[collapsenik]

So if the folks who got the McClure Shale production up to 160,000 bold when prices were much lower couldn't boost production with the higher prices I doubt someone in VA that has never drilled a well in CA knows better.

Doesn't seem like drilling it is as much the issue as producing it and calculating the expected results over some given area.

And the most recent work appears to involve more than folks in Virginia, certainly when you employ the top government scientific geologists to figure it out, you aren't just talking about washington bureaucrats anymore.

The revised figures, part of EIA’s annual assessment of technically recoverable reserves, were based on well production data and new information from a U.S. Geological Survey review of the shale formation, Jonathan Cogan, an agency spokesman, said in an e-mail. The data included “a lack of production growth relative to other shale plays like the Bakken and Eagle Ford,” Cogan wrote.

http://www.ernstversusencana.ca/calforn ... -oil-by-96

So the scientist types noticed something about the geology, and then the EIA layered their own economic analysis or expectations on top of it? That is something the Washington folks would know all about, economics and higher prices and their effect on technological application and whatnot.

[ROCKMAN]

C - So it's very simple in your view: the bureaucrats in DC (who have never drilled a well in CA) know the production potential of the shales in the Monterey Formation better than the folks who have been horizontally drilling, frac'ng and producing those shales for more than 15 years. And the same folks who brought that production to a peak over a decade ago when oil prices were 1/3 of what they are today. And the same folks who are now doing very little development of the shales even though oil prices are 300% higher now then when they increased production to 160,000 bopd.

Interesting logic. So the folks who actually make a living drilling wells are intentionally leaving all that easy money in the ground the EIA, USGS and all those other east coast Monterey Formation experts have said is there.

[Graeme]

Pstarr, You're welcome. Glad to see that you like this post and that I've finally got one right! Best wishes, G.

[collapsenik]

C - So it's very simple in your view: the bureaucrats in DC (who have never drilled a well in CA) know the production potential of the shales in the Monterey Formation better than the folks who have been horizontally drilling, frac'ng and producing those shales for more than 15 years.

I doubt it. But they certainly would have talked to the folks who do. Would the folks doing all this work have lied to the Feds for some reason?

Interesting logic. So the folks who actually make a living drilling wells are intentionally leaving all that easy money in the ground the EIA, USGS and all those other east coast Monterey Formation experts have said is there.

The USGS never said anything about "easy money", they rarely say anything about the money aspects of this at all. If I recall, the EIA has a price path allowing development of oil in the US to happen at prices up near $250/bbl. Haven't you implied previously that all this new production has been happening because of price? Does your industry knowledge disqualify $250/bbl oil production from these more difficult to produce areas? Maybe this is exactly what the EIA learned, that the price point for the Monterey was above even their forward price projections of $250/bbl or greater? And thus…KA POW!!! no oil in the technical recoverable category?

[TheDude]

Thanks, ROCK, that clears things up.

[kuidaskassikaeb]

Rockman wrote:

Also did you know that in some areas where folks were complaining about their water quality the state of PA had ruled it unfit for consumption long before the first well was frac'd in the area? Their water was naturally crap. And did you see the video of a guy in the Texas Barnett shale play flaming NG from the end of his water hose? A huge hit on YouTube. He filed a lawsuit against Ranger that frac'd a well close to him. And he wasn't lying either: the methane was really coming from his well. So Ranger asked the Texas Rail Road Commission to investigate and they found his fresh water was badly contaminated with methane...and had been naturally for decades before. He actually has his garden hose hooked up to a methane vent line he had installed long ago. The judge immediately threw the case out and the Texas Rangers had considered filing criminal fraud charges against him. But they decided to pass and let Ranger go after his lying ass. Which, uncharacteristically, Ranger did file a civil suite. Most companies just let such situations settle down and move on. But apparently the folks didn't appreciate the many thousands in legal fees they had to pay and took personal the attempt to soil their reputation.

