Tag: fracking

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Interview Part I: Fracking and Regrets

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I had a conversation with a friend who ships trainloads of ‘frack-sand’ into the Eagle Ford shale in South Texas.  We talked about the Natural Gas Revolution, as well as the surprising and possibly regretful turn his life has taken, far from working in book publishing in Brooklyn.

 

Bryant:  Hello, my name is Bryant, and I presently work for a company that develops and operates frack-sand silo terminals in the Eagle Ford shale.

Horizontal fracking or hydraulic fracturing is a new technology. It’s been around probably — I would say since about 2007, but obviously now it’s really picking up. What it is, is instead of drilling and fracturing the earth, only in a vertical manner you drill vertical and horizontal and you fracture along the horizontal, through the shale.

Michael:  When you and I were having a beer with a mutual friend of ours, he was describing basically oil and gas trapped in small little bubbles of rock that you can’t, with conventional drilling, get at. But you sort of smash it up with this horizontal drilling by shooting water and sand and chemicals, and it smashes up the rock and then the oil and gas flows. Is that basically still the right, accurate description?

Bryant:  Yeah, that’s exactly right. First you drill it, and then — which means you just basically drill a hole and then you pull out all the drill pipe, and you go in with the fracking equipment. They call it the gun. The gun then blows off, which shoots shrapnel in all directions. After that, you pull that out. You then pump millions of pounds of water at a very high pressure, which then opens up the routes that the shrapnel first created to get to those pockets, and then you pump millions of pounds of frack sand, chemicals, and guar. It almost creates a slurry that helps keep those routes open so the oil and gas can actually flow out of the well.

Michael:  To go back to the original description, your link in this chain is that you move huge amounts of sand from northern United States into South Texas?

Bryant:   Yes, right now we’re averaging about 35,000 tons a month, which is about 70 million pounds so it’s quite a bit. It’s about 350 rail cars a month. Each one holds 200 thousand pounds.

Michael:          350 rail cars, so you basically take over an entire train, you fill it up with sand. It leaves Wisconsin, or where is this coming from?

Bryant:  The mines are all located in the north, mainly Wisconsin, Minnesota.  Apparently it has to be portions of the earth that were covered over during the Ice Age, and therefore have been untouched for a very long time, and the earth is very, very hard. This sand can basically deal with very high pressure.[1]

Michael:  Referring to Eagle Ford. I know what it is because I live in South Texas, as do you, but basically this is a giant area covering a huge number of counties under which they’ve discovered there’s all this oil and gas trapped in previously undrillable area in the shale formation.

Bryant:  The Eagle Ford Shale actually is a formation that spans from Laredo, obviously it continues into Mexico, I’m only giving you the American formation. Starts in the Laredo, Carrizo, Cotulla area, spans northeast right under San Antonio, up through Cuero and Kennedy, really very key spots. That’s actually where the first well was ever drilled, but that’s really the formation of it.[2]

What makes it the best play really in the world right now is the economics of the play.  So, all the infrastructure is in place to bring in high volumes of sand, high volumes of water, high volumes of guar from India coming into the Port of Houston, Port of Corpus Christi. You’ve got chemicals; you’ve got bauxite coming in as another form of I guess sand or proppant from South America. So, you have infrastructure in for high volume of rail and barges, etc. There is a large amount of workforce. You have a lot of people looking to work. You have infrastructure, and then probably the most important is it doesn’t cost a lot of money to then get the product to refineries because you have all the refineries located on the Gulf Coast, so your margins to get it to market are a lot higher when you’re in the Eagle Ford. That’s really what makes it the most attractive play right now in the world.

Michael: I went down to Eagle Ford to tour it. I asked one of the guys down there; I said, “How long is this thing going to go for? How many years do we have for drilling?” He said, “What we’re looking at is probably fifteen more years of heavy drilling and fracking operations.” Is that what people talk about when you’re there?

