Pennsylvania communities along New York border greet news with delight.
By Alex Mills
AUSTIN Texas (Texas Insider Report) Its official: The good people of New York will be paying an arm and a leg for electricity this winter. And although State & Federal Regulators have repeatedly said that in the 60 years the industry has been fracturing
wells
theres never been a case of groundwater pollution because of fracing New York Gov. Andrew Cuomos administration
announced earlier this week it will prohibit hydraulic fracturing statewide.
Governor Cuomo made the move even though the southern portion of New York has excellent
potential for cheap and plentiful natural gas.
Just a few weeks ago when a winter storm blew through the Empire State natural gas prices shot over the $10 per thousand cubic feet (Mcf) mark while most of the nation paid $3 to $4. The reason was the people who trade on the spot market for natural gas felt that there was a shortage of natural gas in the area.
And when demand exceeds supply prices rise.
New York which is a net importer of energy could be a part of the solution to its energy problems by following the lead of its neighboring states Pennsylvania West Virginia and Ohio.
The Marcellus Shale formation encompasses all four of these states. In 2013 alone:
- Pennsylvania produced 3.26 trillion cubic feet of natural gas from the Marcellus
- West Virginia produced 717 billion cubic feet
- Ohio 186 billion cubic feet and
- New York 23 billion cubic feet
New Yorks production probably will decline even further because if the industry cannot stimulate the wells in the Marcellus Shale formation with hydraulic fracturing techniques there will be no reason to even drill the wells.
The New York State Department of Environmental Conservation said it would issue a recommendation to prohibit hydraulic fracturing following a study by the agency and then did.
The agency cited the potential health problems from contaminated drinking water soil pollution and methane releases. However state and federal regulators of the oil and gas industry have stated many times that in the 60
years that the industry has been fracturing wells there has never been a case of groundwater pollution.
The conservation department also noted that the cost of regulating hydraulic fracturing could overwhelm local and state governments.
Pennsylvania communities along the border of New York initially greeted the news with delight. Some believe that the money and jobs that would have been spent in developing natural gas reserves in New York probably will be spent elsewhere hopefully in northern Pennsylvania.
Natural gas producers in Texas Louisiana and Oklahoma have been fighting gas from the Marcellus over the gas market back east. Natural gas from the Marcellus has a big advantage because it is much closer to consumers.
Peaks & Valleys Nothing New For Oil Industry
The recent decline in crude oil prices takes me back to the winter of 2008 when prices took a roller-coaster ride south after reaching historic highs during the summer.
Crude oil prices dropped to a low of $33.87 on Dec. 20 2008 on the New York Mercantile Exchange after reaching $140 per barrel. Gasoline prices peaked at $4.11 per gallon and tumbled in record time to $1.64 per gallon in December.
The pain was felt throughout the industry. People lost their jobs and companies went out of business.
Again prices have tumbled to under $60 per barrel
and the industry is anxiously watching to see how low prices will go and how long they will stay there.
Looking back at 2008 and 2009 the industry cut the fat and got lean. It set the stage for a run that would last for five years and increase production in the U.S. to 9 million barrels per day and people started talking about energy independence" again.
An optimist back in 2009 was Senator John Cornyn (R-TX) who wrote a column that appeared in many newspapers that pointed out the need for increased crude oil production.
Texas leads the nation in energy production and it has the potential to contribute significantly more to Americas energy future through traditional sources like oil and natural gas and also emerging alternative sources like wind power solar and biomass" Cornyn wrote.
Unfortunately Texas and other domestic producers are hemmed in by miles of red tape and outdated regulations that have prevented the construction of a new refinery in the U.S. for more than 30 years and barred the development of valuable resources in the Outer Continental Shelf and on other federal lands" Cornyn said.
He pointed out that the American Petroleum Institute released a study indicating the regulatory barriers in place are blocking the development of U.S. energy resources that could yield about $1.7 trillion in government revenue.
In addition to this enormous economic boost the untapped resources would create thousands of jobs.
Most importantly freeing domestic resources for exploration would directly alleviate the core of Americas energy challenges dangerous dependence on foreign energy" Cornyn said.
Obviously no one knows what the future has in store but history tells us that the domestic oil and natural gas industry has been through these peaks and valleys before. The industry survived the last decline and it came out even stronger.
Price stability would be nice but it appears that the oil and gas industry is in for another tough period.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely those of the author.
