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the underreported boondoggle of fracking

https://www.nytimes.com/2022/07/27/opinion/environment/energy-crisis-oil-gas-fracking.html

'From 2006 to 2014, fracking companies lost $80 billion; in 2014, with oil at $100 a barrel, a level that seemed to promise a great cashout, they lost $20 billion. These losses were mammoth and consistent, adding up to a total that “dwarfs anything in tech/VC in that time frame,” as Bloomberg writer Joe Weisenthal pointed out recently.'
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Comments

  • "Holy money down the drain, Batman!"
  • More like "down the well".
  • +1 History will not look kindly upon Manchin for killing the bill so he could buy the second yacht. I think perhaps the fossil fuel industry's climate science denial dodges will eventually end with a major acquisition of a company like First Solar. Much like the tobacco industry went from hating nicotine delivery system replacement products to manufacturing them: https://vice.com/en/article/8xxx83/the-shady-link-between-big-tobacco-and-nicotine-gum Big oil will want to transition at some point to Big Solar and say see we're solving the problem to stay relevant in a post-fossil fuel world. Right now they're only gesturing in that direction symbolically while the profits are still good from their original planet-killing products.
  • Thanks , now I know why gas was sky high & recently started to fall.
    Derf
  • ISTM that the fracking industry, probably with help of lobbyists, succeeded beyond expectations in hoodwinking the public into thinking fracking is patriotic, good laissez-faire economics, and beneficial to the country. The industry seems to have succeeded in sidelining dissent, especially from those who claim environmental harm. Promotion of the US as an energy bully may suit the purposes of the previous presidential régime, but it really is bad policy for this country, other countries, and poor suffering Mother Earth.
  • +1 History will not look kindly upon Manchin for killing the bill so he could buy the second yacht. I think perhaps the fossil fuel industry's climate science denial dodges will eventually end with a major acquisition of a company like First Solar. Much like the tobacco industry went from hating nicotine delivery system replacement products to manufacturing them: https://vice.com/en/article/8xxx83/the-shady-link-between-big-tobacco-and-nicotine-gum Big oil will want to transition at some point to Big Solar and say see we're solving the problem to stay relevant in a post-fossil fuel world. Right now they're only gesturing in that direction symbolically while the profits are still good from their original planet-killing products.

    It will probably be closer to their nature to go after bio-fuels and hydrogen/fuel cell technology. I know a couple of the Bay Area refineries are converting to bio-fuel. And I think there are some conversions under discussion in Puget Sound.
  • Bio-fuel. Is that where they burn garbage and waste to produce the energy? Bio-Mass?
  • BenWP said:

    ISTM that the fracking industry, probably with help of lobbyists, succeeded beyond expectations in hoodwinking the public into thinking fracking is patriotic, good laissez-faire economics, and beneficial to the country. The industry seems to have succeeded in sidelining dissent, especially from those who claim environmental harm. Promotion of the US as an energy bully may suit the purposes of the previous presidential régime, but it really is bad policy for this country, other countries, and poor suffering Mother Earth.

    Check out the Alberta oil sands project(s). It is wanton, open-pit, shameless defacing of the Province of Alberta, Canada and Mother Earth.
    ***************
    Wiki: "...Only 20 percent of bitumen can be extracted using open pit mining methods,[5] which involves large scale excavation of the land with huge hydraulic power shovels and 400-ton heavy hauler trucks. Surface mining leaves toxic tailings ponds..."

    Still, 20% is 20%. This is BIG Industry, BIG Money.
    https://en.wikipedia.org/wiki/Athabasca_oil_sands

  • msf
    edited July 2022
    For a variety of environmental reasons, I'd like to see the end of fracking. But that doesn't diminish the appearance of the cited NYTimes Op-Ed piece as a polemic, grounded in misleading, cherry picked data.

