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Setback Initiative Puts Colorado Fracking Fight in the Hands of Voters

Advocates for keeping fossil fuels in the ground have gathered enough signatures to provide a ballot choice for voters to increase setbacks for oil derricks and fracking pads from 500 feet to 2,500 feet. This would likely result in a curtailment of Colorado oil and gas production. A major political battle is likely to ensue. The success of this initiative provides a window into the larger choices we face as human caused climate change impacts start to ramp up.

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Possible Record Methane Spike at Barrow, Alaska — What Does it Mean?

There’s no avoiding it — climate change is a controversial subject; a threat that should unify us all that, due to reticence, denial, fear, and a basic lack of understanding, is instead often quite divisive. But among the subjects that stand out as real fodder for acidic controversy, the issue of methane feedbacks from the global climate system — the oceans, thawing permafrost, and especially the Arctic — is one of the worst. There’s a noted tendency to either downplay or overplay risks. Though this polarization is likely fed by the general mysteriousness and complexity of the subject, its potential existential nature also feeds into the heat that methane feedback-related discussions tend to draw.

It all makes one hope for improved discussion on the subject. Given the fact that catastrophic methane feedback appears unlikely (but would have a high overall impact if it did emerge), it’s probable that the subject will continue to generate a difficult conversation for as long as human-forced warming is an issue, and so long as the science continues to remain uncertain.

copernicus-observatory

(The Copernicus Observatory shows surface methane hot spots in China, Africa, South America, the U.S., Canada, Europe, Russia and the Arctic. Note that generally high concentrations still tend to center over the Arctic. Meanwhile, the various hot spots seem to indicate major sources like fossil-fuel industry wildfires, wetlands, droughts, the Arctic Ocean and glacial and permafrost thaw. Also note that current readings indicate a serious rise in global methane concentrations, but not a spike that significantly exceeds peak 20th-century additions. It’s worth considering that, during recent years, expanded natural gas exploration and extraction through fracking has likely contributed a substantial new human methane source addition to the global atmosphere. Meanwhile, there is some concern that the Earth System may be starting to mildly feed back by bleeding additional carbon from warming lands, forests, oceans and permafrost.)

It’s not really a question of whether or not some scientists are concerned or if there is a risk, however ill-defined. Dr. James Hansen has often indicated that a strong methane feedback from the Arctic or world ocean system would be a climate nightmare that could well eliminate the time window to respond to prevent catastrophic warming. Methane and other carbon feedbacks are prime suspects for past hothouse event triggers — potentially playing a role in setting off events like the Permian-Triassic Extinction and/or greatly contributing to the loss of ocean health that was a key feature of these extinction events. Neil deGrasse Tyson alluded to this risk in his 2014 rerendering of the science series Cosmos.

Polar researchers, including those at the National Snow and Ice Data Center (NSIDC), often point to varying risks and potentials for methane feedback from numerous sources such as permafrost thaw. Others fear releases coming from seabed stores — claims that often meet stiff resistance from more established areas of the science. But given how close we are to locking in 2-degree-Celsius or greater amounts of warming this century, it doesn’t take a lot of carbon feedback, methane or otherwise, from the Earth System to generate a problem. Even a moderate feedback would cut the time necessary for carbon emissions draw-downs. It is for this reason that monitoring of the methane, and overall carbon feedback, situation is a necessary part of developing a comprehensive climate change situational awareness (which I have worked hard to develop here at this blog). Which is why, today, we are going to talk a little bit about a big methane spike appearing in the hourly readings near Barrow, Alaska.

Apparent Record Methane Spike in the Hourly Readings at Barrow

Yesterday, climatologist Brian Brettschneider, whose Twitter feed provides a good stream of informed climate change-related updates, posted a truncated version of this NOAA ESRL graph:

hourly-methane-spike

The graph tracks hourly methane readings at the data collection location for Barrow, Alaska. As shown, the recent (and unconfirmed) data set shows what appears to be a record methane spike for that location. Also note that big spikes appear in the hourly data at certain points many times since 2000, as is typical during this time of year. Most notably, a similar very large spike occurred in 2004, one that the recent 2016 spike just edges out.

