Antero Resources To Pipe Water To Fracking Wells

Antero Resources Inc., plans to spend more than half a billion dollars on an 80 mile pipeline that will carry water from the Ohio River to fracking sites in West Virginia and Ohio.  Fracking, an oil-field technique driving the nation's current energy boom, involves injecting vast quantities of water into the earth, along with other materials, to break up rock formations and unlock trapped oil and gas.

Antero Resources wants to tap the Ohio River, above.

 

Hydraulic fracturing is a water-intensive business.

• Average amount of water used to hydraulically fractureasingle Marcellus Shale well: 4.2 million-5 million gallons
• 4.2 million gallons is enough water for a town of 42,000 people for one day
• Number of Marcellus Shale wells drilled in 2005-July 2013: 8,700*
• Percentage of freshwater used: 90%
• Percentage of water recovered from fracks and reused: 10%

Note: *Includes wells drilled and fracked through May 2013 in both Pennsylvania and West Virginia, but doesn't include every well. Some data are still being processed. Sources: Susquehanna River Basin Commission via Environmental Protection Agency; West Virginia Department of Environmental Protection
 

Colorado-based Antero, which has announced plans to go public, had oil and gas revenues of about $265 million last year, according to filings with the Securities and Exchange Commission.  The company says it is the most active driller in the Marcellus Shale, a gas-rich rock formation that stretches across Pennsylvania and into New York, Ohio and West Virginia. It is also pushing into Ohio's Utica Shale as well. The company uses a total of about six million gallons of water to frack each of its wells.

The proposed pipeline would slash the company's water costs by two-thirds, or about $600,000 per well. The trucks that now deliver most of that water are a "very, very large expense.

Tapping the Ohio would give the pipeline access to the region's most dependable source of water. Many of the rivers and streams that Antero now uses run low in the summer, prompting state officials to stop gas-industry withdrawals. A drought in Ohio last year curtailed water to fracking operations.

Ohio River & watershed

In a permit filed with the Army Corps of Engineers, which regulates water withdrawals from the Ohio River, Antero plans to build an intake pipe capable of sucking up 3,360 gallons of river water a minute—or about 4.8 million gallons a day.  Pumps would send the water through a 20-inch steel pipe eastward where it would be collected in several large pools before it was piped to drilling pads. The Army Corps has approved part of Antero's plan, and a decision on the remainder is pending.

A growing number of pipelines are supplying water to fracking wells—though few of them have been anywhere near as expensive. Antero filed for an initial public offering in June.

In 2011, Range Resources Corp.  built a 20-mile pipeline in the West Virginia panhandle to move water from the Ohio River.  In 2012, Aqua America Inc. built a 54-mile pipeline in northern Pennsylvania that serves several different energy companies.
The pipeline cost about $100 million.  It is estimated that the industry has spent nearly $1 billion altogether on water pipelines.  Exxon Mobil Corp.  has built three relatively short water pipelines in Pennsylvania and West Virginia.

Based on the company's projected savings of $600,000 per well, Antero would need to frack 875 wells to break even; according to its filings, it plans to frack 135 wells in the Marcellus this year.

While the pipeline's construction costs are high, the project could pay off if there was a drought that sent other companies scrambling for water.  Access to reliable, affordable water can make or break the profitability of companies doing shale in a remote, water-scarce region.

Antero is an energy company backed by New York private-equity firms. The pipeline might not remain with the publicly traded Antero for long. According to its SEC filings, the company's top management and its private-equity backers, which include Warburg Pincus LLC, Yorktown Partners LLC and Trilantic Capital Partners, will be able to force the company to split off its gas and water pipelines into a separate company, called Antero Midstream. Antero would enter into a 20-year agreement with the new Antero Midstream to purchase water.

Shareholders of the newly public Antero would own the split-off company, but the private-equity backers and Antero management would retain management control and ultimately receive 50% of the cash distributions generated by the pipeline company.  (WSJ, 8/13/2013)

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Duke Energy Cancels Plans For New Nuclear Plant

Duke Energy has dropped plans for a $24.7 billion nuclear reactor complex in Levy County, Florida, on which the company has already spent $1 billion, most of it collected from customers.  The company cited “regulatory uncertainty” after a change in Florida's rules that cast doubt on whether a utility can collect money from customers for construction work before a project is finished.  The project was started by Progress Energy in 2008, and was acquired by Duke when it merged with Progress Energy last year.  (NYT, 8/1/2013)
      

 

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HyperLoop

Pods would be mounted on thin skis made out of inconel, a trusted alloy of SpaceX that can withstand high pressure and heat. Air gets pumped through little holes in the skis make an air cushion. The front of the pod would have a pair of air jet inlets—sort of like the Concorde. An electric turbo compressor would compress the air from the nose and route it to the skis and to the cabin. Magnets on the skis, plus an electromagnetic pulse, would give the pod its initial thrust; reboosting motors along the route would keep the pod moving. In theory, the pods would be propelled at high speeds just below the sound barrier, and the set-up would be powered by solar panels running along the top of the system.

