All posts by Roger Straw

Editor, owner, publisher of The Benicia Independent
East Bay, Fracking, Keeping Watch on Earth News, Oil drilling, San Francisco Bay Area

Trump to allow new oil drilling in NorCal – targets include Mt. Diablo State Park near Walnut Creek

Repost from the San Francisco Chronicle
[Editor:  See also a Center for Biological Diversity press release.  – R.S.]

New oil drilling in the Bay Area? Trump admin opens possibility

By Kurtis Alexander May 9, 2019 
The San Ardo, Ca. oil field in Central California which is located between King City and Paso Robles, as seen on Wed. May 6, 2015. Photo: Michael Macor / The Chronicle 2015

The Trump administration brought its pro-drilling agenda to Northern California on Thursday, disclosing a plan to make more land available for oil and gas development, including parts of the Santa Cruz Mountains and East Bay hills.

Documents released by the U.S. Bureau of Land Management show the agency is looking to nearly double the amount of federal property and mineral deposits in its Central Coast region that can be leased by fossil fuel companies compared to what was proposed by the previous administration.

Roughly 725,000 acres across 11 counties will be opened up for new leasing, according to the bureau’s preferred plan, including areas in or around Mount Diablo State Park near Walnut Creek and Butano State Park near Pescadero.

Industry experts say such spots, far beyond the major oil and gas fields in San Benito, Monterey and Fresno counties, are unlikely to attract interest from oil companies because of public outcry or engineering logistics — or because they don’t find petroleum. But environmentalists aren’t so sure.

“Many of these areas have drilling and active gas wells (nearby), so yes, there’s a real risk that these places will be developed,” said Clare Lakewood, a senior attorney at the Center for Biological Diversity.

The federal government’s new plan comes as part of an environmental report addressing a court ruling five years ago that essentially halted new drilling leases in California until the impacts of fracking were fully evaluated.

The Center for Biological Diversity and the Sierra Club had brought suit against the Bureau of Land management in 2013, alleging the agency had not sufficiently analyzed fracking’s toll.

Fracking is a method of extracting oil in rock with high-pressure water and chemicals. The practice has become an increasingly popular way to get at previously inaccessible mineral deposits, but it can tear up the landscape, pollute groundwater and trigger earthquakes.

While environmental groups say fracking’s impacts have become increasingly evident since the lawsuit, the Bureau of Land Management report outlines ways in which it says the technology can be safely deployed.

The fossil fuel industry praised the agency Thursday for moving forward with a plan that embraces fracking and advances the extraction of oil and gas.

“We’re pleased that after five years, the process worked and the federal government has reaffirmed that hydraulic fracturing is a safe method of production in California,” said Kara Greene, spokeswoman for the trade group Western States Petroleum Association.

The Bureau of Land Management’s new report comes in contrast to the agency’s initial environmental report, prepared under President Barack Obama and released in early 2017. That document proposed leasing about 400,000 acres in the Central Coast region for oil and gas development.

“For the BLM, the oil and gas program needs to align with new secretarial orders,” said agency spokeswoman Serena Baker, referring to the Trump administration’s aggressive push to expand energy production.

In the bureau’s Central Coast region, drilling operations are currently limited to Fresno, Monterey, San Benito, Alameda, Contra Costa and Santa Clara counties.

Industry experts say that while leases may be offered in additional parts of the region, which include the counties of Merced, San Joaquin, San Mateo, Santa Cruz and Stanislaus, it’s not likely.

“Drilling for oil is so expensive in California, it’s hard for me to believe that anyone is doing it,” said Amy Myers Jaffe, formerly with the UC Davis Institute of Transportation Studies and now a senior fellow at the nonprofit Council on Foreign Relations in New York. “There’s only going to be new drilling if there’s someone who has property nearby and they want to extend what they’re doing on the federal pocket next door.”

The Bureau of Land Management estimates that 37 new oil and gas wells will be drilled as a result of the new plan, a small fraction of the few thousand existing wells in the region.

Most of California’s oil operations are on state and private property, with California regulators dictating if and where new drilling proceeds. Like the Trump administration, officials in Sacramento have been supportive of fossil fuel extraction.

Environmental groups have pressed the state to limit or halt new drilling, citing not only the local problems but the contribution of fossil fuels to global warming.

“There are hundreds of organizations that have been coming together for years” to pressure California officials, said Monica Embrey, a spokeswoman for the Sierra Club. She’s hoping the Newsom administration will finally act.

The Bureau of Land Management’s new report is scheduled to be published Friday in the Federal Register, at which time a 30-day public comment period begins. The governor has 60 days to weigh in. After input is gathered, the agency will review any concerns and decide how to move forward.