Looking at the graph, there’s a lot that it doesn’t tell us. Firstly, what is the source of this methane spike? If the spike was an outlier with no periodicity it might indicate the potential for some kind of anomaly or human source. However, since seasonal spikes seem to show up in this graph, this hints that the current spike is environmental. In addition, since Alaska as a whole and Barrow in particular both recently experienced some of their warmest weather on record, there’s some reason to suspect that this added heat played a part in the 2016 spike. And, 2004 also saw a period of then-record warmth during summer in Alaska. So Alaska warming is in line as a suspect cause for the 2016 methane spike.

As anomalous spikes go, this one is pretty big — it apparently set a new hourly record methane reading around 2370 parts per billion for the recording station. But since this Barrow spike isn’t visibly part of some big regional methane plume and since the global monitors aren’t recording a big methane jump as well, we can be pretty certain that this particular spike, if confirmed, is a local and probable short-term issue, and not a sudden, huge methane release issue of global importance. However, it does represent another point in a context that seems to include some big local methane sources popping up in the Arctic environment and possibly indicating a larger, if comparatively moderate, regional feedback taking place in response to the warming and thawing ongoing there. (No consensus scientific study has yet fully confirmed such a preliminary observation, which is a threat analysis-based potential identification on my part.)

So, overall, something to add to the big pot of bubbling concerns — but nothing to light your hair on fire over yet.

Conditions in Context

During the 20th century, large-scale industrialization linked to fossil-fuel burning and extraction helped to drive rapid rates of atmospheric methane increase. These rates peaked during the late 1980s and early 1990s when global policy measures helped curtail methane leakage from fossil fuel infrastructure. According to NOAA, annual rates of global atmospheric methane increase peaked in 1991 at a 14.32 ppb yearly jump.

ch4-trend

(Global methane is again hitting a rapid rate of rise. Though the Earth System appears to be providing some ominous rumblings that feedbacks may be on the way, the present spike is likely primarily due to increased fossil-fuel extraction activity, particularly due to fracking. Image source: NOAA.)

Such curtailments helped to produce a mid-1990s to mid-2000s plateau in the rate of atmospheric methane accumulation. Now, with the advent of fracking and with global warming appearing to generate a number of possible new methane sources (or amplify traditional sources) from the Earth System, rates of annual methane increase are again on the rise. In 2014 and 2015, annual increases hit 12.53 ppb (the third highest annual rate of increase in the NOAA record) and 10.07 ppb respectively (tenth highest). Preliminary reports show that 2016 appears to be on track to hit near 10 ppb worth of atmospheric increase.

As a result, it appears that fracking, primarily, and warming-related feedback (possibly secondarily) are contributing to annual rates of atmospheric methane increase that are comparable to peak periods of increase during the late 1980s and early 1990s. However, these rates of increase, though significantly adding a heat forcing that about equals one quarter to one third of the annual CO2 addition, show no current indication of a catastrophic rate of methane increase that would point toward the major environmental releases some have feared. As such, the greatest part of our ability to currently prevent further rising rates of atmospheric methane comes in the form of rapidly reducing all fossil fuel use and particularly to contain and reduce coal mining and oil and natural gas fracking. And if we do that, there will be less heat stress on the environmental methane stores and less overall long-term pressure for the kinds of feedbacks some of us have come to fear.

Links:

NOAA ESRL

All About Frozen Ground

The Arctic Turns Ugly

Hydrate Catastrophe Unlikely

The Copernicus Observatory

Brian Brettschneider

Toward Improved Discussions: Methane

An Update on Fracking Emissions

Cosmos

Hat tip to Griffin

World to Oil Producers — We Don’t Want Your Fracking Crude

World oil prices routed to 49 dollars per barrel today amidst weak global demand. It’s a sea change in the oil and energy markets that is now in the process of rattling many previously well established oil ventures to their foundations. A shot across the bow that may well signal the beginning of the end of crude due to a combination of expensive production, competition by renewables and efficiencies, and a widespread recognition of ramping hazards from human-caused climate change.

