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Recent Cyber Operations Against Actors in the Oil Industry | Analysis Intelligence

Recent Cyber Operations Against Actors in the Oil Industry | Analysis Intelligence.

AnonGhost Hacks National Oil Corporation

The past two weeks have witnessed a series of cyber attacks against several national oil outlets. The oil industry in Angola, Kenya, and Mexico have all been targeted by website defacements in these past few weeks. The names of OpAngola, OpGreenRights, and OpPemex were attached to each, respectively. A timeline view using Recorded Future’s analysis tool provides a keen visualization of these attacks in relation to one another.

Anonymous Goes After Mexico Timeline

By the same token, the data underlying the above visualization provides additional insight into these three separate attacks. And that’s exactly what they are – three distinct hits that, while targeting actors in the same industry, are different in their objectives.

OpAngola, for example, went after the government of Angola, the third largest oil producer in Africa. AnonGhost led the defacement of some seventy government websites, including the Ministry of Oil’s, on December 4. The operation was launched after claims were made that the Angolan government was set to make Islam illegal in the country. Such claims were false.

AnonGhost was also behind the defacement of the website belonging to the National Oil Corporation of Kenya on December 10. The motivation here is less straightforward than in the case of OpAngola, yet the use of the hashtag #OpGreenRights with the attack is a clear association with the larger OpGreenRights campaign initiated by Anonymous.

This cyber campaign was launched after the taking of the so-called “Arctic 30” by Russian security forces on September 18. In a video release, Anonymous stated that OpGreenRights was “designed to target high-level communication assets of the Russian Federation worldwide.” While going after the national oil company of Kenya is a far cry form a “high-level communication asset” of Russia, the OpGreenRights moniker can of course be applied across different targets. The clear connection with oil is close enough.

In addition, Anonymous was behind the most recent cyber attack targeting an oil actor:OpPemex. The attack took down the websites of both the Mexican Senate and the Chamber of Deputies on December 12 in protest over a soon-to-be passed bill that leads to greater privatization of the state oil company, Pemex. The bill has passed the Senate and is slated to pass the Chamber of Deputies in the days ahead.

Malawi Cash-Gate Timeline

As the above data highlights, the targeting of actors in the same industry in this string of cyber attacks is not indicative of a larger industry-wide threat. The rationale behind each attack is not related in the same way that those oil-producing countries targeted byOpPetrol were supposed to be in June of this year.

 

Mexican Congress passes radical shake-up of oil industry | Business | Reuters

Mexican Congress passes radical shake-up of oil industry | Business | Reuters.

MEXICO CITY (Reuters) – Mexico’s Congress on Thursday overwhelmingly voted to open up the country’s oil and gas sector to private investment in the biggest overhaul of the industry since it was nationalized in 1938.

After a whirlwind final passage through Congress, President Enrique Pena Nieto’s bill will offer companies the chance to operate oil wells, commercialize crude and partner with state oil giant Pemex as Mexico seeks to revive flagging output.

Facing down accusations they were betraying their homeland to foreign oil majors, Mexico’s two biggest parties approved a series of changes to the constitution that could radically transform the fortunes of the world’s No. 10 oil producer.

At more than 10 billion barrels, Mexico has Latin America’s third-largest proven oil reserves after Venezuela and Brazil. It also has nearly 30 billion barrels of prospective resources in the country’s territorial deep waters of the Gulf of Mexico.

Pemex has struggled to exploit those reserves due to a lack of investment, a crippling tax burden and persistent allegations of corruption. Since peaking at 3.4 million barrels per day in 2004, Mexico’s crude output has fallen by more than a quarter.

Proponents of the reform argued Mexico would fall further behind its peers without finding new investors to help exploit its deep water and subterranean oil and shale reserves.

“Today, the name of the game is greater economic competitiveness,” Javier Trevino, a lawmaker in the ruling Institutional Revolutionary Party (PRI) on the lower house energy committee, said in a debate that went through the night.

END OF AN ERA?

Pena Nieto first presented his bill in August, and after weeks of negotiations with the center-right opposition National Action Party (PAN), the PRI unveiled a revised plan at the weekend in the Senate that was far more radical.

The new draft bore the stamp of the PAN, which had urged the government to offer companies full concessions at a time the president was only talking about profit-sharing contracts.

The revised bill did not go that far, but it opened up the prospect of production-sharing contracts and licenses, and both parties were keen to pass it this week.

Barely 24 hours had elapsed since Senate approval when PAN and PRI lower house deputies signed off on the reform, packed into a smaller chamber of the house after a group of left-wing Party of the Democratic Revolution (PRD) legislators tried to derail the reform by blocking access to the main floor.

Supported by the Green Party, a group allied to the PRI, lawmakers from the three parties gave final approval to the bill with 353 votes in favor and 134 against after rejecting a long list of objections to the bill argued by left-wing opponents.

Critics lamented the energy reform as an act of submission and the end of an era, tapping into the pride many Mexicans still feel over President Lazaro Cardenas’ move to expropriate foreign oil companies’ assets in 1938 and create Pemex.

“Today is a black day,” said Ricardo Monreal, a trenchant critic of the government and leader of the leftist Citizens’ Movement in the lower house. “More poverty for everyone, which has been the rule for Mexican privatizations.”

One leftist lawmaker stripped down to his underwear on the podium during the overnight debate, accusing the backers of the reform of leaving Mexico naked without its oil wealth.