    Start with the except quoted. Here's an alternative description of 2014, just as factually accurate and just as misleading: With oil prices plummeting over 50% in 2014, it's not surprising that the oil industry failed to make a profit that year.

    Is it really true that the domestic industry cannot make a profit with oil at $100/bbl? A graphic by the Dallas (yes, I know) Fed asserts that oil companies can make a profit on drilling new wells at WTI prices ranging from $48 to $69 depending on the oil field (including fracking). See p. 35.
    https://www.dallasfed.org/-/media/Documents/research/energy/energycharts.pdf/

    The Op-Ed piece draws your attention to oil, while using Chesapeake as a poster child. What it doesn't say is that Chesapeake "was far slower than many of its peers to pivot to tapping shale formations for oil, which turned out to be much more lucrative than gas."
    https://www.wsj.com/articles/fracking-trailblazer-chesapeake-energy-files-for-bankruptcy-11593374287

    What caught my eye in the Times Op-Ed was this part: "Previously, from 2002 to 2012, Chesapeake, the industry leader, didn’t report positive cash flow once, ending that period with total losses of some $30 billion"

    Negative cash flows are to be expected in capital intensive industries when they first start out. They have to put a lot of cash into equipment and oil fields for payoffs down the road. It's a balancing act. Expand too slowly and you get killed by fixed costs. Expand too rapidly and you're crushed by debt. The WSJ I cited reports that Chesapeake failed the latter way: "Chesapeake’s breakneck growth left it highly leveraged." That's an indictment of Chesapeake management (ousted by Icahn in 2013), not of the industry.

    Let's talk about that $30B in losses for 2014. While I'm not fond of non-GAAP figures, in some industries one should also look at EBITDA. The oil industry gets tremendous subsidies from the federal government in the form of accelerated depreciation and depletion allowances. It is curious how this taxpayer subsidy is not mentioned. Perhaps because it could call the dollar losses into question - are these real losses or just financial manipulations?

    $30B is surely a ton of money, but it's presented for shock value without a frame of reference. Here's one (also misleading, but in the other direction): while the industry leader lost $30B in ten years (in a capital intensive industry where it invested for the future), Uber lost the same amount of money in just five years, spending that money not on capital but on capturing market share. They lost money on every ride but made it up in volume.

    Limited cites to data, no links given (e.g. "the single best and most thorough account of the fracking boom", so the writer says); this stands in stark contrast to copious citations and links presented for environmental concerns. Not even a link to a Chesapeake financial statement? (Here's the 2014 10K, showing a $2B net profit, even after writing off $2.7B in depreciation, depletion, and amortization.)

    The conclusion may be right or wrong. One can't tell because in the end, this is just a hit piece.
  • edited July 2022
    Crash said:

    Bio-fuel. Is that where they burn garbage and waste to produce the energy? Bio-Mass?

    No. Liquid fuels for things like trucks, rail, ships, tugs, even airplanes eventually--so they say, where batteries are not yet considered to be efficient. Which basically means bio-diesel. I think it will be awhile before people are ready to ride in an airplane filled with used vegetable oil.

    https://www.mercurynews.com/2022/05/03/martinez-refinery-to-start-producing-biofuels-instead-of-crude-oil/

    But fuel cells are also considered alternatives for some of those applications in the future.

  • edited July 2022
    @MSF I don't doubt your numbers, but I do doubt your focus, given what's at stake environmentally. Part of the problem with finance's fixation on traditional cash flow metrics is it ignores the triple bottom line and the old saying what gets measured gets managed applies. This is why the SEC's movement to force each company to provide comparable statistics on their carbon emmissions matters. And those and other kinds of harmful emmissions should not only be measured but taxed significantly. Not only that but the total carbon/environmental impact of products manufactured should be measured. What then would the fossil fuel industry's cash flow be when adjusted for environmental and social impact? I am aware of course that no industry including for instance solar panels is impact free. Yet the right wing's fixation on alternatives and ESG every time there's a problem like Solyndra is far more of a hit piece if you ask me. Consider another potential "hit piece" comparing Solyndra to the military: https://vox.com/2015/1/5/7490593/F-35-vs-solyndra The fact is we should be investing in real alternative fuel sources whether they're good short-term financial investments or not. That should be the focus. Despite our missions to Mars, there still is no planet B. I would also add that Chesapeake's problems were not an isolated incident: https://ogv.energy/news-item/over-100-oil-and-gas-companies-went-bankrupt-in-2020

