Coping: What the Frack?

Reader Konrad, up in Ohio asked a pretty good question since our focus is on economic trends (and how to make a buck now and then).

I live in the Canton OH area and the local powers to be are in love with fracking.  It will create hundreds of thousands of high paying jobs forever, wean us off of foreign oil , whiten our teeth, etc.  Yet there is never a word about depletion rates or the capital cost of drilling.  I would like your thoughts on why supposedly college educated individuals, when looking at any topic such as taxes, fracking, the Federal budget, etc. refuse to look at any facts, or even read or try to understand the other sides views.  I know what George Carlin said about the real owners of this country not wanting a society of critical thinkers, but I am interested in your thoughts of how to change this unwillingness to think at all.

I have to admit to being guided by the data I get from the US Energy Information Administration and from my buddy Oilman2 who, if you remember, is a real honest-to-God rig engineer who’s “playground” ranges from China to the Andes when he’s making drill bits, and our 200 miles into the Gulf when he’s got pipe down.  When he doesn’t, he’s building a bugout farm 30-miles south of us in the East Texas Outback.

The Big Big Picture

The US/World has been in a major sideways move economically for a couple of years.  And this is a good thing (in a paradoxical way) because it keeps down energy demand.

At the same time, there has been a lot of new resource coming on line and yes, Keystone is coming but the US still needs foreign oil and so there’s something of a “bait and switch” in media.  While most eyes have been on Ukraine, the really key US interest has been Venezuela.  Mexico and Venezuela are still mighty damn important.

When you zoom out (to the 50-year level) of the data, what you see is pretty convincing evidence that the long-foretold “Peak Oil” is really in play, and it is only a combination of low interest loans and other factors, that have resulted in a short-term spurt in supply.

That will all likely change over the next five years, or so.  The reason is that as borrowing costs go up (rig time ain’t cheap) the cost of putting in new holes is high and going higher.

Aggravating this is a lack of good “worms.”  Those are the new kids on the rigs.  Much of the “old timer” knowledge (OM2 is 50ish) is being lost and there aren’t a lot of sharp, young, hard working kids out there.

In fact, I’ve heard stories (during the West Texas spurt that may have peaked a year or two back as the west-of-the-Permian Basin was redrilled and updated) that CDL (truck) license holders were being fished out of rehab and anywhere else they could be found to supply labor.  And yes, there’s some good talent for oil field work coming in from Mexico, too.  Drillers do a generally good job of getting documented-only workers.

What Fracking Does

The good news about fracking is that is really does provide a short-term blip in the supply picture. And that’s why people in the business expect something of a rounding “shark’s tooth price pattern” in the coming five years, or so.

There is also building evidence that in areas like Oklahoma, Arkansas and up into Kansas where there was a 4.0 earthquake, just in the past week, the combined geological impacts of fracking likely increase earthquakes.

There’s a pretty good Mother Jones article from a year ago that lays out some of fracking’s dirty laundry.  Plus, depending on how much time you have to spend on this, the article (36 pages, pdf) titled “On Shaky Ground: Fracking, Acidizing, and increased earthquake risk in California” is a fine summary of the data and quite current, being only three days old.

What Fracking Doesn’t Do

Besides not whitening your teeth, it really does poison the ground water and it really doesn’t whiten teeth.  Sadly, Konrad was kidding on this point.

In that Shaky Ground article, start about page 9 to look at the waste water injection-wells and quake relationships.

History and Geography

There is not “good choice” on fracking.  Ohio officialdom is correct in a sense:  Fracking does cause a short-term pop in employment and it’s one of the few sources of mid-skill jobs for the millions of Americans who didn’t go to college.

But those short-term jobs come with a price tag. 

I don’t know if you’ve ever been up to Ohio, but last year when Elaine and I went to Columbus to meet with our Consigliere, and we went out to the Air Force Museum at Dayton, OH, we got a running commentary on the geology of the area.

There’s some of the most fertile farm land in the world that begins around Columbus and works out west a couple of hundred miles to the west.  To the east of Columbus, you start getting into the rolling hills that eventual turn in Appalachia, as you head east.

The major fields are in this area, east of Columbus, and coming down, south, from the Cleveland area. 

imageThe Ohio Department of Natural Resources has a nifty map online that you can display wells, fields, and so forth.

Use the layers tool and give it a few seconds to load and you need to be zoomed in to see clusters, but the fields, wells, and gas resource is definitely there.

The fields run from (generally) east of Columbus (there are some wells west, however) east to Pennsylvania.  And that’s where Standard Oil (of Ohio) struck it rich in he 1880’s and laid the foundation of the Rockefeller fortune that continues delivering Rockefellers to this day.

Documentaries, Demonstrations, and Policy Issues

If you haven’t seen it, the Josh Fox 2011 documentary GasLand  which was nominated for an Academy Award in 2011, now has a sequel.  From Wikipedia:

On February 2, 2012 Gasland’s director Josh Fox was handcuffed and arrested as he attempted to film a Congressional hearing on gas drilling by hydraulic fracturing which the Environmental Protection Agency reported caused water contamination in Pavillion, Wyoming. Fox said he was arrested after Republicans refused to allow him to film because he did not have the proper credentials.

And it doesn’t stop with damning documentary evidence.

Just this weekend, thousands turned out for the anti-fracking demonstration in Sacramento which was about the same issues raised by Fox, raised by Pennsylvanians, and now Ohioans.

imageThe policy nightmare is in the circled area.