OPENING THE DOOR

The floor of the lower house started to debate the bill just a few hours after it arrived from the Senate. In a swipe against the PRD and other left-wing lawmakers trying to derail the reform, legislators from the PRI, PAN and Green Party voted to bypass the committees usually consulted.

Following congressional approval, the constitutional changes must be ratified by a majority of the 32 regional assemblies in Mexico, most of which the PRI and the PAN control.

However, experts say the shake-up is some time away from yielding fruit, not least because the government must still draw up secondary legislation to implement the reform.

“They removed the lock from the door, but do you want to go through?” said Alberto Ramos, an economist at Goldman Sachs.

Seeking to lure billions of dollars to Mexico, the reform formally puts an end to Pemex’s monopoly in oil and gas and will offer companies the right to be paid in barrels of oil.

That is a big departure from the service contracts now on offer, in which firms are paid a fee and can recover costs.

But how lucrative the new regime will be is not yet clear.

“They still have to determine royalty rates and tax structures and national content requirements,” said Carlos Sole, an energy specialist with law firm Baker Botts in Houston.

“All that will determine the scope of potential investment,” he added. “But given Mexico’s market has been mostly closed to investment for so long, this is really a transformative change. The lion’s share of the excitement is on the upstream side.”

(Additional reporting by Gabriel Stargardter, Miguel Gutierrez, Ana Isabel Martinez, Tomas Sarmiento, Lizbeth Diaz, David Alire Garcia and Michael O’Boyle; Editing by Simon Gardner, Alden Bentley and Andrew Hay)

What Happens When The Oil Runs Out? | CollapseNet

What Happens When The Oil Runs Out? | CollapseNet.7-31-2013-king-hubbert

Summary of a lecture by Professor Chris Rhodes to the Conway Hall Ethical Society, Conway Hall, Red Lion Square, London. 11.00 am, Sunday July 28th, 2013.

The world supply of crude oil isn’t going to run out any time soon, and we will be producing oil for decades to come. However, what we won’t be doing is producing crude oil – petroleum – at the present rate of around 30 billion barrels per year. For a global civilization that is based almost entirely on a plentiful supply of cheap, crude oil, this is going to present some considerable challenges. If we look over a 40 year period, from 1965 to 2005, we see that by the end of it, humanity was using two and a half times as much oil, twice as much coal and three times as much natural gas, as at the start, and overall, around three times as much energy: this for a population that had “only” doubled. Hence our individual average carbon footprint had increased substantially – not, of course, that this increase in the use of energy, and all else, was by any means equally distributed across the globe.

 From the latest document that I can find – the B.P. Statistical Review – we see that the majority form of energy used by humans on earth is crude oil, accounting for 33% of our total, closely followed by coal at 30%: a figure that is rapidly catching up with oil, as coal is the principal and increasing source of energy in developing nations such as China and India. Natural gas follows in a close third place, at 24%; nuclear and hydroelectric power at 5-6% each; and the tiny fraction of our overall energy that comes from “renewables”, is just 1.6%. Thus, we are dependent on the fossil fuels for 87% of our energy. Now, such a comparison is almost misleading and naïve, because it tacitly presumes that if our oil supply becomes compromised, we can make a simple substitution for it using some other energy source.

However, this is not so readily done in practice, because oil is a particular and unique substance, having both a high energy content, and that it is readily refined into liquid fuels – effectively by distillation – to provide the petrol and diesel that runs practically all of the world’s transportation. Moreover, everything we depend upon – literally everything: food, materials, clothes, computers, mobile phones, pharmaceuticals etc. – for our daily existence is underpinned by a plentiful supply of cheap crude oil. So, the loss of this provision is going to have a profound, and shattering effect on human civilization.

In the “good old days”, e.g. the Humphrey Jones “Giant Gusher” drilled in Texas in 1922, it was necessary only to drill a hole in the ground to get oil. An oil well contains not only oil, but gas at high pressure, meaning that once the cap-rock that holds it all in place is broken, the oil is forced out in that familiar jet of black gold. The good old days indeed, because then it was necessary only to expend an amount of energy equal to that contained in one barrel of oil to recover a hundred barrels, which is like investing a pound and getting a return of a hundred pounds – a very good net profit. In 2013, the return is maybe twenty pounds or just three for extra-heavy oil, or for “oil” derived from tar sands, once it has been upgraded into liquid fuel.

Of greatest concern is how much oil is remaining. As noted, we currently use 30 billion barrels a year – 84 million barrels a day, or a thousand barrels every second. When it is trumpeted about some new and huge find of oil, e.g. the Tupi field off Brazil, thought to contain 8 billion barrels, in reality this is only enough to run the world for three months. Context should not be lost in these matters. The quality of the oil is also at issue. For example, much of the remaining oil is of the “heavy”, “sour” kind, meaning that it is not necessarily liquid at all, but bitumen, and contains relatively high levels of sulphur, necessitating complex and energy-intensive processing to get the sulphur out – which would otherwise be corrosive toward the steel used in the refinery – and to crack the heavier material into lighter fractions that can be used as fuel, or as feedstocks for industry.

So, it’s not just that we have got through much of our original bestowal of oil, but that what remains is of poorer quality – in other words, we have used-up most of the “good stuff”! Oil shale is not oil at all, but contains a material called “kerogen” which is a solid and needs to be heated to five hundred degrees Centigrade to break it down into a liquid form that in any way resembles what we normally think of as “oil”. So, when it is claimed that there are “three trillion barrels” of oil under America, really this is only to encourage voters and investors, because the actual Energy return on Energy Invested (EROEI) is so poor that there has been no serious commercial exploitation of oil shale to date, and probably there never will be.

