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Tags: Fracking

Fracking Cuts Ohio Heat Costs



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Ohioans are cranking up the heat this month as frigid weather sets in. On January 7, for example, Cleveland broke a cold-weather record that had stood since 1884. But natural gas is mitigating the high energy costs as the freeze continues, and residents are enjoying significant savings.

Columbia Gas of Ohio says that were it not for the fracking boom, Ohio residents would have had to pay up to 129 percent more for their heating this month, the Toledo Blade reports this weekend:

Columbia Gas of Ohio said this January’s average residential heating bill will be $142.19 to $146.19 for the 1.4 million households it serves, many of them in northwest Ohio. . . .

But what if the modern era of hydraulic fracturing — fracking — to drill for natural gas as we know it hadn’t occurred?

“They’d be paying more, and that’s obvious,” said Tom Stewart, executive vice president of the Ohio Oil and Gas Association.

Based on current usage patterns, applied to Columbia’s January, 2005, and 2006 rates for natural gas, this month’s average residential bills would likely have been somewhere between $234.15 and $324.95.

That’s 65 to 129 percent more.

Columbia’s price for natural gas is among the lowest it’s been in years, which industry experts attribute to a regional abundance of natural gas generated by the modern era of fracking.

Stewart also notes that because Ohio produces its own natural gas, prices have remained relatively steady despite the unseasonably cold weather.

While other states have been reluctant to embrace natural gas, Ohio has encouraged the industry’s development in recent years, the Columbus Dispatch reported yesterday:

State officials say they are committed to working with energy companies to increase shale drilling in Ohio. Gov. John Kasich predicted in 2010 that drilling would be a “godsend” for the state’s economy.

Shale drilling added the Buckeye State to a national energy revolution in which companies are tapping domestic sources of oil and gas. It also involved the public in an ongoing debate focused largely on the environmental and health effects of fracking and the waste that comes out of shale wells.

Since 2010, more than 660 wells have been drilled in Ohio, paving the way for pipelines, disposal wells for fracking waste and refineries.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity. She also writes about energy and environmental policy as a senior fellow for the Independent Women’s Forum.

Tags: Fracking , Energy

The Audacity of Frack



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Capitalism, said economist Joseph Schumpeter seven decades ago, is a process of creative destruction. New inventions, new processes, new methods of organization lead to the creation of new profitable and efficient businesses and to the destruction of old ones unable to compete.

There are few accounts of the creative side of Schumpeter’s phrase more vivid than The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters, a new book by Wall Street Journal writer Gregory Zuckerman.

For years, politicians, policy experts, and corporate executives have tried to reshape American energy policy and development. They have operated on a series of assumptions seemingly based on experience and logic.

One is that oil and gas production in the United States is inevitably in decline. Another is that we can move toward energy independence by increasing use of renewables like wind and solar energy.

Those assumptions seem to have been refuted in the course of this young century by a group of audacious outsiders who have made great fortunes — and in some cases lost them.

The Frackers tells their story. It tells the story of George Mitchell, son of a Greek immigrant, who was convinced that hydraulic fracturing — fracking — could bring in vast amounts of natural gas from the Barnett Shale in north Texas.

It tells the story of Aubrey McClendon and Tom Ward, whose Chesapeake firm bought mineral leases atop vast shale deposits, becoming America’s No. 2 gas producer, but overexpanding disastrously.

It tells the story of Harold Hamm, a sharecropper’s son who rose from picking cotton to having a $12 billion fortune by prying oil out of the Bakken shale of North Dakota.

And it tells the story of Charif Souki, Lebanese immigrant and proprietor of the Los Angeles restaurant where Nicole Simpson and Ronald Goldman were served their last meals, who charmed some investors into financing a liquid-natural-gas-export terminal in Louisiana.

This is mostly a story of private enterprise in action. Government studies provided some early support for fracking, but government energy experts lagged far behind these wildcatters in appreciating the potential for extracting gas and oil from shale.

It’s also worth noting that these men were not motivated simply by greed. Mitchell had a vision that America could liberate itself from dependence on foreign energy, and had the satisfaction of seeing the nation on the road there when he died last summer at 94.

McClendon and Ward preached that shale gas could provide a clean alternative to coal and oil, an essential interim step to developing renewables that are competitive in price.

Both of these men could have paused at some point in their careers and retired with enough wealth to live in luxury, contribute generously to others, and leave large inheritances behind.

Instead, they surged ahead, taking enormous risks, borrowing enormous sums. I suspect that most readers will feel queasy, as I did, reading of the enormous debt they carried at times and the breathtaking chances they took.

Nor did everything work out well for them. In 2012, McClendon and Ward were both forced out of the firms they headed because of their insatiable desire to buy ever more mineral leases. Hamm faces the loss of half his net worth in divorce.

