The Gas Bubble

Market bubbles come and go, but they all have things in common: a few people get rich, a lot of people get taken, and a mess is left for the taxpayers to clean up. To understand the hydro-fracking bubble, there are some things one must know: each well only produces a little gas (and exhausts relatively quickly), reserves were significantly overstated at the beginning of the game, and most important: Wall Street is very invested and wants its money out.

The devastating environmental effects of the process are well documented, and not the subject of this essay (water depletion, water pollution, habitat and farmland destruction, and significant climate change impacts).
Hydro-fracking drill sites during drilling process with drilling slurry containment pond

The process of fracturing rock to create a cavity in a thin layer of shale, deep under ground, to extract the gas trapped in cells there does not create a large pocket. So, only a small amount of gas is produced, and the well is exhausted quickly. Given the low volume of gas produced by a single well, sustained supply depends on the production of many, many wells, which means many leases must be signed with landowners. As the gas rush caught on, there was a big push by gas drillers to sign as many leases as possible, as these "reserves" increased the company's value, and thus its stock price. When those leases began to come due, they had to be exercised, or else they would expire, thus increasing the market glut.

In any resource extraction rush, the easily obtained reserves are the first to be taken, and as they dwindle, more difficult and expensive assets are pursued until such time as extraction cost plus profit exceeds market cost, at which point extraction ceases.
Hydro-fracking site with drill rig next to pond, cut out of forest
The Energy Information Agency has predicted that the USA will shift much its energy production to natural gas in the coming years, based on the imagined plentiful supply, and clean combustion characteristics of this fuel. With the sudden oversupply brought on by the hydro-fracking rush, the price of natural gas has plummeted with numerous consequences. Most alarmingly, the bottom has dropped from the sustainable energy markets, as gas has became cheaper than wind or solar, which have already become competitive with oil and coal. Given the low price, and the EIA predictions of plenty in the future, many industries have placed significant investments on gas-fueled technologies. Last year, the USGS significantly lowered its estimate of recoverable gas in the East Coast shale deposits to at least one twentieth of their previous estimates, upon which the gas bubble was based. But as the money was already invested, there is little discussion of this.

The oversupply of gas in the USA has driven domestic prices to about a fifth of the worldwide average, a situation that can only be temporary. Last week, a pump on a gas pipeline supplying Britain from the continent failed, causing a 50% spike in wholesale gas prices. Though it was not revealed at the time, Britain, suffering an unusually cold winter, was down to a two day supply of gas. This week it was announced that a US gas company had signed a contract to supply hydro-fracked gas to Britain, starting in 2018, in the form of liquid natural gas, via tankers loaded in Louisiana.
Liquid natural gas compression terminal
The Keystone XL pipeline, proposed to carry heavy crude oil from northern Alberta to refineries in Texas, figures into this equation as well. Canada was formerly the largest supplier of natural gas to the USA, but the tar sands operations consume a tremendous amount of natural gas in the processing of that dirty crude, thus eliminating that supply.
Oil sands upgrader in Alberta
In the last few years, the EPA has finally enacted air quality regulations that will force electricity utilities to either retire or upgrade the most dangerous coal fired power plants. Many of these utilities, taking into account the projections of future gas supplies, and current USA market price of gas, are converting their electricity production to natural gas. In 2000, the USA produced 51% of its electricity with coal, and 16% with gas; in 2010 the ratio was 44.5% and 24.1%, and the trend continues.
Coal fired power plant in SC, soon to be retired
So let's add up all of these facts and draw a few conclusions:
-tremendously overstated supplies
-an overstatement upon which bankers make large investments
-increasingly expensive and difficult reserves remain for extraction
-commitments in place to sell gas overseas in markets with higher prices
-numerous domestic industries (especially electric utilities) implementing technologies to utilize the erroneously projected plentiful, cheap gas supplies
-coal powered electrical generation converted to natural gas to avoid the expense of adding pollution controls
-Wall Street wants its money back before the bubble bursts, so the pressure is on the gas companies to keep drilling wells and producing gas to pay the interest on the loans.

