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Some thoughts on the domestic oil and gas situation as we move into April…
The rigs just keep on coming…: The industry activated more than 70 additional drilling rigs during the month of March, bringing the total new rigs activated during the first quarter of 2017 to more than 200. My “bold” prediction as the year began was that it would take four months, not three, for the U.S. industry to bring that number of new rigs onto the market. So, ok, I was too timid.
Interestingly, more than a dozen of these newly-active rigs have moved into the Haynesville Shale region, which is experiencing a somewhat surprising resurgence of activity, even in the seemingly interminable weak price market for natural gas. The play’s abundance of pipeline takeaway capacity and proximity to major export facilities are two of the main reasons for this uptick in activity, as detailed by Forbes contributor Jude Clemente in his piece of March 25.
March’s increase in rigs drilling for oil was also less focused on the Permian Basin than in prior recent months, with other basins like the Eagle Ford, the SCOOP/STACK and the DJ Basin also seeing significant upticks in activity. How much longer this rising rig count can last is anyone’s guess, but it was a major reason why…
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An interesting facet of the news media’s coverage the past couple of days about President Trump’s Executive Order on Promoting Energy Independence and Economic Growth (hereinafter referred to as “Order”) is that the coverage focused mostly or entirely on the Order’s impacts on the U.S. coal industry and coal-related jobs. Granted, the Order was cast as the President’s effort to essentially rescind major parts of former President Obama’s “Clean Power Plan”, which most recognize was an effort by his Administration to damage the nation’s coal industry. But just as the “Clean Power Plan” had impacts and produced major regulatory efforts that reached far beyond the coal industry, President Trump’s newest executive order also impacts other segments of the nation’s energy sector.
Here is a review of several of them:
- Section 2 of the Order directs all relevant agencies to “review all existing regulations, orders, guidance documents, policies, and any other similar agency actions (collectively, agency actions) that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources.” This is a very broad-ranging mandate that, when combined with other aspects of the Order, is likely to create a vast array of proposed regulatory rescissions and reforms.
- This makes them different from the Democrats….how, again?: With the Democrats threatening to shut down the federal government over the pending expiration of the current continuing resolution (CR), Republican “leaders” in both the House and Senate have already conceded that they will continue to fund Planned Parenthood and Obamacare, and will deny President Trump’s request for funding for the border wall. I’m sorry, but didn’t we just have an election about every one of those funding priorities last November, and didn’t the voters indicate they prefer to reverse all three of those decisions by the pathetic GOP congressional leadership? What am I missing here?
- Let’s just rename it The Federal Bureau of Non-Disclosure.: You would have had to search long and hard to find it due to the mainstream fake media blackout on anything not harmful to President Trump, but the Weekly Standard reports that House Intelligence Committee Chairman Devin Nunes pointed out yet again that the FBI is still stonewalling his Committee’s requests for information related to its investigation of the Democrats’ Trump/Russia fantasy. In response to Nunes’s statement, the FBI sent a spokesman out to say “We’re cooperating”, and then presumably went back to stonewalling the Committee.
- But was her son, Scut, involved? What about his toady, Grover Dill?: Speaking of stories you can’t find, a former Obama official named Evelyn Farkas told Mika Brzezenzski (or however you spell that name) on MSNBC early in March that she and many other Obama officials had indeed participated in an organized effort to circulate raw surveillance intelligence involving members of the Trump Transition Team, and had gladly shared the intel with members of the fake news media, unmasking some American citizens in the process. She told this all to MSNBC gladly, and in a manner that made it obvious she is in fact proud of her actions. She apparently did not understand that, in the process of that interview, she was potentially admitting to the commission of multiple felonies by herself, other Obama officials and members of the fake news media. Thus, the fake news media has been jointly sitting on this story hoping it would just fade away. Trouble is, the story has been getting a ton of attention in the realm of talk radio this week, so suddenly Ms. Farkas felt the need to go back on cable TV on Thursday to deny everything she had told Mika. And her friends in the fake news media will nod their heads and move on. Nothing to see here, all is well.
- Editor: you really think the public will buy that cock and bull story? Reporter: Well, sure, er, the Democrats will, at least.: Rather than report on the admissions of Ms. Farkas, the fake (literally fake, since it is no longer in print) magazine Newsweek ran with a “blockbuster” story about how our suddenly intrepid (now that he’s bashing a Republican) bi-polar FBI Director James Comey really, truly, no kidding was begging to run to the NY Times late last summer with an op-ed in which he would reveal the Russian efforts to “rig” the elections. And guess who stopped him? Why, our hero, Barack Obama, of course! Also of course, this Newsweek “blockbuster” is based solely on the word of not one, but two (!) source…who naturally remain unidentified. *sigh* #Fakenews at its finest.