I think that you don't have your facts straight. I think you mean Steve Lipsky. At the very least your timeline is wrong, and there is a lot of information missing.

Basically as near as I can tell. These are the facts

All the drama began in 2010 after Steve Lipsky noticed some strange things about the water coming out of his private well at his home in Parker County. For instance, he could light it on fire. The EPA first issued an emergency order against Range Resources to better monitor the well and to provide drinking water to the Lipsky family and others who might be affected. Range resisted, so the Justice Department filed a complaint on behalf of the EPA in 2011.

Anyway both sides sued. Ranged filed it's defamation suit in 2011 for 3 million dollars. The EPA withdrew from the case for a while (they return in Dec 2013), and the Texas Railroad commision decided the methane was naturally occurring.

In Lipsky's lawsuit, which he lost, range claimed that using a garden hose implied that he said his water was flamable, but as you stated it was a vent for the well. A PVC pipe was used to make the same demonstration. There is no evidence as you state that this vent was a long term thing. The EPA allowed Range to test nearby wells and only found one with explosive amounts of methane. The story should end there right. Wrong
s
The TRC has reopened the complaint

http://blogs.dallasobserver.com/unfairpark/2013/09/in_parker_county_regulators_ar.php

Its victory before the commission, it appears, may not be the final word. EnergyWire has a scoop indicating that the commission is once again investigating Lipsky's and other water wells in Parker County. At least four homeowners say the methane contamination in their water is only getting worse.

An TRC inspection report from one of the homeowners.
http://www.eenews.net/assets/2013/09/18/document_ew_01.pdf

The EPA also released a report on their retreat from the case on Christmas eve so it would get a lot of coverage.

"Based on the evidence the EPA uncovered regarding the nature and source of the contamination in the residential wells," says inspector general's report, "the EPA determined that a Range Resources gas production well was the most likely contributor to the contamination."

This EPA inspector general's report was released to the public on December 24, timing that "shows the Obama administration is obviously embarrassed by its findings," Bruce Baizel, a director at environmental group Earthworks, said in a statement. "As they should be. The withdrawal of Obama's EPA is an abject failure of its mission to protect Americans' health and environment." Hey, maybe the EPA was just looking for an excuse to not have to go to that annoying relative's house on Christmas Eve!

This report was made not at the request of environmentalists but by the EPA critics on the other side of the ideological coin. Republicans in Congress had accused the EPA's regional office Texas of being too tough the gas industry. Those Republicans are now also predictably critical of this report. The EPA just can't win.

Anyway as stated above the gas leak appears to be getting worse, and our favorite Duke University professor is involved also. Isotopic studies have identified the gas as the same as what comes from the Range Resources well.

From Bloomberg

"The leak continues and it's spreading," Geoffrey Thyne, an independent scientist who was commissioned to work the case with EPA, tells The Associated Press. "I can say, based on the current data, there are at least two other wells that show the same source ... which is the Range well."

Range has always contended that the gas is naturally occurring, originating in shallow, gas-bearing rock called the Strawn formation. But by comparing Strawn gas and Barnett gas with the gas found in several homeowners' water wells, Thyne has concluded that it isn't just bubbling up. This gas came from the Barnett, and its only conduit would be Range.

Rob Jackson, a Duke University researcher, is working on a big study on Parker County for the National Science Foundation. His testing has identified concentrations of gas in the well water at up to 10 times the federal threshold.

From Bloomberg roughly the same story.
http://www.bloomberg.com/news/2014-01-10/epa-s-reliance-on-driller-data-for-water-irks-homeowners.html

Homeowner Perdue’s case illustrates the discrepancies in the results. Range’s consultants found 4.2 milligrams per liter of methane in her water in a test taken in mid 2012, and 20 milligrams in November 2012. Duke’s tests a month later found a value of 54.7.