Bryant: It fluctuates all the time. When this first started a couple years ago, you know, it was twenty to thirty years. Now they’re saying yeah, about fifteen. I read an article the other day it’s sixteen. That seems to be the consensus.

Michael:  Then I asked him, “So if we’ve got natural gas reserves that are now available in the U.S. that we never thought were available because this stuff was trapped inside the rock, and now it’s being released from the rock, how long do we have great reserves of natural gas?” He said, “About ninety years-worth is of the known or probable, available natural gas.” Ninety years worth in the United States, does that sound right? Is that what people talk about?[3]

Bryant: I wouldn’t doubt it. The Marcellus Shale which encompasses a lot of up-state New York, Pennsylvania, even creeps its way into Ohio and down into West Virginia – the Marcellus Shale they say hasn’t even been fully, surveyed. They’re saying that shale alone if developed would become the largest gas shale in the world.  So yeah, I believe that’s probably pretty accurate.

Michael:  So if we’ve got ninety years — here’s where I go with that. When I think about what is going to be sources of energy for, say, the rest of my lifetime, your lifetime, pretty much what that tells me is that extraction of carbons from the earth is going to be cheap for the rest of our lives, and renewables that from a political standpoint I may prefer that we use solar power or wind power because it just seems cleaner and better for the earth, but that’s probably not going to be viable when compared to natural gas, for the rest of our lives.[4] This is sort of what I take away from it when somebody says yeah, we’ve got about ninety years worth of really cheap gas we can access. I don’t know if you have any thoughts about that.

Bryant:  I do. I’m originally from the Northeast, so I work in an industry that is frowned upon by a lot of people in the northeast. So a lot of my friends will tell me, “Why are you involved in something when you could be involved in solar power or something greener?”

Michael:  When I told the woman who looks after my kid a couple days a week that I’d been down to see a fracking site, she said, “Fracking, isn’t that illegal?” Do you get a hard time from people, from your old world about fracking itself?

Bryant:  I do. I get a horrible time. I even hate myself sometimes. If you were to tell me ten years ago that I would have been doing business with Halliburton, I would have denied it, but I’m now in that world. I attend a lot of conferences where you look around and it’s just not the type of people I thought I’d be hanging out with all the time. Basically it’s all about fifty, sixty, or forty or fifty-year old white men that have just been raised in the oil field in some form. I like art and things like that. So it is a little crazy, and I do get a lot of flack from them, but I always do welcome a debate.

Michael:  Do you have any thoughts you care to share about where you see yourself in five years, either how you’re going to make your fortune as an oil guy or not, and another would be whether you have any kind of personal regrets about starting out in the publishing industry and ending up as an oil guy.

Bryant: Yeah I think I’ll probably answer the second question first because it will lead to the first one. Obviously when you’re young and in college, you’re a real idealist. I was really into writing and reading and if I could do it all over again I probably would have focused my energies more on a lifestyle where I could have lived off of some kind of art or humanities. But life is not — I don’t think college really prepares you as well for reality, at least in my opinion.

Personally, I would have preferred to not have taken this route, but I’m not ashamed in what I work in. I do find it fascinating. It is something that moves on a global scale, which I think is very interesting.

In this business you’re constantly meeting people with money and with ideas and with connections. I hope to one day be able to capitalize on my knowledge and my connections, but I actually prefer to go somewhere else in the world. I wouldn’t mind getting involved in South America.

I think the way it’s going to happen in the rest of the world is actually a little more interesting because they’re going to have all the little problems that we’ve already solved here a long time ago. And problem solving is actually kind of a fun part of the job. The rest of the world really doesn’t have the infrastructure that we have here for moving equipment and materials. I think that would be even interesting to do. I don’t have to necessarily get involved in drilling or trading. It could be as simple as logistics. Things like that are actually — I think there’s room for it in the future, and hopefully five years from now I’ll have some options to do that.

 

Next up in Interview Part II – Bryant and I talk about the Eagle Ford labor market.

