fracking

Why It Matters If Fracking Companies Are Overestimating Their ‘Proved’ Oil and Gas Reserves

Read time: 12 mins
Oil pumpjacks in silhouette

Back in 2011, The New York Times first raised concerns about the reliability of America's proved shale gas reserves. Proved reserves are the estimates of supplies of oil and gas that drillers tell investors they will be able to tap. The Times suggested that a recent Securities and Exchange Commission (SEC) rule change allowed drillers to potentially overbook their “proved” reserves of natural gas from shale formations, which horizontal drilling and hydraulic fracturing (“fracking”) were rapidly opening up.

Welcome back to Alice in Wonderland,” energy analyst John E. Olson told The Times, commenting on the reliability of these reserves after the rule change. Olson, a former Merrill Lynch analyst, is best known for seeing the coming Enron scandal 10 years before the infamous energy company imploded in 2000.

Today, those same rules have allowed shale drillers to boost their reserves of oil, as well as natural gas. As a result, these “proved” reserves, which investors and pipeline companies are banking on, could potentially be much less proven than they appear.

And the unprecented degree to which this is happening in the shale industry casts a shadow of doubt on the purportedly bright future of America's booming oil and gas industry.

Flip This Well: How Fracking Company CEOs Get Rich While Losing Billions

Read time: 9 mins
Flip this well logo on top of oil pumpjacks

Last year the fracking company Halcón Resources announced a new strategy that was sold as the path to profits for the previously troubled shale oil and gas firm. The company had sold its stake in the Bakken oil fields in order to double down on the Permian shale in Texas. At the time, Reuters touted the deal as a “stunning turnaround” for CEO Floyd Wilson, and the good news immediately drove up the Halcón stock price by 35 percent.

The sale of our Williston Basin operated assets transforms Halcón into a single-basin company focused on the Delaware Basin where we have more than 41,000 net acres,” Wilson said in a statement. He was making his pitch and investors responded.

However, the move was part of a familiar formula for those in the shale industry, which uses horizontal drilling and hydraulic fracturing (fracking) to release oil and gas from shale formations: Borrow lots of money, drill lots of fossil fuels at a loss, flip the company for a profit.

How Trump’s EPA Is Moving to Undo Fracking Wastewater Protections

Read time: 8 mins
Scott Pruitt

Back in 2008, residents of Pittsburgh, Pennsylvania, and surrounding areas received a notice in the mail advising them to drink bottled water instead of tap water — a move that Environmental Protection Agency (EPA) internal memos at the time described as “one of the largest failures in U.S. history to supply clean drinking water to the public.”

The culprit: wastewater from oil and gas drilling and coal mines. This included fracking wastewater that state officials had allowed to be dumped at local sewer plants — facilities incapable of removing the complex mix of chemicals, corrosive salts, and radioactive materials from that kind of industrial waste before they piped the “treated” water back into Pennsylvania's rivers.

This Federal Policy Enabled the Fracking Industry’s $280 Billion Loss

Read time: 12 mins
Stock market numbers over oil drill pumpjack

Most people probably aren’t familiar with the acronym ZIRP. It stands for zero interest rate policy and is the policy that unintentionally created the American fracking bubble — just one of its many consequences.

And while most people may not know much (if anything) about ZIRP or the Federal Reserve (Fed), it is likely that they are aware of the impact this policy has on their own lives.

Pennsylvania Lawmaker Advancing Pro-Fracking Legislation Profits from Leasing his Land to Drillers

Read time: 4 mins
Eugene Yaw

A Pennsylvania state senator, who is responsible for a slew of legislation favoring the oil and gas industry, leases his own land to fracking companies, recent disclosure documents show. Last year, veteran lawmaker Gene Yaw of Lycoming County profited from royalties he received from several different drillers.  

As Rest of World Moves Towards Renewables, US Keeps Offering Exclusive Tax Breaks for Fossil Fuels

Read time: 10 mins
Solar panels and oil pumpjack

About a half decade ago, as the shale drilling rush was sweeping across the U.S., drillers needed upfront cash — and quick — to let them snap up acreage, drill and frack exploratory wells, and hone their skills at the horizontal drilling and hydraulic fracturing (fracking) that fueled an oil and gas boom.

Bankers and financiers began attending shale industry conferences, marketing a clever idea. By dusting off an obscure part of the tax code, drillers and pipeline builders could attract a different class of investor than would usually look at a boom-and-bust prone industry, an investor hunting for stability and predictability. Form a Master Limited Partnership, or MLP, shale drillers and pipeline builders were advised, and you'll be able to access that capital.

GOP Tax Law Bails Out Fracking Companies Buried in Debt

Read time: 6 mins
A Scrabble board spells out 'Bankruptcy' overlaid on an unconventional oil and gas rig

EOG Resources is one of the top companies in the fracking industry, and thanks to the new tax bill passed by Republicans and President Donald Trump at the end of last year, EOG had an exceptionally strong year compared to 2016.

In 2017, the company reported a net income of $2.6 billion. The previous year? A loss of $1.1 billion. That financial turnaround seems very impressive until you realize that $2.2 billion, or about 85 percent, of its 2017 income was the result of the new tax law. Without that gift from the GOP and Trump, EOG would have lost approximately $700 million between those two years. Instead they are $1.5 billion ahead of the game.

Despite Disappointing Returns, Oil Driller Pushes Ahead with Fracking Near Rare Texas Wildlands

Read time: 12 mins
Balmorhea State Park with views of oil and gas well flares

If you ask the CEO of Apache Corp., his company made in 2016 the kind of once-in-a-lifetime find that every oil driller dreams of: a massive oil and gas field that no other company noticed, where thousands of wells could be drilled and fracked to produce massive amounts of fossil fuels — and, in theory, profits.

The Secret of the Great American Fracking Bubble

Read time: 8 mins
Natural gas drilling well pad in Wyoming

In 2008, Aubrey McClendon was the highest paid Fortune 500 CEO in America, a title he earned taking home $112 million for running Chesapeake Energy. Later dubbed “The Shale King,” he was at the forefront of the oil and gas industry's next boom, made possible by advances in fracking, which broke open fossil fuels from shale formations around the U.S.

What was McClendon’s secret? Instead of running a company that aimed to sell oil and gas, he was essentially flipping real estate: acquiring leases to drill on land and then reselling them for five to 10 times more, something McClendon explained was a lot more profitable than “trying to produce gas.” But his story may serve as a cautionary tale for an industry that keeps making big promises on borrowed dimes — while its investors begin losing patience, a trend DeSmog will be investigating in an in-depth series over the coming weeks. 

World May Hit 2 Degrees of Warming in 10-15 Years Thanks to Fracking, Says Cornell Scientist

Read time: 4 mins
Ingraffea

In 2011, a Cornell University research team first made the groundbreaking discovery that leaking methane from the shale gas fracking boom could make burning fracked gas worse for the climate than coal.

In a sobering lecture released this month, a member of that team, Dr. Anthony Ingraffea, Professor of Engineering Emeritus at Cornell University, outlined more precisely the role U.S. fracking is playing in changing the world's climate.

The most recent climate data suggests that the world is on track to cross the two degrees of warming threshold set in the Paris accord in just 10 to 15 years, says Ingraffea in a 13-minute lecture titled “Shale Gas: The Technological Gamble That Should Not Have Been Taken,” which was posted online on April 4.

Pages

Subscribe to fracking