The Gas Fracking Industry is in a Mess in WV, PA and Nationwide

Can the Drilling and Fracking Companies in WV Crawl Out of the Mud?

Commentary by S. Tom Bond, Retired Chemistry Professor & Resident Farmer, Lewis County, WV, April 12, 2016

The drillers and frackers want you to think this is a temporary lull in fracking, they will soon be back bigger and badder than ever. Time moves on and things change. Remember the old saying “When Judgment Day comes I want to be in West Virginia: it’s twenty years behind in everything else, and surely it will be in that, too.” Typically, “the powers that be” in our state haven’t been getting the news.

All fracking is in limbo right now. The tall tales about availability of gas through fracking, the easy access to money in our society of schemes that can make a great return, and the fact conventional drilling had about drilled out all gas lands that were economically feasible, lead to everybody and his brother jumping into it. Never mind the change of scale, lack of experience with four new technologies that came along together, and considerable ignorance of what was really in those new target strata.

That enthusiasm, along with the world wide downturn in the use of energy for manufacturng lead to gross over production. There is a backlog of some 5,000 drilled and not produced wells waiting, the gas storage fields are filled to high pressure, and the bills on the borrowed capital keep coming in. Many companies are forced to sell at present low prices to meet those bills. Many are on the edge of bankruptcy.

Some of the names are famous. Chesapeake sold its Jane Lew offices to Southwestern Energy during the downsizing after Aubrey McClendon was removed, and now both are in trouble. Little activity is observed, and few fracking trucks are now going through the truck stop and fracking establishment here. McClendon’s subsequent adventure faced a court battle over illegal leasing in Michigan, and he apparently committed suicide in a car crash. Two years ago the hot investment news pertained to fracking. Now the situation is so bad they have about stopped discussing gas (and oil companies) in investment newsletters.

The arrogance which has characterized the industry “mimics the captain of the Titanic,” in one author’s words. They assure everyone they are on top of the situation, just give them another year or two.

Regardless of how the legislature sees it, fracking is loosing public support with only 36% of Americans support fracking, 51% oppose it, with Republicans changing views more than Democrats.

At present, much of America can get cheaper energy with gas than with renewables, but gas shuttinging out renewables through manipulation of legislatures is also a factor. Let’s list a few of the problems fracking faces.

Opposition is universal where fracking is tried, world wide, just as it is always supported by governments. This is true in Colorado, Pennsylvania, West Virginia, Louisana, Florida, Canada, England, South Africa, New Zealand – in short, the locals don’t like it anywhere. The complaints are uniform: destruction of aquifers, denied by “authorities;” Air contamination and resultant sickness; effect on crops and livestock; serious complaints about light, noise, traffic near homes and animals and public relations resembling an invading army, but armed with law enforcement instead of guns.

Science is beginning to catch up with what has been said for years. There are presently 124 studies concerning water quality in fracked areas. Air quality is under active investigation. Aggressive company lawyers and stodgy judges will have to stand aside.

The array of opposition is amazing. No industry ever before faced as much or as sophisticated opposition. The resourcefulness and sophistication must be daunting. Several groups have regular access to aerial photographs of rights of way and construction. Imagine a “Pipeline Air Force” surveying your work, or “Marcellus-Shale.us”, which is supported by an acknowledged professional level photographer with a huge library of aerial photographs, the ability to put notations on them and to write excellent news articles explaining them!

Opposition includes experts in Petroleum Engineering to Environmental Science to Endocrine Disrupters to people intimately familiar with land and land values. And it includes hundreds of motivated people, willing to work for free in every corner.

Investors have lost interest, the desired high gains are not there. Fracking is not a hot topic in investment newsletters, the articles are inclined to give information on how to get out, or which stocks to hold as a longer shot. Activity in the field is using the backlog of already drilled wells. You see graphs like the one at the beginning, and claims of increased efficiency of new wells are implied. Not so. The increased production is from those wells already drilled, and simply closed in. That graph has noting to do with the efficiency of new wells.

Global oil and gas debts grew to $3T by 2013, and higher in subsequent years. The renewable energy surge may come before the oil and gas recovery. More details here.

Some few wells are being drilled. They are almost invariably going on established pads in hot spots. In the old days they drilled all over the country one well per pad, to find the hot spots to do first. Now they are using the best they found, and avoiding the expense of new pads, rock, and lines to connect to the larger collecting lines – strictly doing things to get the most new gas for the least expense. The point of this is that the longer production goes on, the more expensive the recovery of gas will become.

There are many court cases involving fracking. Some are upsetting the apple cart. Cabot recently paid 4.24M for contaminating the wells of two Dimock (PA) families. Some two dozen odd Dimock families had settled previously, doubtless for far less, but they were bound in the settlement not to talk about it, a common tactic to prevent the public from finding out price and details. Now Cabot is asking to have the judgment reduced to $85,500.

There are something like 220 nuisance suits against various drilling companies in West Virginia. These have been combined by the legal system, ostensibly to save costs, but the effect will be to homogenize them. Some in the legislature tried to redefine nuisance suits out of existence in the last session, but the public caught on in time and the effort was defeated.

Signs of panic are easy to find: (1) insider selling, (2) selling frack waste water for irrigation, the (3) fight against gas produced outside the US, (4) the need for public relations and (5) occasional slips of the tongue by executives.  What does the future hold, as the population of WV dwindles!

Tagged as: drilling, fracking, industry debt, marcellus shale, natural gas, O & G issues, oil & gas industry