Not only are we entirely dependent on crude oil for all our fuel and materials, but without cheap crude oil, and natural gas to make nitrogen fertilizers, we could grow no food. If we look at a field of soya beans being harvested in Brazil, we see a number of features. For one, those beans are not consumed at source, but are transported around Brazil and around the world. So, oil-derived fuels are necessary not only to run the tractors and combine harvesters, but the trucks, ships and planes to move the crop onto the world markets. In addition, we see the vast clouds of dust being thrown up behind the marching array of mighty machines – combine harvesters – which represents the loss of top-soil.

Even if we could solve all our energy problems, we are consuming the living and fragile portion of the earth’s surface that is our soil, and upon which we are utterly dependent to grow any food at all. We have “lost” around one third of our soil in the past half century – much of this through unsound and unsustainable agricultural practices – which does not bode well for the survival of a burgeoning human population. Another feature is that this land was once rain forest, which has been cleared to use the land for farming.

This is done either simply by setting fire to the forest, or by more exquisite means, such as taking a ship’s anchor chain, four hundred feet long – and if it is two inches in diameter, weighing five tonnes – then stringing it between two one hundred tonne tractors and simply driving over the terrain, so that the chain rips through everything that is there, tearing the trees out by their roots and destroying the structure of the soil in the process. The upshot is that the soil becomes unproductive within only a few years and so it is necessary to move on and do the same thing elsewhere.

In Britain we import about 40% of what we eat, and we use around 7 million tonnes of crude oil each year to fuel our food-chain. It can be said that we literally “eat oil”.

The concept of “Peak Oil” is due to Marion King Hubbert, a petroleum geologist working for the Shell Development Company in Texas, who predicted that oil production in America would peak in 1970. At that time, Texas was “awash” with oil – America being the world’s major oil-exporting nation then – and so no one took him seriously: but when in 1970, he was proved correct, Hubbert’s Peak entered the realm both of hard science and folklore. According to Hubbert, there is a 40 year lag between the year of peak discovery and that of peak production. If we apply this to the world situation, where global oil discovery peaked in 1965, we expect a global production in 2005. Indeed world production of oil has been on a flat line since 2005, and it is thought that we are at the production limit.

The price of oil has quadrupled in the past 10 years, reflecting the more strenuous efforts that are necessary to maintain production: deepwater drilling, fracking, tar sands, all of which have much lower energy returns than for conventional crude oil. Indeed, oil that is recovered from fracking costs about $105 a barrel to produce which until recently was more than it could be sold for. However, the price of oil is creeping up, and the industry is prepared to bear the loss for now, because it knows that the price of a barrel of oil will shortly rocket, and having cornered this “new” portion of the industry, will make big profits. Oil companies are not charities, after all. I emphasis the word “new” because fracking – properly called hydraulic fracturing – has been around since 1947: what is new is the combination of this technique with horizontal drilling, meaning that porous but impermeable rocks can be drilled-out laterally, then “fracked” to break them open thus releasing the oil or gas that they contain.

Fracking is a controversial matter, and there are grave concerns about groundwater contamination from the process. It is not only the fear that the chemicals that were originally present in the fracking fluid might migrate upward into the water table, but that other toxic materials, e.g. radon, that were confined safely within the natural prevailing geology, might be exhumed too. The Royal Society (U.K. equivalent of a national academy of sciences) has concluded that the procedure is safe, so long as it is strictly regulated, but how can this be guaranteed, when profits are the order of the day, and if the technology is to be employed across the world?

What too will become of the millions of gallons of contaminated water, injected under great pressure into the wells to fracture the rock, that remains? Will this be disposed of safely or simply left behind, potentially to leak into and contaminate the groundwater and the soil? This would be a tragic and cruel legacy for future generations.

Analyses made by both the International Energy Administration (IEA; effectively part of the U.S. Department of Energy) and its counterpart organisation, the Paris-based Energy Information Agency (EIA), concur that we will have lost around half our production of conventional crude oil by 2030. This is equivalent to four times the present output of Saudi Arabia, and it seems highly unlikely that this gap in supply can be filled from unconventional sources. Since we are entirely dependent on crude oil to fuel the world’s transportation, and looking at the amount of oil we are likely to be left with, we may conclude that it will be necessary to curb transportation by about 70% over the next 20 years.

This means the loss mainly of personalized transport and it is unfeasible that there will be 34 million electric cars in the U.K. (the current number of oil-fuelled cars) any time soon, and in reality, never. The only sensible means to move people around using electric power is by light rail and tramways, i.e. mass-transit systems.

If we can’t address the problem from the supply side we have to curb our demand. In the absence of cheap and widely accessible transport we will need to produce far more of our food and materials at the local level. Such a metamorphosis of human civilization from the global to the local, will be underpinned by building strong, resilient communities in which people share their skills and knowledge, to provide as much as possible at the local, grass-roots level. This is the underpinning philosophy of the growing network of Transition Towns. Frightening though all of this is, we may evolve into a happier and more fulfilling state of living than a perceived status quo, that in truth is all too rapidly running through our fingers.

By. Professor Chris Rhodes

 

Greenhouse gas reduction called threat to oil industry – Politics – CBC News

Greenhouse gas reduction called threat to oil industry – Politics – CBC News.