*    *    *    *    *

During the summer of 2014, amidst geopolitical crisis after geopolitical crisis in oil producing regions of the globe, world crude oil prices spiked to near 115 dollars per barrel. Ever since the mid 2000s, global producers had struggled to keep up with demand or to even keep crude + condensate production flat. But as of 2012, deregulated US fracking technology had ruptured large sections of the Dakotas, Texas and a strand from the Virginias through Pennsylvania.

US Fracking Ascendant

US oil production rose by 1 million barrels per day for three years running. By end 2014 US crude production had hit 9.13 million barrels per day. US liquids production, including 1 million barrels per day of biofuel, had spiked to 14.3 million barrels per day — making it the largest liquid fuels producer in the world.

But the US wasn’t the only region benefiting from gains. Russia and Iraq also saw oil production rise even as Saudi Arabia completed construction on a surge production capacity of 2 million barrels per day. And in the oil project pipeline more than 55 million barrels per day of new production was planned through the mid 2020s. All projects banking on continued oil price support in excess of 100 dollars per barrel.

Fracking Pads

(Fracking Pads stretch as far as the eye can see in North Dakota’s Bakken Formation. Image source: Greenpeace.)

It was an oil faerie tale come true. High prices and surging production combined to push oil asset valuations to levels never before seen. The oil majors, the world’s most profitable companies in the history of humankind, could rest safe in the assurance that this wealth and power base would continue to extend their reign for decades to come.

But, for the oil producers, the drilling and the service companies, and yes, even for the oil majors themselves, there happened to be more than one serpent in this otherwise rather lovely and gratuitous garden.

Declining Demand

From the control rooms of various corporate Death Stars, oil company executives must have felt quite comfortable with their positions. Even to those with fracking, tar sands, and deep offshore production exposure, 115 dollars per barrel was still quite profitable. And, conventional thinking was that the extra fire-water would, even at this price, support global economic growth which would, in turn, bring about more demand.

Past years experience supported this notion with demand rising by more than 1 million barrels per day each year even during times when the price of oil charged to $120 or higher. The 150 dollar price of economic harm set in 2008 was still a ways off and the forecasts called for demand to grow by 1.3 million barrels per day through 2015.

But demand did not perform as expected. Throughout the world economic weakness reigned. In Russia, sanctions imposed by the US bit deep into economic activity. In Europe, austerity measures resulted in stagnating growth. In China, an unwinding housing bubble did its own damage to demand for oil.

In addition, rapid and widespread increases in vehicle fuel efficiency were also drawing down marginal demand for oil. In the US, corporate average fuel efficiency was rising by 2-3 mpg per year. Worldwide, fuel efficiency standards were also rising. Furthermore, an entirely new animal began to appear on the international stage — the zero oil consuming electric vehicle.

By end 2014, more than 250,000 electric vehicles had been sold in the US with 600,000 EV sales worldwide. Compared to hundreds of millions of ICE vehicles roaming the world’s streets, this initial surge in EV adoption seemed small. Yet it was more than enough to instill a nagging worry among oil company supporters and investors. A worry reinforced by China’s late 2014 pledge to put 5 million EVs on its roads before 2020. So it seemed the tiny EV sprig could well grow into a tree that may later topple most of the oil demand base through the next couple of decades.

First Municipality-owned Solar Powered EV Charging Station in the USA

(Oil corporations’ worst nightmare. Solar charging station with EVs. Image source: Technology Tell.)

And oil companies didn’t need to look to just EVs to find instances of alternative technology drawing down oil demand. Throughout the world island and Middle Eastern nations, for so long dependent on oil-based electricity generation, began to adopt distributed solar systems that were far cheaper than their fossil fuel rivals. Though just 5 percent of global electricity demand still runs on oil, that 5 percent represents upward of 5 million barrels per day of global oil consumption. And eroding that demand in a marginal and sensitive market was beginning to show its impacts.

Throughout the latter half of 2014 demand faltered with growth forecasts winnowed down to 1.1 million, 900,000 and finally 700,000 barrels per day. A near halving of the previous forecast.