Last month, the bureau released a similar document for Southern and Central California, clearing the way for new oil and gas development on more than 1 million acres of federal land and mineral deposits.

Kurtis Alexander is a San Francisco Chronicle staff writer.
Keeping Watch on Earth News, Oil prices, Oil production income, U.S. oil production

2018 was likely the most profitable year for U.S. oil producers since 2013

Repost from The Energy Mix
May 10, 2019, Principle contributor Jeff Barron
changes in liquids and gas production and return on equity for seleted U.S. producers
Source: U.S. Energy Information Administration, based on Evaluate Energy

Net income for 43 U.S. oil producers totaled $28 billion in 2018, a five-year high. Based on net income, 2018 was the most profitable year for these U.S. oil producers since 2013, despite crude oil prices that were lower in 2018 than in 2013 on an annual average basis.

Lower production costs per barrel of oil equivalent (BOE) and increased production levels contributed to a higher return on equity for these companies for the fourth quarter of 2018 than in any quarter from 2013 through 2018.

The companies included in the analysis are listed on U.S. stock exchanges, and as public companies, they must submit financial reports to the U.S. Securities and Exchange Commission. EIA calculates that these companies accounted for about one-third of total U.S. crude oil and natural gas liquids production in the fourth quarter of 2018. However, these companies were not selected as a statistically representative sample but instead because their results are publically available. Their results do not necessarily represent the U.S. oil production industry as a whole.

Most of these companies operate in Lower 48 U.S. onshore basins, with some in the Federal Offshore Gulf of Mexico and Alaska, and some in several other regions across the globe. Because of various corporate mergers and acquisitions in 2018, the number of U.S. producers that EIA examined in this analysis fell from 46 companies in 2017 to 43 companies in 2018.

The aggregated income statements for these 43 companies reveal a trend of relatively low increases in expenses directly related to upstream production in 2018. Although these upstream production expenses per barrel typically correlate with crude oil prices, the magnitude of these increases in 2018 was small compared with the increase in prices.

The annual average West Texas Intermediate (WTI) crude oil price increased 28% from 2017 to average $65 per barrel (b) in 2018, but expenses directly related to upstream production activities increased 16% between 2017 and 2018 to $24/BOE. When including depreciation, impairments, and other costs not directly related to upstream production, expenses for these 43 companies averaged $48/BOE in 2018, the lowest amount from 2013 to 2018.

In contrast to production expenses, between 2017 and 2018, upstream revenue for these 43 companies increased 31% to average $48/BOE in 2018, mainly because of the increases in average energy prices and production. As crude oil prices fell in late 2018, their upstream revenue declined 11% between the third and fourth quarters of 2018.

selected expenses and revenues for 43 oil companies
Source: U.S. Energy Information Administration, based on Evaluate Energy

However, this group of companies reported financially hedging nearly one-third of their fourth-quarter 2018 production at prices in the mid-$50/b range, offsetting revenue declines when WTI prices fell lower than $50/b by the end of the year. Consequently, even with their decline in upstream revenue in the last quarter of 2018, total revenue increased for these 43 companies because of the gains from financial derivatives.

Contributions to revenue from derivative hedges—which increase in value when prices decline—for these 43 companies reached the largest total for any quarter since the fourth quarter of 2014. Financial hedging can act like an insurance policy, reducing risk by stabilizing revenue for producers. When oil prices fall lower than the prices at which producers established a hedge, the producer effectively receives higher revenues than selling at market prices. When oil prices rise higher than the hedged price, hedging results in a loss that is treated as an operating expense.

More information on these 43 producers’ financial statements, including a comparison of these companies’ cash from operations relative to their capital expenditures, is available in This Week in Petroleum.

Fossil fuel subsidies, Keeping Watch on Earth News

Fossil subsidies hit a ‘staggering’ $5.7 trillion in 2017

By IMF staff and Tim Dickinson, May 9, 2019
Repost from The Energy Mix; Full story: International Monetary Fund and Rolling Stone
skeeze / Pixabay

Global fossil fuel subsidies were expected to total US$5.7 trillion in 2017, and U.S. subsidies in 2015 exceeded the country’s profligate military spending, according to analysis released earlier this month by the International Monetary Fund.

In a summary of its May 2 working paper, the IMF places 2015 subsidies across 191 countries at $4.7 trillion, or 6.3% of GDP, including $1.4 trillion from China, $694 billion from the U.S., $551 billion from Russia, $289 billion from the European Union, and $209 billion from India.

