaskan landscape. Although nearly 20 years have passed since the largest oil spill in U.S. history, there are still at least 55 tons of oil buried in Prince William Sound, but there's a noticeable absence of political sloganeering on this front.

That's why Ott, a marine biologist who earned her doctorate at the University of Washington, has come up with the "Why It's Not OK To Drill, Baby, Drill Tour," celebrating the release of her book. The visionary environmental leader and self-described "fisherm'am" talked to the P-I.

Dr. Riki Ott a marine biologist who earned her doctorate at the University of Washington, is celebrating the release of her book "Not One Drop" with a "Why It’s Not OK To Drill, Baby, Drill Tour," and sending a message to Alaska Gov. Sarah Palin.

P-I: What do people who live around Puget Sound have in common with you who live around Prince William Sound in Alaska?

OTT: Anybody who lives on such a beautiful shoreline should have the same heart- and soul-level connection to the environment around you. ... Up in Cordova, we feel a strong connection to the Puget Sound. ... We are very linked as the fishermen, native people, recreational users of water bodies. We are the ones who bear the brunt of these industrial accidents.

What were you doing when you first realized that Exxon Valdez had begun to spill into Prince William Sound?

I had been asked the night before to give a teleconference to the community of Valdez ... on the positive and negative effects of the oil industry they depend on for their livelihoods. This was 1989, and (the local government in) Valdez was beginning to realize that an oil spill was possible despite what the corporations said, and that such a spill would be devastating. ... I was talking to them on behalf of fishermen, on behalf of people who made a living from the land and the water ... (Ott was a leader of Cordova District Fishermen United).

At 9:16 p.m., in the middle of my talk, Exxon Valdez -- fully loaded with 53 million gallons of crude oil -- took off from the tanker terminal. After the talk, I went home ... and went to sleep.

By 5:30 a.m., over 10 million gallons had already escaped into the sea. At 7 a.m., Jack (Lamb, the acting president of CDFU), came to my door to tell me we had had "the Big One." We just scrambled into disaster mode.

This summer, the U.S. Supreme Court slashed the initial $5 billion that Exxon was to pay to $507 million. How do the oil spill survivors feel about this?

This is a crucial question for our times right now, and not just for us in Cordova and Alaska, but for the world. What is environmentally sound development? We've got to get to the point where our human rights count, our lives count, and our little communities count more than corporate profits. How is it that corporations like Exxon, using our land and labor, are still able to shove injured communities under the carpet and roll right on with their profit-making machine while we're committing suicide, going out of business, watching our fish die, and losing our homes?

You write in "Not One Drop" that the damage and loss caused by the oil spill was far more toxic than the obvious damage to the environment and the local economy. You write of "invisible losses." Can you elaborate?

The truth is that Cordova gutted itself after the spill, especially after our fish runs collapsed in '92 and '93. The stress manifested itself in all manner of horrible things, including substance abuse, alcohol abuse, domestic abuse, depression, PTSD, isolation, divorce and suicide.

Do you feel like you're finally recovering?

Yes. We've made amazing progress in rebuilding and helping each other. ... Also, we, like other people, were duped too long into believing that it's all about making money. ... What corporations are doing, the way they're doing it, (trashes) lifestyles, cultures and ecosystems around this planet ... (and) we the people can make it stop. We have to believe in that.

sisu@well.com

You might also be interested in this article about Riki Ott:
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Posted by Arthur Caldicott at 09:43 AM

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