    @WABAC Although the technology may have advanced since this article was published, as far as I know biofuels are not an adequate environmentally-friendly solution: https://scientificamerican.com/article/biofuels-bad-for-people-and-climate/
  • I completely agree that the focus on numbers is wrong. I didn't pick it. The thesis of the opinion piece was that from a financial perspective, fracking is a sham.

    A piece that presents readers with dubious assertions creates impression that it can't make its case objectively. It is easy to attack, especially by those with an opposing perspective. Ultimately it is harmful as it doesn't persuade and leaves readers suspicious.

    I don't appreciate hit pieces on any side of any issue. They're problematic regardless of whether they are more prevalent on one side or another.

    Aside from all of that ISTM that it was worth the space saying a little bit about how one looks at cash flows, capital intensive investments, and tax subsidies. There are a number of people investing in MLPs getting "tax free" payments courtesy of the industry's tax breaks: K-1 line 1 ordinary income "May be negative in early years due to accelerated depreciation, but become positive over time."
    https://tortoiseecofin.com/media/2581/the-abcs-of-mlps_053018.pdf

    2020 - the year that oil futures turned negative. If there was any time in the past few years that the industry would go through a shake out, that was it. OTOH, the piece you cited states that between 2015 and 2020 the industry filed more than 500 bankruptcies. So while the 107 given for 2020 may have been the high for that time span, it doesn't seem that far out of line with the other years.

    Again, a frame of reference would help. What is the size of the companies that failed? What percentage of the industry did that represent? The point of the original piece was that "fracking companies" were not profitable, yet aside from Chesapeake which was pretty much a pure play, what even constitutes a fracking company? Haliburton? Schumberger? Are oil companies the same as fracking companies or are we conflating things here? (That was another problem with the original piece.)

    harmful emmissions should not only be measured but taxed significantly.
    Maybe, or maybe cap and trade would work better. They're not quite the same, and sometimes one can be better than the other. (The former sets the price of emissions and lets the market decide the amount, while the latter sets the amount and lets the market set the price.) Of course in the end either is far superior to the status quo.
    https://www.brookings.edu/blog/planetpolicy/2014/08/12/pricing-carbon-a-carbon-tax-or-cap-and-trade/
  • https://www.nytimes.com/2022/07/27/opinion/environment/energy-crisis-oil-gas-fracking.html#commentsContainer

    Almost all of the Reader Pick comments are of interest, and those of GLC and some others do some substantiated rebutting. The author meant PE when he wrote VC; corrected.
  • I'm with @msf on this one: I want my news to be "fair, balanced and accurate" as I believe the PBS Newshour claims. I really don't appreciate it when a news source that I depend on slants the picture. I expect that from certain news operations on the far right- I really don't appreciate it when coming from the left.
  • edited July 2022
    It's worth noting that the linked piece is labeled as "Opinion," so it is not a news piece. Errors MSF pointed out aside, I think there is important information in it: Between 2010 and 2020, the cost of solar power fell 90 percent, and the cost of wind and battery power fell nearly as much. That kind of information matters if we're going to stave off climactic disaster and invest in a greener future. And there's no question in my mind that the coverage of Solyndra this opinion piece mentions was far more severe in many media outlets than that of Chesapeake.
  • WABAC said:

    Crash said:

    Bio-fuel. Is that where they burn garbage and waste to produce the energy? Bio-Mass?