Greenhouse gas reduction called threat

Greenhouse gas reduction called threat 2:09

Alberta’s proposed oil and gas regulations are too ambitious and will hobble the Canadian industry’s ability to compete, says the industry association in Alberta government documents obtained through provincial freedom of information laws.

The industry group says the proposed regulations won’t buy any goodwill and the government should delay their introduction.

The 200-page trove of memos, correspondence and reports offers a rare glimpse behind boardroom doors at the negotiations between industry and government to craft rules to reduce greenhouse gas emissions.

The Canadian Association of Petroleum Producers offers blunt assessments of Alberta’s plan to introduce rules that would demand industry reduce greenhouse gases by 40 per cent per barrel and charge $40 per tonne of CO2 above that level.

David DalyDavid Daly, the Canadian Association of Petroleum Producers’ manager of fiscal policy, penned the file titled CAPP Concerns and Questions for Alberta and Consultants. It was made public under Alberta’s freedom of information legislation. (LinkedIn Photo)

Alberta already has a carbon pricing scheme that costs CAPP members about 10 cents per barrel of oil. The new plan could cost industry up to 94 cents per barrel.

“Proposed 40/40 is 9 fold increase over current. Why such a dramatic step?” writes David Daly, CAPP’s manager of fiscal policy. The average price that a barrel of western Canadian bitumen fetched in 2013 was about $75, so the carbon-pricing increase would represent about a one per cent increase in the cost of a barrel oil.

That is just one quote from a file titled, CAPP Concerns and Questions for Alberta and Consultants. It tells the tale of an industry afraid that strong oil and gas regulations will rob it of what little competitive edge it has.

Strikingly candid comments

The candour is striking:

  • “Will higher stringency requirements impact production and revenue? Very likely.”
  • “GHG policies should be done in concert with other jurisdictions. US has no carbon tax. Why be so far out in front of them? What is that based on?”
  • “Will higher stringency requirements [oil and gas regulations] deliver greater GHG reductions? Unlikely. The challenge with the oil sands is that current technology is not yet available for deployment.”

In the end, the industry’s prescription is to delay putting the regulations into effect.

“Major policies like this one should not be fast-tracked. Adequate time is required for study analysis and consultation,” writes Daly.

That suggestion irks environmentalists, who point out that negotiations over oil and gas regulations between industry and the federal and provincial governments have been going on for over two years.

“This is not a case where we need more research. We need more action and that’s what hasn’t been happening,” argued Clare Demerse of the Pembina Institute, an environmental think-tank.

The industry defends itself by pointing out that the documents provide just a snapshot in the middle of negotiations and that nothing is final yet.

“What we want to ensure is that we’ve got a competitive industry in Canada that can continue to grow, but also, very importantly, can continue to invest in the technologies that are going to be extremely important in driving down greenhouse gas emissions,” said David Collyer, CAPP’s president, in an interview with CBC News.

In the documents, the CAPP plan calls for a 20 per cent intensity reduction and $20 per tonne of CO2.

That is half of what the Alberta government’s plan is and only marginally stronger than the regulations now — 12 per cent and $15, said Demerse.

But the CAPP document explains the association’s approach.

“Will higher stringency requirements ‘secure’ social license [public support] and forestall negative policy action elsewhere? Unlikely,” writes Daly.

Demerse, on the other hand, believes that weak regulations are just going to make doing business harder for the oil and gas industry.

“The customers of the oilsands are asking very tough questions. Right now, the sector does not have good answers to give. When they continue to ask for what is essentially the weakest possible regulation, I don’t think that is working for their real best interest.”

 

Schilling Shilling | KUNSTLER

Schilling Shilling | KUNSTLER.

Such is the power of wishful thinking that a set of fool-making memes now pulses through the word-clouds of financial chatter in America spreading the false good cheer that our economic troubles are behind us and pimping for perpetual motion in wealth expansion. A poster boy for this bundle of falsehoods is financial analyst A. Gary Schilling. Just last week, he was talking out of his cloacal vent about US “energy independence” and “the manufacturing renaissance” that will allow this country to magically decouple from the compressive contraction driving the rest of the world.

Shilling is among the growing chorus of cheerleaders who believe that the shale oil and gas boom will make it possible for so-called “consumers” (what we foolishly call ourselves) to keep driving to Wal-Mart forever — which is the master wish behind all the current fantasies of endless expansion. That idea is going to leave a lot of people disappointed and put the nation further behind in the necessary reorganization of all the key systems that support everyday civilized life, namely: food production, commerce, transport, and the management of capital.

Here’s what’s actually going to happen with shale oil and gas. Best case scenario: shale oil production rises for three more years to about 2.3 million barrels a day and then crashes so quickly that in 10 years the shale oil industry ceases to exist. A less rosy forecast would admit that the exorbitant costs of drilling-and-fracking will not find the necessary capital to even take the industry that far. Rather, dwindling capital will see the shocking decline rates of shale wells (commonly 50 percent the first year and double digits the following) and will run shrieking for other places to hide.

Contrary to Gary Schilling’s blather, America is not practicing “energy conservation.” Rather, an economy engineered strictly to run on cheap oil has gotten crushed by oil that is not cheap. Does Schilling believe, for example, that American suburbia works just as well on $90-a-barrel oil as it did on $11-a-barrel oil, or that it has a future as the basic armature of daily life, or that we are doing anything meaningful to alter the burdens of living this way? My guess is that he has never thought about it.