Pods, with skis on the bottom zip through tunnels put under low pressure.  The pods will ride on air bearings. The pod produces air, and it’s pumped out of little holes on these skis.  You can move huge, heavy objects with very low friction, using air bearings. In the consumer sense, people would be familiar with air hockey tables, except in this case the air bearings are being generated by the pod itself, as opposed to the tube.

You don’t want the tube to be expensive. Because the tube is so long, you want the expensive stuff to be in the pod.

Some people believe it is impossible because it would require too much energy to get something through a tube at such high speeds and long distances.  Some are questioning the energy that would be required to move the air and the pod. But it is not the air that is moving the pod. The pod is accelerated to velocity by a linear accelerator, which is basically a rolled-out electric motor. The air in the pod is going maybe 200 to 300 miles an hour, and it is low-density. So some were thinking: ‘Oh, the air is sea-level density, and the air itself will be the thing that pushes the pod.’ But that is not the case.

You do want to have a continuously circulating loop of air so that you are not losing energy by letting the air slow down. But it is more efficient to have the pod go faster than the air. If you just try to pump air—particularly at sea-level pressure—through what is effectively a 700 mile loop, the energy required would be extremely high if you wanted that air to go fast because of friction against the side walls of the tube.

 

How would the linear accelerator work that gets the pods going?  It’s actually a linear electric motor. It’s a very basic thing. They have been around for a very long time. The air skis in the pod would have a thin row of magnets—you don’t need much. The linear motor would electromagnetically accelerate the pod. It would be just below where the skis are. It just creates an electromagnetic pulse that travels along the tube and pushes the pod to that initial velocity of 800 miles per hour.  About half a dozen re-boosts would be needed between San Francisco and L.A., but the linear induction motor size needed for re-boosts is much smaller than the initial one.

How would you slow down?  When you arrive at the destination, there would be another linear electric motor that absorbs your kinetic energy. As it slows you down, you put that energy back into a battery pack, which then provides the source energy for accelerating the next pod and for storing energy for overnight transport.

The solar panels would be laid on top of the tubes. You would store excess energy in battery packs at each station, so you could run 24-7.  (Bloomberg Business Week, 8/12/2013, Wash Post, 8/12/2013))

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China To Become World’s Largest Oil Importer

EIA's August 2013 Short-Term Energy Outlook (STEO) forecasts that China's net oil imports will exceed those of the United States by October 2013 on a monthly basis and by 2014 on an annual basis, making China the largest importer of oil in the world.

The imminent emergence of China as the world's largest net oil importer has been driven by steady growth in Chinese demand, increased oil production in the United States, and a flat level of demand for oil in the U.S. market.

U.S. total annual oil production is expected to rise by 28% between 2011 and 2014 to nearly 13 million barrels per day, primarily from shale oil, tight oil, and Gulf of Mexico deepwater plays. In the meantime, Chinese production increases at a much lower rate (6% over this period) and is forecast to be just a third of U.S. production in 2014.

On the demand side, China's liquid fuels use is expected to grow by 13% between 2011 and 2014 to more than 11 million barrels per day while U.S. demand hovers close to 18.7 million barrels per day, well below the peak U.S. consumption level of 20.8 million barrels per day in 2005.

Looking beyond 2014, higher U.S. oil production and stagnant or declining U.S. oil consumption, coupled with China's projected strong oil demand growth and slow oil production growth, suggest that once China replaces the United States as the world's largest net oil importer, the gap between net oil imports in China and the United States will grow.

There are several different ways to measure oil import dependence. Discrepancies in the way dependence is assessed arise because oil is imported as crude oil but consumed as refined products, of which crude oil is the main but not only input.

Net oil imports reflect the broadest measure of liquid fuels and include the following elements in the volumes of oil liquids produced and used within national borders: crude oil, lease condensates, natural gas liquids, biofuels, other liquids, and refinery processing gain, which in the United States has been roughly 1 million barrels per day in recent years.

Another common (and narrower) measure of oil import dependence is the ratio of net imported crude oil to net crude oil inputs to refineries. The United States has emerged as a significant net exporter of petroleum products in recent years and a portion of U.S. crude oil imports is used to produce products not consumed domestically. The advent of China as the world's largest importer based on the narrower measure occurs on a different schedule than for the broader one, but the basic trends and drivers remain the same as for the broader measure. However, imports of crude oil alone do not automatically imply domestic dependence on foreign supplies.  (DOE-EIA)

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San Jacinto Mountains Wildfire

The latest wildfire raging through a rugged Southern California San Jacinto Mountains range has already destroyed 26 homes and was threatening more than 500 other residences, forcing some 1,800 people to evacuate. More than 1,400 firefighters and nine helicopters battled the flames as they pushed eastward along the San Jacinto Mountains, a desert range 90 miles east of Los Angeles.  The blaze was heading toward the desert town of Cabazon and was estimated at nearly 22 square miles Thursday with 20 percent containment

Along with Cabazon, the evacuation orders covered two camping areas and the rural communities of Poppet Flats, Twin Pines, Edna Valley and Vista Grande.