The Saudi Gambit

As demand expectations began to fall, so did prices. By September, oil was trading in the 90s and many around the world were looking to OPEC for support. The last time oil went into free-fall OPEC, lead by Saudi Arabia, cut production and prices rocketed back to 100 + dollars per barrel levels. However, this year Saudi Arabia was faced with an upstart US and a resurgent Russia and Iraq. Media outlets in the US were bragging about how North America had unseated the Sauds as the kings of oil production. But these outlets didn’t take into account the essential difference between the cost of North American oil production, which tends to run quite high, and the cost of Saudi production, which is still less than $20 per barrel.

Saudi Arabia must have seen this coming for quite some time as the Kingdom had banked more than 750 billion dollars in oil profits for a rainy day. By late fall, and sitting on this mountain of cash, Saudi Arabia made the then surprising decision to keep pumping oil and to urge its fellows in OPEC to do the same. And so, by November, OPEC’s 30 million barrels per day continued to be delivered.

Combined and surging US, Russian and Iraqi production formed a tsunami of ever cheaper oil competing for a host of unenthusiastic customers. Prices plunged to 65 dollars per barrel by mid December. By today, the price of a barrel in West Texas was 49 dollars, at Brent it was 53 dollars, in the geographically isolated and environmentalist blockaded regions near Alberta barrels traded for less than 37 dollars.

Extraordinarily High Price Production

If oil valuations, due to prices consumers appeared willing to pay, were high earlier this year, so were the costs of producing the new oil. Though there was quite a lot of new, unconventional oil out there to replace the slowly winnowing supplies of traditional fuel, that new oil was tough to reach. It required a great expense in broken and poisoned earth. In regions the size of a small country laid waste. Under skies that ever more frequently disgorged extreme droughts and deluges, after a proceeding series of years that have brought ever higher global temperatures, inexorably rising seas, and ever more rapid glacial melt, the environmental and human cost of extracting that unconventional fuel seemed very high indeed. A price that appeared to be rising to the point of an impending mass extinction event for the Earth due to a wrecked climate. A ghastly sacrifice in the name of oil profiteers. One that would include a growing number of human beings together with countless animal species.

Tar Pit #3

(Tar Sands’ hellish landscape of ruined Earth and toxic tailing ponds. Image source Occupy.)

In the North, in Canada, a vast strip mine wasteland reminiscent of Tolkien’s Mordor hosted colossal machinery devouring gigatons of earth and spitting out sun-blocking plumes of smoke, vomiting massive lakes of poisonous water (lethal to any poor bird who happened to land upon its surface and to fish and Canadians down-stream alike), and spitting out billions of tons of corrosive bitumen. In the US, fracking required the near-constant injection of water and chemicals into the earth, wrecking water sources and farmlands, to produce an equally caustic fracked crude. And far off shore, deep ocean drilling leveraged technology equivalent to lunar landers and the most advanced remote operated vehicles all launched from gigantic sea-based platforms.

The cost to continue to expand these ventures ranged between 50 and 110 dollars per barrel of oil extracted. An observation that shows more than a trillion dollars and 40 million barrels per day of planned oil developments through 2025 unprofitable at today’s price of 49 dollars per barrel. An observation that lead a recent Bloomberg analyst to appropriately term the projects ‘Zombies’ during a December assessment of a Goldman Sachs’ report on the matter:

Oil Zombies 70 dollars

(OMG, Zombies! Goldman Sachs’ report from December showing more than 1 trillion dollars of oil projects at risk under a $50 per barrel oil price regime. Image source: Goldman Sachs and Tom Randall at Bloomberg.)

Putting this investment at risk results in severe instability for global energy markets. The reason is that current oil field decline rates are so extreme that 9 million barrels per day of new production or enhanced recovery from existing wells must come on line every four years just to keep current production flat. Wholesale de-funding of these investments would lead to a rapid drop-off in global oil production in the coming years as rapidly depleting new sources such as fracking and faltering old wells fail en masse.

Notably, almost all new major oil projects are now on indefinite hold pending a return to higher prices. Prices that will almost certainly come at some point due to that raging depletion rate. But the question many are asking is will it come soon enough to prevent massive failures of numerous companies within the unconventional fuels industry?

Even the cost of just maintaining current unconventional production ranges from 35 to 95 dollars per barrel. Far more than the 10-20 dollars per barrel cost of extracting oil from a traditional pressurized oil well. And with current massive price falls to 49 dollars per barrel or less, many companies are now in jeopardy.