 


[2] And the Eagle Ford shale play has really changed the look of South Texas.  It’s kind of a Mad Max Bizarro world down there.

[3] In other words, this Natural Gas Revolution is huge.  As further described here.

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The Natural Gas Revolution Part VI – Has It Killed Renewables In Our Lifetime?

Here’s my hypothesis[1]: The abundance of cheap domestic natural gas – what I’m calling the Natural Gas Revolution – makes “renewable” energy sources like wind and solar financially untenable, and possibly unnecessary, for the next 90 years.[2]

I can’t prove my hypothesis because energy pricing is complicated.

Figuring out the ‘price’ of energy derived from traditional fuels such as coal, natural gas, and nuclear is not as straightforward as it may seem.  I’ve made an attempt based on a conversation with an official at my local utility company.  But every financial assessment depends on a series of assumptions: from the future price of input fuels, to regulatory changes, to models that take into account the depreciation of assets such as a nuclear or coal plant.

We know that energy produced from nuclear and coal plants has relatively low prices, partly because, in the case of my local utility, it bore the cost of building the nuclear and coal plants long ago.  As a result, we can afford that energy.  We also like the price of natural gas, because both plant construction and current market prices are low.

On the other side of the ledger, my local utility in recent years added solar- and wind-derived energy to its energy portfolio, both of which cost considerably more.  At a free-market price, wind power would be about 50% more expensive than natural gas energy, but a federal government Production Tax Credit (PTC)[3] brings the wind-energy price within the range of natural gas-derived energy.

Solar power is even more expensive than wind.  Solar may cost three times as much per KW hour as natural gas – assuming current technology – but with a federal subsidy through tax credits,[4] solar energy can be priced at a cost about twice as expensive as natural gas.

The energy provider of my home city targets a ‘portfolio mix’ by 2020 of 20% ‘renewables’ – at this point primarily wind and solar energy.[5]

As a retail consumer, I pay 9 cents/Kilowatthour on my energy bill.  This retail price reflects a blend of energy costs from the utility’s primary sources of nuclear, coal, natural gas, and renewables, plus the cost of administration and delivery to my house.  The price per KWhour could be brought down, somewhat, by prioritizing energy sourcing purely on a cost basis, which would favor coal and nuclear, and increasingly – given the natural gas revolution – natural gas.  Wind and solar make less sense on a pure cost basis without the federal taxpayer subsidies that make them feasible for the local utility.

My local utility has chosen to build a portfolio to include wind and solar energy; as a person with environmental sensibilities, I see the benefits of this and I feel good.  In addition, from a risk-mitigation perspective, the utility wants to stay ahead of regulatory changes which may make coal production more costly[6], or periodic events that make nuclear untenable[7], or market prices that would increase the cost of energy from natural gas.

So the local utility embraced wind and solar in part as a reasonable portfolio hedge against the risk of high natural gas prices.

But the future price of natural gas, and the likely range of prices for gas[8], just shifted massively with this natural gas revolution.  Folks I’ve spoken to in the natural gas sector forecast 90 years’ worth of known, accessible, cheap natural gas in shale rock formations.  All of this natural gas we really had no way of bringing to market just 4 years ago.

As a result, from a purely financial perspective I fear we’re locked into paying extra for renewables in a way that makes much less sense than it did just a few years ago, before the natural gas revolution started.

Fans of renewable energy are not going to like this message, I know.  In the largest sense, however, it should be seen as good news, and I’ll explain why.

It’s a huge economic boon to the entire country.

So why is cheap natural gas such good news?  For the majority of consumers the natural gas revolution will benefit their pocketbooks in subtle but important ways.

A drop in the price of energy impacts the price of nearly everything, keeping goods and services cheaper than they otherwise would be.  Just as expensive oil during the Oil Embargo of the 1970s kicked off a round of intense inflation, cheap natural gas will act to keep inflation contained in the future.

To ask people to throw away cheap energy and adopt expensive energy is a lot like asking everyone to throw away cheap food to consume expensive food.