So where will that leave us, the average citizens in the USA?
The first thing that will affect all of us will be a tremendous spike in electricity prices in the next few years as US natural gas prices equalize with world market prices, which will have risen from current levels due to the voracious demand of Europe, Asia, the tar sands, and diminishing world supplies. More importantly, we will be faced with depleted and polluted groundwater, and tremendously degraded farmland here at home as we rushed to keep the bubble inflated.
Farm with four completed hydro-fracking well pads

TAR SANDS - Part II

27 July 2009

Everywhere it smells like oil, a constant reminder of the force that drives this region. And the people, all polite and helpful, are defensive, because they need those jobs. How dare those environmentalists come and criticize? “What powered the car that got you here anyway?” In traveling the world, I see this over and over, fear-motivated support of environmental destruction by the populations dependent on the pillage for their jobs. My friend Larry Gibson, the David fighting the Goliath of Massey coal, holds an annual July 4th party (remember life, liberty, and the pursuit of happiness) at his place in WV. This year it was busted up by a gang of drunken, slovenly coal miners, threatening the women and children present. Land of the free, home of the brave. One almost feels sorry for them, because it is fear that drives this behavior. Of course, the coal companies with whom they cast their lot have repeatedly shown their willingness to enslave and abandon the workers: the stories of coal towns and indebtedness to the company stores are legendary. More recently, the mechanization of coal mining has obviated all of the jobs once provided by the mines, at a much greater environmental cost. There is a madness at work here: our heritage is being destroyed, and make no mistake, the environment is our legacy; it pervades our songs and lore. But we seem to be willing to sacrifice our children’s inheritance for trinkets and our indulgence.

Fort McMurray, the support town for the tar sands operations, has the gold-rush feel pervading everything: hotel rooms and real estate cost more than prime cosmopolitan areas, labor is scarce, so service suffers, fortunes are made (and lost) overnight, and everyone is rushing to get theirs. Meanwhile, the people downstream (the Athabasca River looks like chocolate milk) are suffering myriad cancers and birth defects, but can’t get anyone to pay attention.

TAR SANDS - Part I

25 July 2009

Like all industrial extraction processes, the culpable actors don’t want publicity. I'm driving along next to the Albian sands project, a joint venture of Shell and Chevron/Texaco, which happened to be one of the most interesting excavation projects from the air, and the “Access Interdit” signs abound, as if one could actually do damage to this ravaged landscape. Of course the only damage is to reputation: no one is more dangerous than the photographer. Meanwhile, as I drive, I listen to the local radio station, which is full of the news of a recent study commissioned by the Alberta provincial government (which is very supportive of tar sands development) asserting (for the benefit of dubious USA lawmakers (who are always on the side of the environment)) that oil from tar sands has only ten percent more global warming footprint than traditional crude. Driving through Fort MacKay, a First Nation community which, unlike many others, has embraced tar sand development, I’m impressed with the new roads and community center and school, all in a village of 450 people. Of course, given the rate of cancers and other mysterious diseases I’ve read about, one wonders who will be around to enjoy it all. Must jobs always come at the cost of environmental devastation? A resounding NO.

Meanwhile, I’m in northern Canada and the weather feels like Florida. Can we realize the problem before it’s too late?

EDMONTON

21 July 2009

The tasks somehow increase in monumentality, due to the exactitude required and the preparation, let alone the execution. Production takes more and more time, and is increasingly difficult: a clear vision of the road between concept and product would almost certainly discourage the attempt. Nonetheless I find myself rushing to Newark airport on the Pulaski Skyway (love this road) with the monumental Hudson power plant off to the right, and the series of rusted bridges over the River, with that feeling of anxiety - based on the fear of unpreparedness. It always leaves once I am in motion (and realize what I forgot, in this case the spare battery for the video camera.)