- A story you can easily find this morning is the Wall Street Journal’s report that General Mike Flynn has offered to testify before the Senate Intelligence Committee in exchange for immunity. Upon hearing of this offer by Gen. Flynn, talking heads all over the fake news media exploded, and immediately jumped to the conclusion they have jumped to 1,000 times before over the last 21 months, which is that “this is finally it” for President Trump. Trouble is, if you read the whole WSJ story, you find this statement from Gen. Flynn’s lawer:Mr. Kelner, Mr. Flynn’s attorney, decried the “unfounded allegations, outrageous claims of treason” and other charges by lawmakers and media commentators.“No reasonable person, who has the benefit of advice from counsel, would submit to questioning in such a highly politicized, witch-hunt environment without assurances against unfair prosecution,” he said.That doesn’t sound much like someone who’s getting read to toss the POTUS under the bus. It sounds a lot like someone who saw the shameful travesty that happened with Scooter Libby during the last Republican presidential administration, and who wants to avoid the same fate.
But hey, it’s all Trump Derangement Syndrome, all the time in the fake news media.
That is all.
As their decade-long effort to demonize hydraulic fracturing – or “fracking” as they like to call it – lost its previous steam over the last couple of years, anti-fossil fuel conflict groups who raise money by stoking public fears related to the oil and gas industry have gradually shifted their main focus over to the pipeline segment of the business. Encouraged by the temporary victory given them by the Obama Administration related to the Keystone XL pipeline project, these conflict groups have become engaged in protests related to numerous midstream projects in the Northeast, in North Dakota (the Dakota Access Pipeline) and in West Texas (the Trans-Pecos Pipeline).
While their high-profile “wins” to date have been either temporary or, as with the Dakota Access Pipeline, illusory, nevertheless. Thus, they have chosen to engage in a constantly-increasing number of pipeline-related construction projects and incidents.
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The growing glut of natural gas on the global market – spurred in part by increased exports of Liquefied Natural Gas (LNG) by U.S. producers over the last year – reminds us of the dynamic nature of the domestic natural gas market, and the role shifting public policies have played into that over the years.
My own frame of reference here begins during the summers of 1977 and 1978, when I earned college tuition money by taking summer jobs on pipeline crews in deep South Texas. In 1978, the Congress and the Carter Administration had become convinced by some really bad science that the U.S. would actually run out of natural gas in a few decades, and thus needed to conserve what little remaining reserves it had on-hand for home heating usage. Acting on this belief, then-President Jimmy Carter signed into law the Natural Gas Policy Act (NGPA) and the Fuel Use Act (FUA), both of which had major impacts on natural gas markets, and both of which inhibited investment in new natural gas-buring infrastructure.
The NGPA discouraged investment in drilling for new natural gas reserves by allowing the federal government to establish ceiling prices producers could receive for various categories of natural gas that were established under the law. The FUA was even more prohibitive on the demand side of the natural gas ledger, prohibiting utility companies from building new gas-fired power plants. The result? A Democratic Administration ironically actively encouraged the building of dozens of new coal-fired and nuclear power plants all over the United States, many of which are still operating, much to the chagrin of today’s climate alarm lobby.
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Another CERAWeek conference has come and gone, producing, as it always does, literally hundreds of stories in the global energy-related media. But the biggest news related to the oil and gas industry that happened during the week was unrelated to the conference.
That of course was the precipitous drop in the global price of crude on Thursday and Friday, following the report of a record inventory build in the U.S. for long positions by a market that was already nervous about the slow pace of closing the global supply surplus despite the reported high level of OPEC nation compliance with the group’s production limits agreed that became effective on January 1.
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As the United States Senate finally begins taking up joint resolutions designed to reverse a handful of regulations implemented during the waning days of the Obama Administration, it’s worth discussing the indispensable role the Congressional Review Act (CRA) has come to play in halting regulatory excess, and more importantly, upholding the rule of law. While the merits of some of the regulatory actions targeted for reversal are certainly arguable, others lie so far outside the governing statutes that their reversal, either by congress or the courts, was almost inevitable from the day of their initial proposal.
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