    No. Liquid fuels for things like trucks, rail, ships, tugs, even airplanes eventually--so they say, where batteries are not yet considered to be efficient. Which basically means bio-diesel. I think it will be awhile before people are ready to ride in an airplane filled with used vegetable oil.

    https://www.mercurynews.com/2022/05/03/martinez-refinery-to-start-producing-biofuels-instead-of-crude-oil/

    But fuel cells are also considered alternatives for some of those applications in the future.

    Thanks for the clarification. :)
  • ...And then there is the video of a woman who can light the water from her faucet on fire, after seeping, leaking junk reached her property from a nearby fracking site.

    Oh, ya. We all should run out and get us some of THAT!

  • Question for those that commented on this thread. Did anyone take a position in energy when it went negative in 2020 ?
    I'll answer that first. No I didn't & kick myself in the butt every time I think about it !

    I await your reply, Derf
  • I wasn't any smarter than you, @Derf, with respect to that wacko market in oil.
  • Nope. (And your point is...? grin. )
  • I did not take a new one and didn't add to the one I already had (EPD).
  • Derf said:

    Question for those that commented on this thread. Did anyone take a position in energy when it went negative in 2020 ?
    I'll answer that first. No I didn't & kick myself in the butt every time I think about it !

    I await your reply, Derf

    I realized a tax loss in GASFX somewhere in there. I don't feel like I missed out on anything important in the long run. That money went into water and green energy.

  • The value tilting funds I own have loaded up on oil since the March 2020 weird pricing, particularly SMVFX, SMXAX, GQEPX, and COWZ. I did not own any of those funds in early 2020.
  • beebee
    edited July 2022
    @WABAC

    GEVO landed a bio-fuel contract to supply American Airlines…

    american-airlines-gevo-biofuel-sales-deal
  • Instead of SMVFX (C shares), one could buy the less expensive A shares SAMVX (NTF at Fidelity) or the even better I shares SMVTX (NTF at Schwab). Are you limited to the high ER shares through your workplace or broker? If you still like the fund, you might look into swapping share classes if possible.
  • edited July 2022
    Thanks, @msf. Schwab is charging me 1.26% for my NTF A shares, SVFAX. I made an error in my post.
  • @Crash : That video of the burning water looks to me to be a little bit flaky Noted the stream of water appears to have air or some type of gas added to it. After finishing the homes of to many to count homes this fluctuation of water happens when the water is first turned on. To see the water coming in gushes ,on & off in a functioning home doesn't happen. Also noted person looking in at the kitchen window.

    Just saying, Derf
  • @Derf- If I remember that situation correctly it wasn't a municipal water supply system, but a local well. If gas infiltrated the well forming small pockets, and was then pumped into the pressure holding tank, I think that it could result in that situation. The gushes are similar to what occurs when air gets into the water supply lines.

    At our weekend house we always shut off the water when were not going to be there for a couple of days, because the water heater is located at the living level- there's no basement. When we turn it back on it "burps" very much like that (for a short time) because small air pockets have formed in our absence.
  • bee said:

    @WABAC

    GEVO landed a bio-fuel contract to supply American Airlines…

    american-airlines-gevo-biofuel-sales-deal

    Thanks for the info. That happened faster than I expected.
  • Hi @Derf and @Old_Joe et al PBS Frontline produced Gasland in 2010 regarding the problems with fracking in the Marcellus range in Pennsylvania. The pressurized system used for fracking was pushing gases into the private/muni well systems........thus "burning water at the faucet". A Gasland, part 2 was also produced related to the mini earthquakes becoming frequent in the southwest from the fracking methods. There are numerous video sources; however, I don't know that one will find the full original, even with a PBS membership. For those who have access to OnDemand via a cable system, you may search the name and perhaps discover the program, as I recall HBO running the program, too.

    The link below offers various online sources that are related to the problem.

    GASLAND links
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