But inevitably when flying commercially, one joins the rank of “the problem,” which I spend so much energy avoiding: the carbon footprint, massive use of petrol, the tremendous waste… I devote my life to learning and documenting the hidden cost to our environment of that soda can; to then see them thrown in the rubbish as the airlines tend to do makes me crazy. And the food, or what passes for it, makes me cringe. Watching those overweight kids drink soda after soda and eat hamburgers that have such a staggering impact on the planet makes me want to grab those sodas and burgers from them and ask incredulously: “do you know what you’re doing?” But of course, that is the least effective method of persuasion, so I control myself with a beer (time for a life-cycle analysis of that, I guess.) And I hope that the images I make will educate these same people about their unwitting involvement in the desecration of our world.

But for the time being, I am part of the problem, emitting carbon and eating factory food and hoping for change.

TAR SANDS - press release

June 30, 2009

FOR IMMEDIATE RELEASE:

Described as a “Provocateur” by MSNBC’s Anne Thompson, photographer J Henry Fair never fails to inspire viewers with his horrifically beautiful imagery of environmental trauma. Whether his subject is the mountain-top removal mining practices of the coal industry, or the inhumane treatment of animals on factory farms, Fair’s message is clear: we are all complicit in the destruction of our planet, and to repair the damage we have done means cooperation en masse.

Fair recently collaborated with Columbia University’s Earth Institute and OSI to document the gas drilling practice known as “hydro-fracing,” which will severely affect the Catskills and have a major impact on the New York City water supply if allowed to continue. This project has received significant press attention and will subsequently be published as a book. Fair now sets his sights on our Northern neighbor: the Tar Sands of Alberta, Canada. The Tar or Oil Sands are a large deposit of bitumen, a tarry hydrocarbon, trapped in the earth, and has been called “The Most Destructive Project on Earth” by Environmental Defense.

In July, Fair will make his way up to Northern Alberta, so that he can capture this atrocity from his signature bird’s eye view. Working with key leaders in the Tar Sands cause, Fair’s photographs will become the centerpiece of a touring symposium which will endeavor to educate the public on this little known disaster. Set to debut this fall at Green Mountain College in Vermont, the tour will then continue on to a host of colleges, universities, and other organizations in the US and abroad.


For additional information or images, contact Katherine H. Womer Benjamin, 617.448.0007 or khwb.photog@gmail.com.

TAR SANDS - Part I

June 22, 2009

The Alberta Tar Sands defies comprehension on many levels, starting with the fact that most people don’t even know of their existence. It is possibly the largest oil reserve in the world, and the largest environmental disaster. The impact is systemic, affecting every facet of the environment: air, earth, and water, and causing everything from global warming to mutations. The issue is all the more egregious because the authorities are ignoring the law and allowing this travesty. As is so often the case, the public is unaware of the colossal damage done to provide the calories we crave.

The Tar or Oil Sands are found in an area in Alberta, Canada, in which there is a large volume of bitumen, a tarry hydrocarbon, trapped in the earth. Extraction involves the strip mining of vast regions that are both valuable Boreal Forest habitat and precious water resources, rendering them desolate, lifeless moonscapes for eternity. The material extracted must then be reduced to the usable hydrocarbons, a process that uses tremendous amounts of water, energy, and oceans of toxic chemicals. The largest dam in the world was constructed just to retain this toxic waste from but one of the tar sand refineries. These unlined “impoundments” leach toxins into the groundwater, and since they are really just dikes constructed of earth, this type of construction tends to fail with disturbing regularity, which would release the sea of toxic sludge they contain into the Athabasca River. Toxicity is so high in these lakes that the wildlife coming into contact with them immediately dies; the oil companies hire people to remove the dead ducks floating in the goo. Of course, just sitting there, the vast reservoirs of toxic sludge are releasing benzene, a known human carcinogen and active global warming agent. When asked, the companies involved proclaim their intentions to remediate this waste, which sounds as believable as saying they will mop up the ocean.

Refining the tar sands is done in several stages at numerous facilities in Canada and the USA, each refinery a major polluter in its own right. The first new processing facilities to be built in the USA in 30 years are being built for tar sand “synthetic crude.”

The communities near the Tar Sands operations are primarily first nations people with limited political voice and little means to fight the industrial giants operating in their lands. Cancer rates in these communities are far above the norm, with rare cancers occurring repeatedly. Doctors who try to sound the alarm are ignored or ridiculed.