Perdue said technicians for Range collected samples differently than those for Duke -- taking it from a vented holding tank in one instance -- and didn’t capture all the dissolved gas found in the well.

Separate from questions about the amount of gas present is what caused it to appear. Range says the gas is naturally occurring, and the state so far has agreed.

A consultant hired by the EPA as part of its initial investigation in 2010 concluded that the gas was chemically identical to that being extracted by Range. The consultant, Geoffrey Thyne, analyzed the isotopes of the gas in Lipsky’s wells and the gas from Range’s production wells, and found them to be a match.

Thyne, who was criticized by the gas industry for his findings, said he’s now doing follow-up analysis to see whether those initial results hold up.

“I’ve seen no data that makes me want to change my original opinion,” Thyne said in an interview.

So the story is somewhat different than as you reported it.

[ROCKMAN]

K - Yep...the "facts" float around depending on which source is repeating what source. But the basic facts don't change: the fresh water in the area was contaminated with naturally occurring methane long before any drilling took place. And the indisputable "fact" that the methane in the aquifer is identical to the methane from the shale reservoir? Well, dah! LOL. Where do folks think the methane in the fresh water aquifer came from? The only "shocking report" would have been if it didn't match exactly. It's called "migration": IOW every cubic foot of NG and every bbl of oil that has filled every reservoir that's ever been produced migrated into it from the source rock which is usually deeper. About 20 years I developed a nice little NG field in the fresh water aquifer in Texas at 260' below ground level. And if you missed it before a year ago I discovered a 20' thick NG reservoir with a top just 46' below ground level. The pressure was too low to be commercial but had it been at 1500' it could have produced as much as $2 million in reserves. Hundreds of other very SHALLOW wells have been produced in this 600 mile long and 40 mile wide trend. That's 24,000 sq miles (or 15+ million acre) where it wouldn't be a surprise to find the fresh water aquifers to be contaminated with methane. Not finding methane in the aquifers would be a true shock.

I know I have a long background in petroleum geology and I shouldn't be held as the standard. But it still amazes me that folks are shocked to see both NG and oil trapped in the fresh water column knowing that billions of bbls of oil and trillions of cubic feet of NG has been produced from depths not much deeper. Heck...the billions of bbls of oil sand resources in Alberta is now sitting at ground level. Do they think it's a giant spill from the Exxon Valdez that washed shore? LOL. Mother Earth has contaminate the fresh water aquifers and soil with many times the amount of oil/NG that mankind has produced let alone spilled. If one understands the basics they would know running around claiming they found THE smoking gun is foolish to do so before investigating...and ruling out...natural causes IMHO.

[kuidaskassikaeb]

Rockman

the "facts" float around depending on which source is repeating what source. But the basic facts don't change: the fresh water in the area was contaminated with naturally occurring methane long before any drilling took place. And the indisputable "fact" that the methane in the aquifer is identical to the methane from the shale reservoir?

I made the mistake of thinking that you were up to date on the case. While you may have a strong background in geology, I assume all these others do to. I have also seen that they think that they can differentiate the gas that was already there from the gas in the upper reservoir using an isotopic analysis. Range claimed that the material came from a different shallower reservoir, which would have a different isotopic analysis.

Here is a short list of other facts that you ignore.

You claim that the homeowner performed an intentional fraud. Not likely in my opinion, and you don't have any evidence.

There are 4 homeowners involved and they all claim that something changed. Not explained by naturally long term naturally occurring methane, which has a concentration that should not change.

Range Resources measurement of methane concentrations does not agree with measurements taken by others by factors of more than 2. The obvious explanation for that is fraud on the part of Range Resources.


Anyway this has been one of my pet peeves for awhile. The whole business that methane is everywhere and it can't possibly migrate from fracking drilling is my definition crappy science. First to contrast with global warming science. Where are your 2000 papers and computer models and actual testing. That is rhetorical. I know they don't exist. If you can find one study that says there is no migration I'd love to see it. Anyway here is the money plot from the Duke University of one study that says there is leakage. A graph of methane concentrations vs. distance from the fracked well.