Likewise, as the American economy got crushed by no-longer-cheap oil, all the working classes in this country below the one-percenters got crushed, hammered, and trashed. Among other things they can no longer afford is gasoline. Total vehicle miles driven has gone down by almost 3 percent since 2007. It will keep going down, and the Happy Motoring matrix will collapse for another reason: capital scarcity will translate into fewer available car loans for Americans, and fewer qualified borrowers, and Americans are used to buying their cars on installment loans.

The shale gas situation is also not the “energy savior” it’s cracked up to be. Because it costs so much to export the stuff, and we don’t have the export infrastructure in place — ocean terminals, fleets of special (expensive!) tanker ships — shale gas is hostage to the US domestic market. The initial boom was so extravagant that it produced a gas glut, which drove the price way below the level that makes it economically rational to drill for the stuff. Now, a lot of those drilling rigs are migrating to North Dakota, where the Bakken shale oil fields require perpetual increases in rig-counts to offset the rapid decline of existing wells.

The shale gas regions of Barnett (Fort Worth), Haynesville (Louisiana), and Fayetteville, Arkansas, are already dwindling. The “sweet spots” turned out to be smaller than the hype suggested. The Marcellus (Pennsylvania and New York) is next. Several of the other hyped shale gas “plays” — the Antrim and the Utica — proved too unpromising to even bother with and never made it out of the wish bag.

The problems with fracking and groundwater pollution are secondary to the economic quandaries as far as the fate of the industry is concerned. At under $8 a unit (1000 cubic feet), shale gas is not worth drilling-and-fracking for. It’s currently around $4. Above $8, Americans are going to have a hard time paying for it. So, enjoy the temporary glut and now stand back and watch the industry begin to dry up and blow away.

As for the “industrial renaissance,” clowns like Gary Shilling can’t put together the obvious trends. The talked-about new factories will be operated by robots, so there would be no employment renaissance to go along with them. Then there is the question of who might the products be sold to? To Americans who have no jobs and no money? To Europeans who are also going broke and also have the ability to roboticize industrial production and impoverish their own working people? To Asia, which is already at industrial over-capacity — and which will only grow worse as Americans and Europeans buy less stuff? I guess that leaves South America and Africa. Well, good luck with that.

Schilling is really only shilling for delusional stock market psychology, which tends to be a self-reinforcing racket until it reaches a threshold of credulity criticality and then implodes from a sudden loss of faith, ruining even a great many one percenters. Money may indeed keep pouring into the US stock markets, especially from other countries, where the money is frightened. I’ll tell you what it ought to be really frightened about: that it doesn’t represent genuine capital, i.e. has no real value. One day not distant, all the nations will discover that their money is only notional and that notions have a way of going up in a vapor. Foolish ideas, though, appear more durable and plentiful. They just keep coming, no matter what’s going on in reality.

My basic wish is that we would quit all our wishing in America and get on with the job of transforming our economic arrangements to a scale and mode that are consistent with the resource and capital realities of these times — before they whap us upside the head and put and end to the project of remaining civilized.

 

 

Alberta Voices: Somebody…needs to wake up!

Alberta Voices: Somebody…needs to wake up!.

The Thomases’ story is the fifth in a series of short films on hydraulic fracturing in Alberta.

DSC_0319Dan and Elaine Thomas

 

 

 

Although Dan and Elaine Thomas are taken aback by the horizontal well that will be fracked directly beneath their Lochend retirement home, they are no newcomers to the oil and gas industry. Dan began his career as an engineer more than 30 years ago working with heavy oil in Alberta before heading abroad for 20 years of employment in South America, the North Sea, the Netherlands, and the Gulf of Mexico. Elaine spent eight years in the industry herself, lending her leadership development skills to an oil and gas company in downtown Calgary before joining Dan for three years in the Netherlands. Dan retired following a final stint of work with BP and Transocean a few weeks before the Deepwater Horizon – Macondo disaster in the Gulf of Mexico.

Three years ago, the time came to build a retirement home on the land Dan and Elaine had purchased north of Cochrane, Alberta nearly 20 years earlier. Elaine recalls that they would often make weekend trips to the property to camp out with the kids in their trailer. “We just enjoyed the pristine beauty of the Rocky Mountains and the clean fresh air,” she says.

In the same week that they broke ground to make way for their new house, a horizontal well was drilled 300 metres from the edge of their property line. It was the first of its kind in the immediate neighbourhood. “There had been oil and gas wells here in the area in the past,” says Elaine, “but what we didn’t know was that this was a whole new breed of oil and gas wells. This was multistage horizontal hydraulic fracturing.” Soon after, Elaine and others in the area began experiencing various health impacts that coincided with the arrival of countless oil and gas rigs.

DSC_0219

Dan compares the recent oil and gas development in the area to a “home invasion” and says that the failure to engage resident stakeholders has left many in the community wondering why they do not learn about new wells before “seeing survey stakes and the erection of the derrick.” The Thomases received no notification that the site next door would be developed and Dan learned afterward that the planned well site was strategically relocated specifically in order to evade requirements to notify neighbouring residents. Had they known about the well beforehand, the Thomases say they would not have built the house.