The closest analogy I’ve come up with for renewable energy is the organic food movement.

Organic food works on a small scale, with a dedicated group of true-believers who eat food as an expression of their values.  It’s interesting to think about, but I’m not betting on widespread adoption.

Of course I’m in favor of organic food, and I serve it to my daughters whenever I can.  I’m happy to pay a little extra for the pleasant feeling of using fewer chemicals on the earth, or to support happy, free-range chickens.  The vast majority of food consumers in this country, and the world for that matter, however, do not have the luxury of paying more for food today for some intangible or unvalued long term benefit, even if it ‘costs’ more in terms of health or environmental impact in the long run.  The organic food movement pushes against the immutable logic of the wallet.

Similarly, renewable energy has required people to express their values through their energy consumption, paying more for something that impacts the earth less.

I’m generally in favor of renewable energy, and I would love for more things to be powered from solar and wind generated energy.  Unfortunately renewable energy is a luxury, and it just became even more so with the natural gas revolution.  The risk of future natural gas price spikes decreased dramatically with this revolution, making a portfolio including renewables less financially relevant than it was until recently.

Most people live in a resource-limited world, where cheap food or cheap energy is not a choice, but a necessity.  In my city, San Antonio, for the 25% of residents and 30% of children who live with daily food insecurity, the organic food movement exists in a parallel, irrelevant universe.

Most people I talk to don’t seem aware that the natural gas revolution of the past 4 years has made renewable energy untenable, financially. for the next century.

I see two reasons not to mourn the financial marginalization of renewables right now.

The first is purely financial since the tax subsidies needed to close the gap between wind and solar and more ‘market-based’ energy sources such as natural gas would have to grow in the future rather than shrink.

The second is more political.  This next point is more my instinct than provable fact.  But here goes: Whenever you have an important business – like renewable energy – wholly dependent on government subsidies, the opportunity for power-brokering by public officials and ex-public officials becomes extremely tempting.  More than tempting, it’s inevitable.

I have a real issue with ex-government employees who go out and create ‘green energy’ investment companies, which fund companies whose major source of income is government guaranteed contracts for expensive energy in the form of wind and solar.  Since it’s all divorced from market prices, there’s a huge opportunity for influence peddling and government favors for former public servants.

There may be some of this going around in my city of San Antonio, but there are also big national examples of this.  Yes, I’m looking at you Terry McAuliffe and your GreenTech Automotive.  Most egregiously, I’m looking at you, Al Gore, and your New York Times-reported net worth over $100 million, largely built on this power-brokering technique,[9] earned in just 12 years since leaving office.  I’m very sorry you weren’t president, but your way of making money since then disgusts to me.

As the gap between the cost of natural gas energy and government-subsidized renewables grows in the coming years, one of the main externalities of the renewable energy sector is the opportunity for government graft.  So I’m not just concerned that we’ll pay more than necessary for energy, but I’m also convinced some of our public servants will make sure that the green energy industry pays them back handsomely for their support.

 

See also Part I – Mad Max Bizarro World

Part II – Big, Corporate, Well Capitalized

Part III – The Drilling and Fracking Scene

Part IV – How Big Is This?

Part V – The Labor Market

 


[1] I can’t prove this with data, hence it’s only a hypothesis to be tested over time.  But I still think I’m right.

[2] The natural gas revolution is happening mostly in the United States right now, in the Eagle Ford area of Texas, as well as the Bakken in North Dakota, and the Marcellus Shale of the Eastern US.

[3] Created by the Federal Government’s Energy Policy Act of 1992, which allows energy providers an income tax credit of 2.2 cents/KW hour.  Assuming a current natural gas energy derived price of 4 or 5 cents/KW hour, we can estimate the ‘market’ price (before PTC subsidy) of wind energy for the local utility at around 7 cents/KW hour.

[4] Solar tax credits tend to be Investment Tax Credits (ITC), providing 30% of the cost of development of a solar plant.