If you click on the drawing, you will see that petroleum sources are down about 6-quadrillion BTU from their 2009 area highs.  But, at the same time, fracking has brought a lot of fairly inexpensive (*if you don’t cost long-term environmental damage) online as replacement.

You’ll also find that other renewables are coming up a bit, but that nuclear seems to be looking like a large rounding top.

And this is where we get to the policy quagmire.

The government knows that we need energy: Lots of it and cheap.  And Oilman2 points out that when the “son of Mineral’s Management Service” pulls a pop inspection of offshore wells (*in the wake of the GOM  disaster) all that does is add $25,000 in costs per visit to the price of energy that is then passed on to consumers.

That’s illustrative of the problem:  Adding bureaucracy doesn’t add energy, it just adds cost.

And that’s where the industry and policymakers are not fully coordinated.  The bureaucrats do OK on the laws they have to enforce, but the folks in legislatures (and those Fools on the Hill held hostage by the K Street Mafia’s policy kidnappers) don’t have very good laws when it comes to leftover waste water disposal.

Worst of all, there really aren’t too many ways to deal with waste water; at least ways that don’t consumer more energy than is actually produced by the wells involved.

And so what we get is a kind of sideshow:  “Oh look how great we are at enforcing convenient or demanded laws.”  But at the same time (as Fox and the California demonstration convey) there aren’t adequate long term accounting principles in place that include cost of quakes and cost of long-term ground water degradation and population displacement as water supplies are poisoned.

Is there an answer?  Probably not.

In many ways the situation is analogous to the 1960 book by Upton Sinclair:

The Jungle is a 1906 book written by the American journalist and novelist Upton Sinclair (1878–1968).[1] Sinclair wrote the novel to portray the lives of immigrants in the United States in Chicago and similar industrialized cities. Many readers were most concerned with his exposure of health violations and unsanitary practices in the American meatpacking industry during the early 20th century, based on an investigation he did for a socialist newspaper.

So just as the process of meat inspection waxes and wanes as stories like “Feces in your burger: The dangerous price of cutting back on meat inspectors” make it into the public consciousness and force policymakers to “keep their eye on the ball” despite industry “favors,” so too we see a similar process coming to light in fracking.

There’s a widespread fiction – promoted in America’s totally f/u’ed education system – that people elected to office are “leaders.”

They are not.

What they are are essentially insurance claims adjusters:  the public comes up with a beef or a fracking concern and the role of “lawmakers” is to negotiate the settlement with the public.

I don’t suppose I mentioned, along the way, who collects the premiums for said insurance racket?  The template applies very nicely to healthcare, too.  When you see the template clearly, it begins to fit most of what government does.

But the MainStreamMedia doesn’t want to touch this with a 10-foot pole.  That’s because one of the parties that negotiates with lawmakers writes them checks for advertising.  So the public’s awareness of its power is diminished and the games go on.

Simple, ain’t it?  We periodically change out “issues” that go into this process.  But we haven’t cleaned out those who are negotiating on the public’s behalf in bad faith.

While elections here are ostensibly “clean” issues like fracking and feces in meat (toss in pesticides and health insurance while we’re at it) can’t really be cleaned up until financial parity between the parties is established.  And since most ‘Mericans can barely afford to eat, that’s NOT going to happen any time soon.

It’s called “check and balance”  but it operates suspiciously like “cash & carry” in sheep’s clothing, wrapped in a flag.

When is it Woo-Woo?

On a far different note, our investigations into the World of Woo-Woo have an interesting submission from a reader by the name of Tom up in Albuquerque.  He’s wondering if this qualifies as Woo:

Dear George,

I don’t know whether you would classify this as a World of Woo-Wood (WOWW) event or not, but I thought I would pass this along for your determination.

On May 3, 2012, the phone rang at 1:20 A.M (I have a clock next to the bed). Wondering who was calling me at the hour of the morning, thinking something drastic had happened, I immediately answered! No one answered. Lying back down, wondering who in the world would be calling at that hour; I noticed my wife’s breathing sounded in distress. I tried to arouse her, making a long story short, in a few moments she passed away.  Thinking back on it later that day, and since, I wondered whether it was her letting me know she was leaving the house.

Several weeks later we were holding a Memorial service for her at her church. I was sitting near the front row. Her best friend was in the midst of giving her eulogy.  My daughter had previously given me a cell phone which I was totally unfamiliar with, had made very few calls on, and I had given no one the number. Suddenly the phone started ringing. Being totally embarrassed, I hurriedly dug it out of my pocket looked to see who could be calling and it was a totally unfamiliar area code and number. I shut it off. It was like she was letting me know she was still with us.

Periodically, at least once or twice a week I get a phone call from Anonymous. I have caller ID. There is never a number associated with Anonymous, and no one ever answers. Since I have Comcast phone, I can check in a file called “Received Calls”.  Anonymous never shows up. Can we really be contacted from the beyond, but they just can’t talk to us?

Tom

To begin with, sorry for your loss, Tom.

The answer to your question is a serious maybe.

The problem is one of statistics.  How many wrong numbers, how many don’t have caller ID, how many hang up without saying anything?  You see the problem….and we haven’t even gotten to the problem of “Does Tom’s number happen to be close to that of a bail bondsman, hotel, car dealership, or other business that gets lots of dials per day (and at none business hours)?

Still, it does seem to be drifting toward the outlier region of  the great mental scatter chart we all keep as a scoring tool for reality, so how about this:  65% chance of Woo-Woo?

More tomorrow…write when you break even…

George   george@ure.net

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