In the year and a half that followed, nearly 80 new wells were drilled and fracked in the area. During this period, most wells were not tied into gas conservation pipeline infrastructure and the effluent was instead burned off for months on end. Dan says there was one flare that was visible from a distance of three kilometres, and it led him to wonder what net volume of gas was being burned in the area. Based on the volumes indicated in flaring notices and shareholder press releases, and based on the size of the equipment on various sites, he made rough calculations that in the Lochend alone, the oil and gas industry was releasing approximately 30 to 40 million standard cubic feet of gas per day (0.8-1.1 million cubic metres/day). “Thirty million standard cubic feet of gas is enough to heat about 60,000 Calgary households on a typical winter day,” concludes Dan. This volume of gas was released on a daily basis for a period of 12 to 18 months, he says. The flaring of marketable gas continues on some well sites today, he adds.

DSC_0863Under provincial regulation, flaring at these rates is allowed for a maximum of 72 hours. However, if conservation is not found to be economic, continued flaring is permitted based on an evaluation of costs that is to be submitted to the regulator on an annual basis.

Dan laments the emission of greenhouse gases, the uncompensated release of provincially owned resources into the air, the needless waste of valuable natural gas, and especially the health impacts. “Words fail me,” he says.

The most direct impact of the flaring has been experienced by Dan’s wife. One hot, muggy day last fall, says Elaine, she could see billowing smoke coming off a large flame at the site of a well that was being completed and flared about one and a half kilometres from their house. She did not realize the significance of her observations in that particular moment, but after the fact, she noted that the emissions would have been carried toward her by the prevailing winds.

“Within the next few days, I was severely impacted. I had burning on my scalp, which actually lasted for three months. After a month of burning scalp, hair loss started. I had a burning throat. I have a chronic cough.”

“When spring break up comes and fracking stops, my cough goes away. As soon as it starts up, my cough is back. I have had a number of other health issues and incidents where I have had to leave our home for several days at a time.” Dan explains that the first residents to experience health problems were those who lived closest to the earliest developments. With more wells planned nearby to their west, the Thomases themselves will soon bear the brunt of the pollution.

Many others in the area— Dan included— have also experienced abnormal health problems. The Thomases report that some previously healthy Lochend residents have experienced frequent headaches, dizziness, rashes, muscle pain, and other symptoms. Elaine stresses that all of these symptoms have arisen in the short-term. “Who knows what the long-term effects are when you’ve been chronically exposed to these kinds of toxins that are in the air,” she adds.

It is possible that the health impacts of the flaring have been worse than might be expected because of the chemicals that are used in the fracking process. It is likely that the frack fluid components that are put down the well are also burned off in the flares, producing any number of toxins. Dan claims, “The fracked effluent from these wells is … potentially more dangerous than H2S, particularly given that many of the likely toxins are tasteless and odourless.”

He says another eight to twelve wells will soon be drilled in the area immediately surrounding their home. In the last year, perhaps partly as a result of landowner advocacy, many kilometres of new pipeline have been buried and the amount of flaring has decreased accordingly. The Thomases are glad for the improvement, but Dan asks, “Why was the infrastructure not there before?”

The pipelines are not a complete solution, however. During the completion phase of each well, flaring will continue to occur for a matter of days or weeks or longer until each well can be tied in, says Dan. While the approach would be more expensive, he explains that there is existing technology with the capacity to avoid flaring altogether. Given plans to drill dozens of new wells in the Lochend, it is likely that there will be active flares continuously throughout the year. The Thomases are making plans to leave the area as much as possible until oil and gas development near their home has subsided.

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Because Dan and Elaine reside within 1.5 kilometres of various oil wells, they have on occasion received flaring notices, as per the regulations. Elaine is humoured when “smiling, handshaking” representatives distribute the notifications from door to door in what she suspects the companies feel is an act of neighbourliness. “I find that really interesting, because I have to leave the property and many aspects of life are put on hold,” she says in reference to the impacts of flaring on her health.

The flaring notifications do little to improve Elaine’s wellbeing, but she and her husband recognize that the companies are simply adhering to provincial regulations that require them to notify residents and nothing more.

“It’s an interesting example of regulatory policy that causes the industry to do this,” notes Dan. “It doesn’t go anywhere, so it’s fundamentally irrelevant.”

He says that this is just one example of “voluminous regulation” that is ineffective and without purpose. Dan’s experience in the industry both domestically and internationally has helped him understand the ongoing evolution of Alberta’s oil and gas sector. He mentions that the regulating body is now funded entirely by industry and he notes that it is clear in the mission statement of Canada’s main industrial association that profit comes before environmental and social prudence.

“We convince ourselves that we have the greatest legislative and regulatory environment in the world,” says Dan. “It’s not true. I’ve worked in developed countries — undeveloped countries — that in certain instances have better regulatory policy and possibly better enforcement than we have.”

Dan asserts that the way the oil and gas industry operates in Alberta would not be acceptable in many other parts of the world, including parts of the US that are further ahead in the development of unconventional regulation. Alberta has failed to learn from the multitude of mistakes incurred south of the border, he says. He suspects that industry may regret this failure when shareholders begin recognizing the risks that have already caused financial damage to several companies in the states. Instead, “Alberta is falling behind US legislation probably 8 to 10 years,” he says, with respect to hydraulic fracturing. He provides an example and explains that by 2015, flaring and venting will be banned even during completion stages on most well sites in the US.

“The Alberta regulator,” begins Dan, “has been trying to rewrite — trying to … basically write the regulation for unconventional gas development now for more than three years.” Meanwhile, he says, unconventional development has been ongoing for six or seven years in some areas of Alberta.

