“COLOR BLIND” VOTE MORTIFYING BUT NOT MATERIAL

July 12, 2012 § Leave a comment

When Becky Carney, a Democrat legislator accidentally hit the green voting button rather than the red, it made national news.  I am dubbing this the Color Blind Vote on account that the ability to confuse red with green is a trait of those with this affliction.  Ms. Carney does not take refuge behind this condition.  She attributes it to mental and physical fatigue.  We have all been there; she just happened to be on the national stage.

In the estimation of one national commentator, this one had the biggest “ouch factor” in the political gaffes of the week. It easily lapped the one by Bobby (aka Piyush) Jindal for his slip in use of the words “Obamney care”.  Romney’s VP list just got shorter by one, one imagines.  Freud may have been hard at work on that one.  Bobby does advocate government actions to reduce the uninsured pool, but only when he does it (at the state level).

Ms. Carney’s was the casting vote that overrode Governor Perdue’s veto of the Senate bill S820 to permit fracking in North Carolina.  In her explanation the governor is reported to have stated general support for shale gas production.  But she felt that the bill as written did not have sufficient environmental safeguards.  So she vetoed it.  It was overridden by the deciding Color Blind Vote.

Whilst undoubtedly mortifying, the vote in question will likely not matter very much.  In saying this I am not being prescient with regard to the color of the party of the governor elected in November.  My reasoning is based on the facts and logic related below.

In view of the shale gas related economic boom in Pennsylvania, and soon to be in West Virginia and Ohio, our state has a right to understand the extent of the resource.  Armed with this information it could choose to permit production or not.  In my view, as stated in previous blog postings and my recent book, such activity ought to be permitted only if accompanied by strict measures to assure stewardship of the environment and accommodation of the interests of the local communities.  Pennsylvania suffered the pain of going out in front while seemingly not quite prepared.  We can avoid that fate.  The Pennsylvania governor’s Marcellus Shale Advisory Commission report is comprehensive and a good place to start.

The problem is that we really do not know the extent or quality of the resource.  Sure the US Geological Survey finally released their report.  Their assessment is an average of 1.66 trillion cubic feet of natural and 83 million barrels of associated natural gas liquids (NGL’s). 

While the gas numbers are unexcitingly low, the NGL figure may be more troubling.  I recalculated the above figure to be able to compare it to other areas.  I get about 2 gallons per thousand cubic feet (mcf).  My research has shown that the current producing areas range from 4 to 12 gallons per mcf.  I have used a number of 7 gallons for Marcellus (PA, OH, WVA) calculations in the book.  The key point is this.  With the historic low prices for natural gas, most of the profit is in the NGL’s.  This is because those components are largely priced pegged to the price of oil.  Oil today runs over five times the price of natural gas on the basis of energy content.  So, unless our figures get revised upwards from new data, exploitation prospects are bleak until natural gas prices pick up due to demand creation.

The natural gas figure is a good deal lower than was expected by state geologists.  I have little doubt that this was due to the paucity of the data.  Sparse data inevitably causes confidence limits to be lower, and that drives down the figures.  So, the only means by which the state could really know much how much gas it has is by encouraging more data to be collected.

Now, here is the rub.  By now the whole energy world knows that horizontal drilling and fracking are essential for economic production.  If these are forbidden by law, nobody will invest in data gathering.  What would be the point?

Consequently, allowing horizontal drilling and fracking to be lawful is necessary to know where we stand.  I am not aware of any state in the union where they are outlawed, except Vermont recently making fracking unlawful.  The Vermont action is amusing.  This is akin to Texas outlawing tapping of maple trees for energy conservation reasons (up to 50 gallons of water must be boiled off to produce one gallon of syrup). 

Shale gas is not being produced in most of the states where fracking is lawful.  In the end exploitation decisions will be made by business people assessing the true profitability of the production, including the factoring in of the costs of environmental prudence.

Vikram Rao

Some of these ideas appeared in an op ed piece in the N&O on July 11, 2012

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