[5] With a minimal amount of ‘landfill’ gas supplying a third alternative source of renewables.  My local utility’s published description of their mix of energy sources now and in the near future can be found here.

[6] If environmental regulation made utilities pay out of pocket for ‘carbon offsets’ for example, coal could become much more expensive.

[7] Like periodically happens, e.g. 3-Mile Island, Chernobyl, Fukushima.

[8] At the risk of stating the obvious, I believe the natural gas revolution means low natural gas prices at low volatility for decades, perfect if you’re a utility company forecasting your energy portfolio needs.

[9] No, I don’t have a breakdown between fees he’s earned on his movie, speaking fees, and his income from serving on the board of private equity firms that value his power-brokering to the ‘green-energy’ industry.  Kleiner Perkins made him a partner in 2007 and it wasn’t really for his investing acumen.  I just don’t think he’s rethinking the entire private equity business with his Generation Investment Management Fund, the way he describes in this WSJ Op-Ed.  Instead, I think he’s probably doing the same old power-brokering that becomes available anytime a big industry becomes completely dependent on government contracts and subsidies.

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Natural Gas Revolution Part V – The Labor Market

Mr. Grizzly, Mr. Deliverance and Mr. Biscuit – Contractors and the Eagle Ford Labor Market

Among the main lessons of our tour of the Eagle Ford, is that there’s a lot of jobs down here.  If you’re a man currently out of work, and you have the use of all of your limbs, there’s a job available for you in South Texas, right now.  Like, today.  If you feel like working for a living – go.

At the newly constructed drilling pad the first order of business was to receive another safety briefing.  If I – in my hazmat suit – look like I just escaped from the movie set of E.T., our safety instructor looks like he escaped from the movie set of Deliverance.  He of the scraggly goatee points out the safe gathering point on the pad in the event of a massive blowout or fire.  He makes me nervous on a number of different fronts.

Another grizzled veteran – with 40 years of drilling experience – takes over the drilling pad narrative at this point.

While Mr. Grizzly is old enough to be a grandfather, this is not your grandfather’s drilling operation.  He explains that this particular drill rig we’re looking at, built a few days before we arrived, can ‘walk.’ What he means is they can drill 10,000 feet underground for a few days, then slide the entire 100 foot above-ground structure a few feet away and drill an entirely new underground well, without dismantling the rig.

Since the relevant underground piping for hydrocarbon is horizontal, underground wells can line up next to each other a few feet away but cover a horizontal mile in entirely different directions from a single drilling pad.  This ability to ‘walk’ the rig and set up multidirectional horizontal wells saves days of labor and hundreds of thousands of dollars.

Mr. Grizzy loves this feature.

Listening to Mr. Grizzly I’m struck that this place isn’t swarming with younger guys, and Mr. Grizzy tells us why.  When the 1980s oil crash struck Texas, an entire generation of workers washed out of the business to work elsewhere.  A few like Mr. Grizzly and Mr. Deliverance stuck it out, and new guys are now joining up, but there’s a missing generation of workers, adding to the difficulty of finding competent experienced workers in the Eagle Ford shale.

Also notable on the drill site are the predominance of contractors.

Everything, it turns out, seemingly depends on contractors and sub-contractors.  Halliburton is on the drilling pad here, as is Schlumberger, to name two huge world-wide oil-service contractors.[1]  But everything down to skilled mechanics and plumbers has to be located and hired separately.[2]

This makes sense as I think about this now, since so much is needed in this previously-empty outback country.  Hardly anybody lived out here before the Eagle Ford shale play began, so everything has to be provided in the absence of pre-existing infrastructure.  Contractors guard the gates to the drilling site; contractors supply the tricked-out Mad Max trucks; contractors even set up the barbecue tent where we were served lunch.