Of course, we should probably include trillions and trillions more at risk due to the fact that current oil producers simply must leave most of their caustic product in the ground in order to prevent catastrophic climate change. As a result, the entire oil industry is a zombie at this time.

We Don’t Want Your Fracking Crude!

Compounding the issue of high production cost is a stranding of assets caused by a little televised but widespread phenomena called Blockadia. Perhaps the most visible expression of Blockadia is the ongoing campaign against the Keystone Excel and Northern Gateway Pipelines that have left tar sands oil stranded and dependent upon rail transport in order to access international markets. Even tar sands truck routes and equipment deliveries have been hounded by rampant blockades.

The result is an isolation of Canada’s tar sands that has now driven local prices for a barrel of oil to less than 37 dollars. What this means for Alberta oil is very thin profit margins and no expansion of production whatsoever. If oil strikes below 35 dollars for any extended period, Alberta may be looking at shut-downs over the long haul.

For US fracking the story is similar. From outright bans to constant legal action on the part of communities and individuals, Blockadia has arisen both in the form of protests and in the form of litigation. Even Rex Tillerson, Exxon CEO and funder of some of the most virulent climate change denier hacks in the media sphere, donated money to an anti-fracking campaign aimed at preventing the construction of wells near his multi-million dollar Texas home. Hypocritically, Exxon has funded polluting industries in many disadvantaged and poorer neighborhoods for decades — forcing those without enough monetary muscle to hire troll berserker lawyers to suffer pollution, poisoning and displacement. But turn the tables and Rex likes the fracking crude about as much as the rest of us.

In the end, we are all in what Naomi Klein has called ‘the sacrifice zone.’ A region where the externalities of fossil fuel use become visible and an increasingly violent impediment to daily life and well being. It is for this reason alone that so many pipelines and oil ventures are now under threat of blockade. People are fed up and everyone from moms to scientists to cowboys to Native Americans to activists are willing to put themselves on the line to prevent the worst outcomes of fossil fuel burning. People don’t like being sacrificed or having their children sacrificed for company profits which is the primary reason we don’t want your fracking crude.

Under Threat of Bankruptcy

Sauds’ price war, declining demand, the extraordinary cost of unconventional extraction, and Blockadia now combine to put many oil companies under severe threat. Today, the blood-letting pushed the Dow down by 331 points. Fracking suppliers like United Rentals, which specializes in pumps for hydraulic fracturing, lost 10 percent of its value in just one day. Noble Energy, Diamond Offshore, TransOcean, Anadarko Petroleum, Denbury Resources — all involved in costly unconventional oil extraction — all fell by between 7.8 and 9.5 percent. Baytec, a tar sands player, lost 12.5 percent. Continental Resources, with a large exposure to the US fracking effort, lost 10.7 percent of its valuation. Even energy giants like Chevron and ConocoPhilips fell by more than 4 percent in today’s bloodletting.

Though the US industry has been opaque with regards to risk, given the assessed high costs for both fracking and tar sands and the extremely rapid well depletion rates for fracking, current risks for all US unconventional players are very high. North Sea producers have been more clear in their risks, however, with reports last week identifying 1/3 of oil firms in the offshore region at risk of bankruptcy with oil prices in the range of 55 dollars per barrel.

Even more established companies like Exxon, a company some analysts suspect may be able to prey on weakness in the shale patch, will feel the pinch if oil prices trade in the range of 40-50 dollars per barrel for an extended period with company profits essentially wiped out below 40 dollars.

In short, what we see is that in an over-supplied market high cost producers are very vulnerable to price competition from lower cost producers and from alternatives that can now also increasingly replace base oil consumption outright.

Renewables in the Wings

For it’s not just Saudi Arabia that unconventional oil producers have to take seriously. They are also under existential threat from a combination of rising efficiencies and increasingly cheaper and easy to access renewable energy and electric vehicles.

After this current price fall takes down the marginal producers of fossil fuels that can’t cut it, prices will again rise. Meanwhile, economies of scale will continue to reduce solar panel prices, increase battery storage capacity and economics, and provide electric vehicles at lower costs and ever-greater capabilities.