There is an industry mindset that less or no regulation of the unconventional industry will in some way lead to greater prosperity for us all. In our province, that mindset has been driven over the edge by some well-placed economists in the industry and government. That is a fallacy now and I believe the industry is quickly moving to a situation of higher costs, stakeholder revolts and, ultimately, unhappy shareholders. Somebody — government, the regulator, the industrial association or the industry — needs to wake up!
– Dan Thomas

This fall, despite the Thomases’ formal objections, a well pad was placed on the neighbour’s property. No information was provided to the couple, but Dan was able to read the signage and he discovered that four horizontal wellbores are being drilled from the pad, one of which will extend directly beneath the Thomases’ home and continue another 150 metres beyond. Dan’s conclusions were confirmed when he and Elaine were given a company map during a discussion of lease roads that also happened to include a sketch of the well next door.

DSC_0376“The industry in Alberta works on three principles,” says Dan. “Speed, stealth and secrecy.” The Thomases have been ensured that nothing can go wrong because the wells are more than two kilometres beneath the surface, but Dan points out that regardless of the depth, neither the industry nor the regulator has a worthy philosophy of risk management. There is no risk assessment, he says, no risk mitigation, and no contingency plan in the event that “the unthinkable happens.”

From Dan’s perspective, the risks posed by the well next door and beneath their home include air pollution, water contamination, and induced seismic events that could potentially cause structural damage to their home. The Thomases are almost certain that their health problems can be attributed to the flaring and on one occasion, Elaine and a neighbour both felt a tremor that coincided with a nearby fracking operation. To date, the Thomases’ well water has remained potable, but Dan contends that the contamination of the local aquifer is “almost inevitable.”

He explains that there are several mechanisms by which methane gas, deep saline fluids, or frack fluid chemicals could migrate into shallower strata. Human error, mechanical failure, or the nature of irregular foothills geology could independently or jointly lead to the contamination of drinking water aquifers, says Dan. If something were to go wrong, both Dan and Elaine are convinced that they would have little recourse, just as has been the case with the flaring over the last three years.

“Rule one in this province,” says Dan, “in terms of protection for the rural resident, is that … there is no protection.”

The Thomases have done their best to mitigate the risks on their own. In addition to installing mechanical venting and methane alarms in their basement where they have a 300 gallon cistern that could potentially accumulate gases and lead to an explosion, Dan has made several offers and requests to the operator and the regulator. One such request was that he and Elaine be notified of the date and time when fracking would occur. No response has been received from the operator, but the regulator has reviewed Dan’s submissions, which included a document detailing various concerns — each matched with possible mitigation techniques and viable contingency plans. The regulator responded in writing and informed the Thomases,

The AER [Alberta Energy Regulator] notes that the pad site is a considerable distance from your lands and your residence. … The AER is satisfied that you have not demonstrated that your lands, including your home and water well and your business, will suffer any direct and adverse impact from the wells.

Dan concedes that the pad site is a fair distance from their residence, but he is not convinced that the pad’s location is relevant to the fractures that will soon be induced directly beneath his home. The letter also notes that the wells do not contain H2S gas. Dan was aware of this beforehand and he says the fact remains irrelevant and did nothing to alleviate the concerns that were initially put forward.

From their kitchen window, the Thomases can see another drilling rig in the distance. The well site is approximately 300m from Westbrook School on Highway 22 and both Dan and Elaine are distressed by the fact that, during completion, flaring will occur within sight of the playground. Dan also asks whether there is an emergency response plan in the case of a well site accident and whether the school and its officials are equipped to properly manage such an emergency.

“I’ve seen some things burn down, blown up, and people hurt in other parts of the world,” says Dan, “but I’ve also seen how the potential risk of those things can be reduced significantly in ways that are mostly if not totally absent in the thinking in Alberta right now.”

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While Dan is not sure that the water can be sufficiently protected from the impacts of fracking, he suggests that many other problems can be avoided. “There are solutions to this,” he says. “This can be done differently. This can be done safely and without significant negative impacts to the resident stakeholder group and the environment in general.” However, he concedes that the will to adopt and enforce best practices is lacking. For instance, he asks why the regulator has been reluctant to require the use of tracers in each oil and gas well. These could later be easily detected in the event of water contamination in order to identify the correct source and hold operators responsible for the impacts of their activities.

“I feel that there is no desire to do anything like that in this province,” he says.

However, there is good news, ensures Dan. “I honestly believe we’re at a tipping point where the current legislative and regulatory environment is probably costing the industry money now. It is very certainly in my opinion costing us our reputation globally.”

Dan says that even “industry insiders” are beginning to stand up and voice their concerns with respect to the regulator. He recognizes that some oil and gas executives want to employ better practices, but are limited by the demands of shareholders and the bottom line.

DSC_0365“This is a competitive environment,” says Dan. Any deviation from the standard could threaten a company’s competitive edge. Only a strong regulatory framework that defines the parameters of operation can ensure the application of best practices, he says.

“We’re all trapped in the insanity of an inappropriate, inadequate, out-of-date and dangerous regulatory environment,” he says. “It’s no good for anybody. It’s time to change.”

The Thomases recognize that as former professionals in the industry, they speak from a unique position.

“We’re not trying to stop oil and gas development in Alberta,” says Dan. “Obviously both Elaine and I worked in industry, had a good living from the oil and gas industry, and we don’t want to demonize anybody who happens to be in industry right now.” In general, he adds, the most important changes must occur at the policy level and at the leadership level.

Elaine provides some insight as to how current oil and gas workers and professionals might fail to recognize problems like those she and Dan have been experiencing.