Yes there is a sampling problem here, but your claim is that this doesn't happen. Not that there may be an exageration of amounts.

[ROCKMAN]

K - "You claim that the homeowner performed an intentional fraud. Not likely in my opinion, and you don't have any evidence." Sorry but the EVIDENCE presented by the judge, the Texas Rail Road Commission, the EPA and the confessions of the co-conspirators trump your opinion. It would appear you're lagging far behind the reality of the situation.

[dinopello]

Dino - Cheniere became a capex black hole when their LNG import plan blew up in their face. And they are still losing money but have some prospects of creating some income...in about 18 months. I suspect much of the run up is the foolish hype that the US is on the verge of becoming a major LNG exporter despite the fact we are still a net LNG importer

So the run-up prior to this post (May 21, 2014) was foolish hype. Cheniere (LNG) price has now more than doubled in the 2 months since the post. What's going on ? I tend to follow stocks that I was considering buying but didn't - probably shouldn't do that.

[ROCKMAN]

"What's going on?" You tell me - for at least the last six years Cheniere has lost money y-o-y...between $0.44 to $3.13 per share. http://www.nasdaq.com/symbol/lng/revenue-eps

And will continue to lose money as a result of their LNG IMPORT business blowing up in their face. And what's the good news? By the beginning of 2016 they hope to be exporting a lot of LNG. And how will they get there: The Federal Energy Regulatory Commission approved an order yesterday that will let Cheniere build a $10 billion LNG export plant adjacent to its Sabine Pass gas-import terminal in Cameron Parish, Louisiana. The Houston-based company said its 91 percent owned Cheniere Energy Partners LP hired eight financial institutions to borrow $4 billion to help fund the construction. IOW Cheniere doesn't have an LNG export terminal today nor does it currently have the capital to build one. All it has is the gov't permission to build one and export LNG (if it has buyers once the plant is built). So now all they have to do is find folks who are willing to loan the $10 billion.

Of course how their books balance out will depend on how the LNG export market settles out over the next 10 to 20 years. Cheniere and others have high expectations for that dynamic. Just as high as their previous expectations for a booming US LNG IMPORT business. Remember it isn't important whether Cheniere stock prices increase or fall. It's your buying low and selling high that matters. Or just the opposite if you short them. IOW you makes your bet and take your chances. LOL.

Of course buying some of their bond might be a good investment if you would be happy making 5.75% interest...assuming they don't default in 10 years when it matures: Cheniere Energy Partners, L.P. announced that its wholly owned subsidiary, Sabine Pass Liquefaction, LLC has upsized and priced its previously announced offering of Senior Secured Notes due 2024 ("SPL 2024 Notes"). The principal amount of the offering has been increased from the initially announced $1.5 billion to $2.0 billion. The SPL 2024 Notes will bear interest at a rate of 5.75% per annum and will mature on May 15, 2024.

[Tanada]

Monterey Shale fell out of the discussion right at the beginning of the Glut because producing its resources was judged to be a great deal more difficult than first anticipated. Low oil prices in 2015-2017 kept it completely off the Radar, so to speak.

So now that prices are once again north of $60/bbl what are the prospects for development of the Monterey?

[AdamB]

Monterey Shale fell out of the discussion right at the beginning of the Glut because producing its resources was judged to be a great deal more difficult than first anticipated. Low oil prices in 2015-2017 kept it completely off the Radar, so to speak.

So now that prices are once again north of $60/bbl what are the prospects for development of the Monterey?

The mature source rock production, as compared to the migrated oil to the discrete reservoirs?

No prospects. The USGS evaluated the technically recoverable about 3 years ago now, and put a pretty thorough kibosh on it.

[ralfy]

The prospects for development will likely be based on what investors expect. In the last case, was it high prices for years?