Our host company owns the lease, will oversee extraction from the site for years to come, and will take the oil and gas to market once it gets above ground, but they’ve sub-contracted the actual few weeks of drilling to another group, and that’s who Mr. Deliverance works for.  Mr. Deliverance’s team sets up the drill rig in less than a week and spends another week drilling up to ten thousand feet underground and as much as a mile horizontally, blasting and fracking as it goes.  Following an intense 2-3 weeks of drilling activity, the drilling contractor moves to the next drill site with the same or a different independent operator.

With some sense of what we’re now looking at, we are invited to climb aboard the actual rig, where our steel-toed boots come in handy. We clamber up steep steps to a platform, then over a series of porous metal grates.  Underfoot we see specialty ‘mud’ stored beneath us, a chemically-treated liquid mixture to facilitate the upcoming drilling process.  The actual chemicals mentioned were a mystery to me, but Mr. Grizzly mentions falling into the ‘mud’ container at least once in the past.  Mr. Grizzly appears well past procreation age to me, so I’ve decided not to worry about that too much.[3]

Later in the day, at a separate fracking site, I get another taste of the tight labor market down here.  In an air-conditioned trailer, two men watch flat-screen monitors where all manner of data keeps them apprised of ongoing fracking activity on site.

One of the men hardly notices us, so engrossed is he in his monitors, but the other introduces himself cheerfully as a native of Biscuit, KY.  Based on his overall affect, not to mention his denim overalls, if he wasn’t overseeing a fracking job I’m pretty sure he’d be watching professional wrestling on his couch, right now.  He seemed pretty happy, indeed surprised, to be gainfully employed.  Somehow his provenance from Biscuit tells me what I need to know about the labor market in the Eagle Ford shale.  And no, I can’t find Biscuit, KY on Google Maps either.

See also Part I – Mad Max Bizarro World

Part II – Big, Corporate, Well Capitalized

Part III – The Drilling and Fracking Scene

Part IV – How Big Is This?

 


[1] One of the unfortunately named contractors on this site was Patterson-UTI.  My wife’s an infectious disease doctor, and as such, would never endorse naming something “UTI.”  It sounds like something you’re likely to catch from the infamous ‘Man Camps’ that have sprung up around fracking areas around the country.

[2] I asked our hosts towards the end of the day how someone could ‘get rich’ in Eagle Ford right now.  They all agreed setting up a contracting company was the way to go.  Anyone with a skill and a willingness to work hard could make a good living with so much need for skilled labor.

[3] On the other hand, the unique combination of chemicals in the ‘mud,’ if they didn’t kill him, might have been enough to make him unbelievably strong.  Isn’t that how most superheroes get made?  Can somebody do a cartoon mockup for me of Mr. Grizzly and his superpowers after he emerges from the ‘mud?’

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Natural Gas Revolution Part IV – How Big Is This?

Our hosts drilled a total of 239 wells in South Texas, which at $7 million per drilled well would indicate a $1.7 Billion investment in drilling wells alone by this one company.  They also report a $440 million investment in a fracking team, plus major investments in building collection points for their product and pipelines to move it.  Given that they are only the 12th biggest independent operator in the area, it’s easy to see how companies have invested over $100 Billion the Eagle Ford shale play alone.

Nationwide, industry author Daniel Yergin reports an estimated 1.7 million jobs will be created in the natural gas revolution, with an estimated additional $62 billion in Federal and State taxes collected in 2012 as a result of this activity.

The New York Times reports that the largest 50 oil and gas companies spent $126 Billion per year in the United States, over the last six years, in new oil and gas drilling and land acquisition.

For my friends who look in dismay at the drilling industry and fracking in particular I’m compelled to point out that this kind of money doesn’t scare easily.  The anti-fracking folks are working hard to find evidence of environmental and health damage as a result of the fracking revolution, and will no doubt do their darndest to keep the pressure on, but they have a tough fight on their hands with this kind of major capital.

 

A Silver Lining on this Massive Scale, Maybe

There is one silver lining, however, to this kind of massive, money-intensive operation.  From a safety and environmental perspective, paradoxically, huge scale could be seen as good news.  Big, corporate, capital intensive businesses are all about reducing risks, which will make them extremely sensitive to environmental liabilities and public relations liabilities, in a way that wildcatters simply won’t be.  That’s the theory at least.