“The numbers are quite staggering,” said IMF Managing Director Christine Lagarde, “fiscally, but also in terms of human life, if there had been the right price on carbon emission as of 2015.” The IMF’s working paper summary states that “efficient fossil fuel pricing in 2015 would have lowered global carbon emissions by 28% and fossil fuel air pollution deaths by 46%, and increased government revenue by 3.8% of GDP.”

With subsidies brought under control, Lagarde added, “there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people.” The summary notes that “about three-quarters of global subsidies are due to domestic factors—energy pricing reform thus remains largely in countries’ own national interest—while coal and petroleum together account for 85% of global subsidies.”

Rolling Stone compares U.S. subsidies to the $599 billion budget the country’s bloated military received in 2015. “To offer a sense of scale, Pentagon spending accounted for 54% of the discretionary [U.S.] federal budget in 2015,” the magazine writes. “In comparison to another important, but less well-funded part of the federal budget, fossil fuel subsidies were nearly 10 times what Congress spent on education. Broken down to an individual level, fossil fuel subsidies cost every man, woman, and child in the United States $2,028 that year.”

The fossil industry and its “stooges in public office” routinely argue “that making consumers pay for the full impacts of fossil fuel use would cripple the economy,” Rolling Stone adds. “The IMF experts call bullshit on this idea, revealing that the world would, in fact, be more prosperous. Eliminating subsidies for fossil fuels would have created global ‘net economic welfare gains’ in 2015 of ‘more than $1.3 trillion, or 1.7% of global GDP,’ the study found,” with the calculation based on reduced environmental damage and higher government revenues after factoring in consumer losses due to higher energy prices.

Air pollution, Flaring, Petroleum Coke (Petcoke), Valero Benicia Refinery

Valero Restarts Benicia Refinery 40+ days after major malfunction and pollution release

By Ted Goldberg, KQED
The Valero Benicia refinery. (Craig Miller/KQED)

Valero is restarting its Benicia refinery more than 40 days after a major malfunction and pollution release forced the energy giant to shut down the facility, contributing to the state’s recent spike in fuel costs.

“The Valero Benicia refinery has commenced the startup process, which is a multi-day sequenced event,” the company said in a notification sent to Benicia city officials over the weekend. The message warned of potential “visible, intermittent flaring” as a necessary safety precaution.

That flaring began Tuesday morning, according to a state hazardous materials database, and included a release of sulfur dioxide. The Bay Area Air Quality Management District sent staff to the refinery to observe the flaring, said agency spokesman Ralph Borrmann.

Valero has also been in touch with the Benicia Fire Department about the startup and flaring, according to Fire Chief Josh Chadwick.

Valero shut down the refinery on March 24 after ongoing equipment problems.

The air district, along with California’s Division of Occupational Safety and Health (Cal/OSHA) and Solano County inspectors, has been investigating the refinery’s problems since then.

The focus of the county investigation centers on two key refinery components that malfunctioned, allowing petroleum coke (petcoke), an oil processing residue, to escape.

For several hours on March 24, county officials issued a health advisory, warning residents with respiratory issues to stay indoors.

The petcoke releases later prompted Benicia’s mayor and air quality advocates to call for local air regulators and the city to create a more robust and coordinated strategy to measure what gushes out of the refinery. Two years earlier, the same facility experienced a full outage and a much more extreme pollution release.

The air district, which issued 12 notices of violation against Valero for the most recent releases, does not have a stationary air monitoring device in Benicia’s residential areas and had to drive a van to the area to monitor the situation.

The shutdown took place several weeks after California’s gas prices began to increase.

Energy experts correctly predicted that the refinery’s problems, coupled with maintenance issues at several other California refineries, would prompt an increase in crude oil prices.

The average cost of a gallon of unleaded gasoline in California on the day Valero shut down its Benicia refinery was $3.49, according to the American Automobile Association. It has increased by more than 60 cents since then, and on Tuesday stood at $4.10.

Last month, Gov. Gavin Newsom ordered the California Energy Commission to investigate the hikes.

But the average price increases have slowed in recent days, and an AAA representative said Tuesday that costs may be beginning to stabilize.

“The news about Valero was actually a pretty big reason for the prices evening out,” said AAA Northern California spokesman Mike Blasky.

He said just the talk of the Benicia refinery restarting contributed to a recent 8-cent drop in the average wholesale cost of a gallon of gas.

“When those units do restart, that’s going to really contribute to a higher utilization rate, which will lower prices as we see our stocks resupplied,” Blasky said. “Any major refinery shutdown in California tends to really throw things out of whack.”

KQED’s Peter Jon Shuler contributed reporting to this story.