Judge Issues Watershed Ruling on Fracking, China Is All In

Lots Going On in US

In a watershed ruling on fracking, a federal judge has – for the first time – ruled that leases auctioned in California were illegal because environmental impacts were not considered.

In September 2011, Interior’s Bureau of Land Management auctioned 2500 acres of land in Monterey County to oil and gas companies and the Center for Biological Diversity and Sierra Club sued.

Hundreds and perhaps thousands of fracking wells are already operating in California, and the industry is aggressively pursuing the 1750-square-mile Monterey Shale, which has a depth of 11,000 feet.   

But partly because it’s a hot spot for earthquakes, many are finding the disjointed land too unpredictable to make drilling economical, reports Bloomberg.

Meanwhile, foreign investment in US shale extraction is rising, constituting about 20% of the $113.7 billion spent by the industry. It’s up from $2 billion in 2008 to $7.5 billion in 2012, says the US Energy Information Administration. 

"US operators get financial support, while foreign companies gain experience in horizontal drilling and hydraulic fracturing that may be transferable to other regions," EIA explains.

While Interior weighs regulations on the industry, the EPA announced the formation of the Hydraulic Fracturing Research Advisory Panel – 31 scientists to peer-review EPA’s research on the impacts on drinking water

Administration officials have held nine meetings on fracking regulations over the past nine months with both industry and  environmental groups. 

And while the controversy over whether to export liquified natural gas rages on, the first deal has been approved. Within five years, about two million homes in the UK will be heated by US shale oil. 

Cheniere received clearance from the US government to sell liquefied natural gas to Centrica in the UK. The first tanker deliveries are expected in 2018.

In related news, the Department of Interior released a final plan for oil shale extraction in the West, which focuses on "careful research into its feasibility and environmental issues."

As confusing as the terms are, oil shale in the West is different than shale oil in places like North Dakota. In the West, the oil is not deep underground, but in sedimentary rock that contains kerogen – a precursor to oil.

Oil is extracted by heating the rock under high pressure, an extremely energy and water-intensive process – more so than tar sands. No one really knows how to cost effectively develop it, kind of like "clean coal."

The clay-like rock contains very little oil – about a tenth the energy of crude oil. 

Drought is already a severe problem in that part of the US. It takes about 12 barrels of water to produce one barrel of oil, according to estimates from the Government Accountability Office.

Former President GW Bush wanted to open almost 1.5 million acres to oil shale; Interior’s plan potentially opens 700,000 acres in Colorado, Utah and Wyoming. 

Banned in Cantabria region of Spain 

Even in the face of a deep recession and high unemployment,  Spain’s northern Cantabria region – supposedly a shale-rich area – unanimously voted to ban fracking because of environmental concerns.

Spain’s central government wants the region opened to fracking to create jobs and cut fossil fuel imports, which supply three-quarters of the country’s energy. 

"In Cantabria, there is a very large social movement against fracking… the bill will be passed unanimously by the three parliamentary groups. The region is very small and highly populated," an official source told Reuters.

France and Bulgaria have also banned fracking.

China Moves to Frack

China is getting started on exploiting its shale reserves, and has aggressive targets in the 12th Five Year Energy Plan because it is less carbon intensive than coal and oil. It wants natural gas to supply 18% of the population by 2015 – 250 million people.

Shell Oil will invest $1 billion a year in a government-approved deal to share exploration and development with China’s largest oil and gas firm, China National Petroleum Corp. 

China may have twice the shale reserves of the US, according to the US Energy Information Agency. 

India’s government is also developing policies to encourage development of shale gas and coal bed methane. Its oil minister plans to present a proposal to the Cabinet within two weeks, says The Economic Times.  

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