Of course, our host company gives the State Rep and me the pitch on how safe fracking really is, and the safety mechanisms involved to prevent ground-water contamination.

The gist of his presentation, since you’re curious, is that a series of concrete tubes in overlapping layers prevents fracking fluids, and the eventually extracted hydrocarbons, from leaking into our groundwater.  We hope.

See also Part I – Mad Max Bizarro World

Part II – Big, Corporate, Well Capitalized

Part III – The Drilling and Fracking Scene

Part V – The Labor Market in the Eagle Ford

 

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Natural Gas Revolution Part III – The Drilling and Fracking Scene

If you’re a boy, and you like big powerful tools, you might like the next part of our tour.

Early on in our tour of the drilling pad, we entered the air-conditioned trailer where the head driller directs the drill bit.  For the uninitiated viewer (for example, me), the seat of power is not unlike Han Solo’s seat in the Millennium Falcon.  Large, flat-screen monitors with custom drilling software ergonomically surround the drill master’s elevated LA-Z-Boy-style throne with smooth swivel capabilities.  A joystick and keyboard accompany the cushioned seat which also faces a wind-shield view of the outdoor drill rig.

The State Rep and I each insist on mounting the throne, if only for a few moments, to feel the power of the master driller.1  Drilling teams, we learn, work 24 hours a day in 12-hour rotating shifts until the work is complete.

The fracking site which we visited after lunch had a whole different look to it.

Unlike the drilling site, dominated by a tall metal and plastic rig for punching a hole in the ground, giant green sand storage tanks and tubing dominate the fracking site.

Two dozen green urns elevated on stilts hold about 500 of tons of sand each – literally trainloads full brought from quarries in Wisconsin or Minnesota.

[A buddy of mine, not on site with me at this time, is in the frack-sand provision business, shipping those trainloads of sand from the North into South Texas.  I interviewed him here and here.]

Conveyer belts stretch from the colon of the urns to an unseen area.  Twelve-inch wide jointed metal tubes run from there to entrance points near the well head.  These overgrown green aliens arrived from the Planet Arachnid, and now are poised, abdomen down, to blast their chemicals deep into the ground.2

At our feet we examine blasting tubes manufactured in Fort Worth, TX specifically to provide explosive charges to break open the rock.  All of this equipment allows the operators to force a slurry of water, sand, guar, and chemicals deep into the earth at extraordinary pressure – enough to smash open dense rock formations and then keep them open for the oil and gas to flow.

The engineering and custom-manufacturing of the outdoor structures, and the custom software and computing power indoors, reinforced our strong impression of the massive scale of investment in Eagle Ford.  Some of the workers may look rough, but the equipment is brand new and highly specialized.

See Also:Part I – Mad Max Bizarro World

And Part II – Big, Corporate, Well Capitalized

Part IV – How Big is the Natural Gas Revolution?

Part V – The Labor Market in the Eagle Ford

 

 

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  1. I don’t know about my State Rep friend, but I know for me, sitting up there, I wanted to blast a hole two miles deep into the fucking earth, while simultaneously laser-rocketing Tie Fighters with pinpoint accuracy. ↩
  2. I would have accused the Wachowskis of copying these shapes for those Nebuchadnezzar search-and-destroy insects, but The Matrix came out before fracking really took off. ↩
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Natural Gas Revolution Part I – Mad Max Bizarro World

There’s a Mad Max quality to the back roads and blue highways of South Texas these days. I’d been hearing about this strange phenomenon almost since I arrived in Texas 3 years ago, but only recently did I get an invitation to see it for myself.

I hopped in a car with a Texas State Representative this month to tour a drilling site with an independent oil and gas company in the Eagle Ford shale in South Texas.