A helicopter drops water over a wildfire

 on Thursday, Aug. 8, 2013, in Cabazon, Calif.

 (AP Photo/Jae C. Hong)

It was the second major wildfire in the San Jacinto Mountains this summer. A blaze that erupted in mid-July spread over 43 square miles on peaks above Palm Springs, burned seven homes and forced 6,000 people out of Idyllwild and neighboring towns.

The latest fire also burned in the footprint of the notorious Esperanza Fire, a 2006, wind-driven inferno that overran a U.S. Forest Service engine crew. All five crew members died. A man was convicted of setting the fire and sentenced to death.

After touring the area, U.S. Sen. Barbara Boxer, D-Calif., who lives in Riverside County, said 165,000 acres have burned in California this year and climate change is setting conditions for more disastrous blazes, while budget cuts are limiting resources to fight them. (MSN, 8/9/2013)

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Wyoming Dominates Sales of Coal Produced from Federal and Indian Lands

Annual sales of coal produced from federal and Indian lands in the United States ranged between 458 million and 509 million short tons from fiscal year (FY) 2003 to FY2012. Over the same period, sales of coal produced from federal and Indian lands in Wyoming ranged from 356 million to 411 million short tons, 76% to 83% of the U.S. total.

Most of the coal being mined in the Wyoming portion of the Powder River Basin (PRB) is being produced from federal and Indian lands; Wyoming mines in the PRB are the largest in the United States. Total production of coal in Wyoming, as measured by the Mine Safety and Health Administration (MSHA), tracks closely with the sales of coal produced from federal and Indian lands within the state, as measured by the Interior Department's Office of Natural Resources Revenue. Using these sales as a proxy for production, Wyoming's federal and Indian lands production has been about 82% to 95% of Wyoming's total production over the past decade.

The revenue collected by the federal government from the sales of coal from federal and Indian lands within Wyoming ranged from a low of $303 million in FY2003 to a high of $638 million in FY2012. Under current law, 49% of the revenue associated with onshore federal lands goes directly to the state, and 100% of the revenue associated with Indian lands goes to the respective Indian tribes and individual Indian mineral owners.

Between FY2008, when coal production in Wyoming was at a record high level, and FY2012, coal production in the state declined 10%. Sales of coal produced from federal and Indian lands in Wyoming declined 9% in the same period. The decline seen in FY2009 can be attributed to the economic downturn that reduced electricity demand. The continuing decline through FY2012 reflects slow growth in electricity demand together with a reduced coal share in the generation mix because of relatively low natural gas prices and growing amounts of generation from renewable technologies, especially wind. (DOE-EIA)

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Federal Railroad Administration Tightens Oil Shipping Standards

The Federal Railroad Administration (FRA) plans to start asking shipping companies to supply testing data they use to classify their crude-oil shipments, saying it is concerned that some shipments are being transported in tank cars that aren't safe enough.

In a letter to American Petroleum Institute CEO Jack Gerard last week, the FRA said it is investigating whether some crude shipments contain chemicals—possibly from the hydraulic-fracturing process used to extract it—that make them more hazardous than their classification indicates.

 

 

Oil producers and refiners are increasingly using rail in North Dakota and Texas, where there aren't enough pipelines.

The agency told the API it also suspects that mixes of crude and other chemicals might be the cause of an increase in damage to tank cars caused by "severe corrosion."

If shippers can't supply their testing data, the FRA said in the letter, it will work with the Pipeline and Hazardous Materials Safety Administration to test the shipments independently.

Companies routinely add highly corrosive hydrochloric acid to fracking fluid to break down rock formations. They also add certain chemicals to kill microorganisms and reduce friction in oil. Frack fluids are exempt from federal disclosure laws, but some companies voluntarily provide details, and some states require a thorough ingredient list.

The action is the latest by the agency to toughen regulation of the transport by rail of crude oil after a runaway train hauling 72 tank cars with crude oil derailed and exploded last month, killing 47 people and ravaging the Quebec town of Lac-Mégantic. The Quebec disaster follows a number of serious accidents involving hazardous materials and tank cars in recent years that have raised federal regulators' concern.

More than 34 million barrels of crude were delivered to U.S. refineries by train in 2012, a fivefold increase compared with a year earlier, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department. The volume is expected to increase again in 2013.

The FRA moves will likely pose difficulties for some shippers. Oil producers and refiners are increasingly using rail in Texas and North Dakota, where there aren't enough pipelines to get the crude to markets that will command the highest price.
(WSJ, 8/7/2013, Photo: Getty Images)

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