Within 5-10 years the next price war on marginal oil may well be spear headed by renewables themselves. And that is a good thing, because in order to prevent the very worst impacts of human caused climate change that geological firewater needs to remain where it belongs — in the ground. In other words, there’s good reason not to want that fracking crude.

Links:

Dow Plunges Below 331, Oil Falls Below 50

Bankers See 1 Trillion of Zombie Investments Stranded in Oil Fields

Tar Sands– The Most Destructive Project on Earth

Why My Next Garage Will Be Solar

Market Data

This Changes Everything

Drill Baby, Drill and Climate Change Game Over: US Oil Production Hit Record Growth In 2012

Fracking in Pinedale

(A Fracking Operation in Pinedale, Wyoming. Image source: here)

According to this report in the Wall Street Journal, US ‘oil’ production surged by 14 percent in 2012 to nearly 9 million barrels per day (this figure includes natural gas liquids, hence the quotations, actual crude oil production was about 7 million barrels per day).

This surge in production was fueled, primarily, by a broad application of hydrolic fracturing technology to enhance the rate at which oil and related fuels are squeezed from the ground. Little in the way of new discoveries have resulted in this enhanced flow of climate fire-juice. Instead, new technologies have been aimed at the old, tired, or difficult to reach sources in order to squeeze more from the ground.

It’s a tough gamble for oil and gas companies. The reason is that a massive investment in new drilling rigs and an ever increasing number of fracked wells is required to sustain this large pulse of new oil. By end of 2012, more than 43,500 wells had been drilled, and, perhaps more importantly, a record 19,000 wells were fracked over the same period. All this drilling and fracking activity costs a lot of money. So a price of oil above 95 dollars is required to sustain most marginal operators.

Tellingly, with a slight fall in world oil prices over the past spring, the rate of new wells drilled had dropped and is projected to fall below 2012 numbers by about 1,500 to around 42,000 by end of 2013. US natural gas production has already leveled off due to lower prices and a large portion of this rig count drop includes the lag due to lower natural gas prices. But traditional oil well drilling is also sliding off. So the new focus is primarily on tight oil and oil shale fracking.

Fracking is an energy and water intensive process that costs much more than a traditional oil well. It also results in increased risks of ground-water contamination. So communities across the US have been forced to choose between oil and gas extraction, and keeping their water supplies safe. There is also a longer-term choice on global climate, which we’ll discuss more in detail below.

As noted above, marginal prices need to remain above 95 dollars per barrel for the highest cost operators to make a profit. Embedded in this high marginal price for shale oil is the fact that most fracked wells have a high depletion rate. The result is that flows from these wells drop off dramatically over time. So more and more wells need to be fracked each year to keep overall flow rates high. The end result is that fracked well production creates a net cliff in fracking dependent oil in a 10-15 year time-frame. New basins of fractured oil will, therefore, need to be accessed to keep flow rates high.

Nonetheless, the US is likely to continue to see higher rates of oil production over the coming 5-10 years due to this fracking boom. But at the cost of much more expensive oil and ever-increasing damage to the world’s climate.

Fracking Climate Change Game Over

Oil fracking is a form of enhanced oil extraction. As such, it enables a more rapid extraction of existing oil reserves and, to  a degree, opens reserves that were previously uneconomic to extract. Since less than 1/3 of current fossil fuel reserves can be burned while still maintaining a vague hope of keeping warming below the dangerous 2 degrees Celsius threshold by the end of this century, the race to drill and frack more wells and increase oil production is a race toward climate change game over.

Fracking also results in large methane seeps from fractured wells. These seeps are not included in fossil fuel reserves, yet they still end up in the atmosphere. And since methane is, over 20 years, 105 times more potent than CO2 as a warming agent, this extra emission is a very bad additive to an already warming climate.

The net result is we’ve tapped a more carbon intensive technology to burn more oil faster. In metaphor, we’ve decided not to jog, but to sprint headlong toward the climate cliff.

At current emissions rates and emissions growth rates, the world says farewell to any possibility of preventing a 2 degrees Celsius warming by century’s end sometime around 2025.

Links:

EIA

Record-breaking 19,000 New Wells to be Fracked in 2012

Slower Pace of Drilling Likely For US and Canada During 2013

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