The fracking revolution has had the effect not only of swelling the domestic supply, but also of slashing the domestic price. Bad news for McClendon and Ward, but good news for Souki, who is retrofitting his terminal to export, rather than import, liquefied natural gas.

The Frackers reminds me of the enormous risks taken by John D. Rockefeller, whose kerosene replaced whale oil for lighting (and saved those wondrous mammals from slaughter), and those taken by the auto pioneers of Detroit.

It reminds me also that some — but not all — of them reaped great rewards. Henry Ford became a billionaire. W. C. Durant, founder of General Motors, died broke.

Public policymakers tend to assume a static economic world that responds incrementally to incentives, including changes in policy.

The Frackers shows an explosive and highly unpredictable world where imagination, perseverance, skill, and — a necessary ingredient — luck can transform a nation from whale oil to kerosene, horse and buggy to car, energy importer to energy exporter.

Creative destruction can render public policies irrelevant, as seems to be the case with several decades of conventional-wisdom energy policy. It reminds us that people with ingenuity and daring can reshape the world in ways few can imagine.

Michael Barone is senior political analyst for the Washington Examiner. © 2013 The Washington Examiner. Distributed by Creators.com

Tags: Fracking

The Democrats’ Coming Civil War Over Fracking



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From the puppy-heavy Tuesday edition of the Morning Jolt:

The Democrats’ Coming Civil War Over Fracking

You knew that at some point, the Democrats with constituents who would benefit from the jobs that can be created through fracking — i.e., blue-collar voters and their representatives — and the Democrats who see fracking as a chainsaw massacre of Gaia’s baby seals would conflict. Democrats have largely papered over these differences, but you can only kick the can down the road so many times.

Now that simmering dispute is boiling over . . . in Pennsylvania.

Battle lines were drawn in June when the state committee passed a resolution calling for a moratorium on fracking until health and environmental concerns in the state are more clearly addressed. Though the resolution was little more than a position statement, debate over it was intense and emotional.

But the 115-81 vote didn’t put an end to the debate, and emotions continued to run high among commonwealth Democrats.

Two of the seven declared Democratic gubernatorial candidates — U.S. Rep. Allyson Schwartz and former Environmental Protection Secretary Katie McGinty -– criticized the moratorium.

Even former Gov. Ed Rendell, one of the nation’s preeminent Democrats, condemned the resolution as “very ill-advised.”

[Intra]-party dissension over the controversial vote continued last month with 19 state House Democrats — many of whom [are] from the fracking region — signing a letter to state party Chairman Jim Burn that called the resolution “short sighted.”

And earlier this month eight Senate Democrats weighed in with their own letter to Burn saying they were “dumfounded” by the resolution and urged him to “re-examine” the issue.

Fracking is already a big deal in Pennsylvania, as the neat map at the link demonstrates: 65 operators, 5,982 active wells, as of June 30, 2012. Almost the entire state sits atop the Marcellus Shale formation, which is where all the good stuff is:

It will probably not surprise you that Marcellus Shale development is creating jobs, and the question of precisely how many jobs is hotly disputed, with development advocates counting the ones created by industry-supply businesses, etc., and the environmental groups defining the job creation as narrowly as possible. One estimate of direct jobs is in the neighborhood of 30,000; “indirect” jobs could be as high as 245,054.

“The Marcellus is an important new industry, and there’s certainly no question that is has, over the last several years, created employment in Pennsylvania,” said Mark Price, labor economist for the Keystone Research Center. “But it remains the fact that employment overall in that sector — you’re talking about something that is less than 0.5 percent of the workforce . . . a tiny portion of all the jobs.”

Yet industry groups such as the Marcellus Shale Coalition continue to tout the industry’s job creation, citing numbers in the millions for new jobs created by shale.

“Employment in the entire upstream unconventional oil and gas sector on a direct, indirect and induced basis will support nearly 1.8 million jobs in 2012, 2.5 million jobs in 2015, 3 million jobs in 2020, and nearly 3.5 million jobs in 2035,” said Marcellus Shale Coalition spokesman Travis Windle.

Of course, there are some vocal environmentalists who want to make sure fracking gets stopped in its tracks:

Pennsylvania residents petitioned the Environmental Protection Agency to reopen an investigation into water quality in Dimock, after publication of an internal agency analysis that linked gas drilling to methane leaks.

Ray Kemble, who lives in the town, and Craig Stevens, who lives nearby, today delivered a petition they said was signed by 60,000 people to EPA employees in Washington. They carried a gallon of brown water they said came from a well used by Kemble.

The green site Grist.org reports:

As anti-fracking activism heats up around the country, pro-fracking Dems might find themselves increasingly at odds with their base. As we near 2016, any Democrat who wants to replace Obama might have to start singing a different tune.

I, for one, will be rooting for injuries, lasting recriminations, and alliances torn asunder.

Tags: Fracking , Pennsylvania , Environmentalism

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