As the State Rep and I zoom past empty acreage – not unlike Mel Gibson’s Australian outback – we spy on the horizon a small caravan of specialized tricked-out trucks approaching menacingly.  As they roar past us, we observe flatbeds full of monstrous piping overflowing with weaponized-looking plumbing on their backs.  Ironically these Mad Max vehicles forecast not the last known energy reserves on the planet, but rather the opposite – nearly a century worth of abundant, cheap, domestic energy.

As a relative newcomer to Texas I carry all my prejudices and misconceptions about oil and gas drilling with me.  Most of what I knew before my Eagle Ford visit I learned from Hollywood, via Giant and There Will Be Blood.

I found crucial differences between my preconceptions and what we saw there.

Foremost in my mind is that most people I speak with in San Antonio, not to mention the rest of the country, do not understand just how big the Eagle Ford operations are.

If my estimates of investment are anywhere near correct – something on the order of $100 Billion – the Eagle Ford dwarfs USAA, HEB, or Rackspace[1] as an economic driver of the South Texas region.

Second, the scale of financial investment forces a corporate, risk-mitigating approach to operations down there, which is a good thing when it comes to environmental risks, a major concern about Eagle Ford.

Third, the employment boom in the South Texas region is palpable.  They need more people than they have right now.

 

What is fracking and what is the Eagle Ford Shale play?

So here is as good a time as any to explain what I’ve learned about how the Eagle Ford shale ‘play’[2] works, as opposed to oil and gas operations in other times and other regions of the world.

Historically, exploiting oil and gas reserves in many places on the earth has required sophisticated geological and engineering search techniques, seeking large hidden pools of hydrocarbons that can be extracted from a vertical drill in the ground.

A ‘shale’ play like the Eagle Ford, however, is the kind of seemingly un-exploitable geological formation that oil engineers and geologists skipped over for the past century, in their search for large underground pools.  Oil and gas trapped in small bubbles between tightly packed shale rock could not be released using traditional techniques until the last decade or so.[3]

A combination of two techniques changed all that: horizontal drilling and hydraulic fracturing (fracking).[4]  The horizontal drilling allows above-ground rigs to exploit a much broader underground area from which to extract hydrocarbons, and the fracking involves the use of underground explosive charges to blast open tight rock formations, followed by high pressure water, sand, guar[5], and chemical combinations to keep rock formations open long enough for oil and gas to flow and eventually to be extracted by the horizontal pipe.

Suddenly – and by suddenly I mean in the last 10-15 years – exploitation of shale oil and gas deposits trapped in shale formations has become economically viable.  And by “economically viable” I mean the oil and gas industry has suddenly found 15 years’ worth of profitable drilling in South Texas and maybe 90 years’ worth of U.S. domestic energy underground in the Bakken, Marcellus, and other major shale regions.  Horizontal drilling and fracking has caused an oil and gas revolution.

This revolution is what the State Rep and I have come to see in Bee County, Texas.

 

Up Next Part II – No Dry Wells in the Eagle Ford

Part III – The Scene at Drilling and Fracking Sites

Part V – The labor market in the Eagle Ford

[1] To name a few overly-referenced economic engines of South Texas.

[2] ‘Play’ in this context is what oil and gas folks call it.  Also, I’ve learned that if you’re a Yank and not from around these here parts, Eagle Ford is pronounced as one word: “Eagleferd.”

[3] A little online research reveals that fracking techniques were known and used in the oil industry as early as the late 1940s, with additional advances in the technology in the 1970s, but commercially successful exploitation of shale-trapped gas, using the sand and chemical mix, dates only to 1997.

[4] I only got through one season of the Battlestar Galactica redo that came out a few years back.  I think it’s important to acknowledge the rise of their particular Galactica method of swearing (“Frack!”) and the concurrently perfected process of releasing hydrocarbons from closed shale rock.  For linguists, this may represent an important example of “multiple independent discovery” in the development of the English language.

[5] I hadn’t heard of guar either, but it’s a common cheese and ice cream-additive, derived from beans in India and Pakistan, lately applied to the fracking process.

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