“When you’re within an organization, you’re trying to fulfill the goals and strategies of the company,” she says. “You’re doing your best to be a credible employee and to further the company and you really don’t think about the implications of some of the actions, for example, for residents out in the country.”

“Now that I’m out of the oil and gas industry and I’m on the other side, you definitely see a totally different perspective.”

The Thomases’ experiences both within industry and in retirement have influenced their decision to speak publicly over the last three years and as they continue to advocate safe and responsible oil and gas development. “We made our living inside the oil industry,” says Dan, “so we have a little bit of a responsibility to give back.”

In addition to the time-consuming nature of these issues, Elaine says an enormous amount of stress has been placed on families and on the community. “I’ve seen it pitting neighbour against neighbour,” she says.

“We’re exposing ourselves right now to some more potential risks, and more potential conflict with the landowners who have the wells, and more potential criticism,” says Dan. It has been slow progress, but the Thomases retain the hope that things might be about to change and they continue to push forward despite any difficulties.

“The truth is there,” says Dan. “People are being hurt by this. The causes are pretty obvious and we’ve got to stand up and we’ve got to talk about this in as unemotional and as truthful and as ethical a fashion as we can and allow whatever negative consequences it might bear to just let them take care of themselves.”

Dan and Elaine are members of an advocacy group called Cochrane Area Under Siege – Coalition (CAUS-C). The group can be contacted at causccoa(at)gmail.com.


– Hans Asfeldt
October 30 2013

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Greenhouse gas reduction called threat to oil industry – Politics – CBC News

Greenhouse gas reduction called threat to oil industry – Politics – CBC News.

Greenhouse gas reduction called threat

Alberta’s proposed oil and gas regulations are too ambitious and will hobble the Canadian industry’s ability to compete, says the industry association in Alberta government documents obtained through provincial freedom of information laws.

The industry group says the proposed regulations won’t buy any goodwill and the government should delay their introduction.

The 200-page trove of memos, correspondence and reports offers a rare glimpse behind boardroom doors at the negotiations between industry and government to craft rules to reduce greenhouse gas emissions.

The Canadian Association of Petroleum Producers offers blunt assessments of Alberta’s plan to introduce rules that would demand industry reduce greenhouse gases by 40 per cent per barrel and charge $40 per tonne of CO2 above that level.

David DalyDavid Daly, the Canadian Association of Petroleum Producers’ manager of fiscal policy, penned the file titled CAPP Concerns and Questions for Alberta and Consultants. It was made public under Alberta’s freedom of information legislation. (LinkedIn Photo)

Alberta already has a carbon pricing scheme that costs CAPP members about 10 cents per barrel of oil. The new plan could cost industry up to 94 cents per barrel.

“Proposed 40/40 is 9 fold increase over current. Why such a dramatic step?” writes David Daly, CAPP’s manager of fiscal policy. The average price that a barrel of western Canadian bitumen fetched in 2013 was about $75, so the carbon-pricing increase would represent about a one per cent increase in the cost of a barrel oil.

That is just one quote from a file titled, CAPP Concerns and Questions for Alberta and Consultants. It tells the tale of an industry afraid that strong oil and gas regulations will rob it of what little competitive edge it has.

Strikingly candid comments

The candour is striking:

  • “Will higher stringency requirements impact production and revenue? Very likely.”
  • “GHG policies should be done in concert with other jurisdictions. US has no carbon tax. Why be so far out in front of them? What is that based on?”
  • “Will higher stringency requirements [oil and gas regulations] deliver greater GHG reductions? Unlikely. The challenge with the oil sands is that current technology is not yet available for deployment.”

In the end, the industry’s prescription is to delay putting the regulations into effect.

“Major policies like this one should not be fast-tracked. Adequate time is required for study analysis and consultation,” writes Daly.

That suggestion irks environmentalists, who point out that negotiations over oil and gas regulations between industry and the federal and provincial governments have been going on for over two years.

“This is not a case where we need more research. We need more action and that’s what hasn’t been happening,” argued Clare Demerse of the Pembina Institute, an environmental think-tank.

The industry defends itself by pointing out that the documents provide just a snapshot in the middle of negotiations and that nothing is final yet.

“What we want to ensure is that we’ve got a competitive industry in Canada that can continue to grow, but also, very importantly, can continue to invest in the technologies that are going to be extremely important in driving down greenhouse gas emissions,” said David Collyer, CAPP’s president, in an interview with CBC News.

In the documents, the CAPP plan calls for a 20 per cent intensity reduction and $20 per tonne of CO2.

That is half of what the Alberta government’s plan is and only marginally stronger than the regulations now — 12 per cent and $15, said Demerse.

But the CAPP document explains the association’s approach.

“Will higher stringency requirements ‘secure’ social license [public support] and forestall negative policy action elsewhere? Unlikely,” writes Daly.

Demerse, on the other hand, believes that weak regulations are just going to make doing business harder for the oil and gas industry.

“The customers of the oilsands are asking very tough questions. Right now, the sector does not have good answers to give. When they continue to ask for what is essentially the weakest possible regulation, I don’t think that is working for their real best interest.”

 

Richard Heinberg on Natural Gas: Bridge Fuel or Fool’s Gold?

Richard Heinberg on Natural Gas: Bridge Fuel or Fool’s Gold?.

 

A Texan tragedy: Ample oil, no water – OurWorld 2.0 | OurWorld 2.0

A Texan tragedy: Ample oil, no water – OurWorld 2.0 | OurWorld 2.0.

 

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