Odd solar power?

[shiny!]

Re: Odd solar power?

rogermexico, your post is truthful and honest; how could anyone take offense? Truth isn't always comfortable to hear, but it has a good "feel" to it. It's as refreshing as a tall drink of water on a hot, dusty day.

It's this kind of truth-telling that I wish our so-called leaders would do for the American people with regards to Peak Cheap Oil. Lay it all out without bias or ulterior motives. Explain the necessity of taking conservation measures now. Emphasize the financial benefits of conservation. Give people concrete ideas of what to do to mitigate future disruption and pain. If we could do more to encourage conservation now, voluntarily, rather than continue wasting and waiting for shortages and high prices to make it a necessity...

When I was a child in San Antonio, our mayor spearheaded a citywide anti-littering campaign. The "don't litter" message was everywhere: on TV, radio and billboards. At school we had anti-littering assemblies. We were given litterbags to give to our parents to put in their cars. Trash cans were put on every street corner. The city held a contest to come up with the best anti-littering slogan. The winning slogan was slapped on busses and trash cans all over the city. On and on it went...

The campaign was a combination of education, creating civic pride and team spirit, and simple solutions to solve a problem. More emphasis was put on emphasizing the positive than on villifying the litterers. There were no complicated subsidies and tax breaks involved. The minimal outlay for the city involved buying PSA announcements and more trash cans.

The culture of the city actually changed to one of "San Antonians do not litter", with the result that San Antonio became known as the cleanest city in the country. Once the streets were litter-free nobody wanted to be the first one to mess them up. If you saw a piece of litter on the sidewalk you picked it up without giving it a second thought. If you dropped a tissue on the street your friends gave you a hard time.

I think a positive, full-bore approach like this could change our cultural attitude about oil conservation. But to tell the truth about PCO, our "leaders" would have to break their financial ties to Big Oil and Big Auto... and there's the rub.

Is it possible for Americans to pull together again as a society the way we did during WWII with victory gardens and scrap drives? The way we did with the Lunar Space Program? Or have we become too balkanized and cynical?

[EJ]

Re: Odd solar power?

rogermexico, your post is truthful and honest; how could anyone take offense? Truth isn't always comfortable to hear, but it has a good "feel" to it. It's as refreshing as a tall drink of water on a hot, dusty day.

It's this kind of truth-telling that I wish our so-called leaders would do for the American people with regards to Peak Cheap Oil. Lay it all out without bias or ulterior motives. Explain the necessity of taking conservation measures now. Emphasize the financial benefits of conservation. Give people concrete ideas of what to do to mitigate future disruption and pain. If we could do more to encourage conservation now, voluntarily, rather than continue wasting and waiting for shortages and high prices to make it a necessity...

When I was a child in San Antonio, our mayor spearheaded a citywide anti-littering campaign. The "don't litter" message was everywhere: on TV, radio and billboards. At school we had anti-littering assemblies. We were given litterbags to give to our parents to put in their cars. Trash cans were put on every street corner. The city held a contest to come up with the best anti-littering slogan. The winning slogan was slapped on busses and trash cans all over the city. On and on it went...

The campaign was a combination of education, creating civic pride and team spirit, and simple solutions to solve a problem. More emphasis was put on emphasizing the positive than on villifying the litterers. There were no complicated subsidies and tax breaks involved. The minimal outlay for the city involved buying PSA announcements and more trash cans.

The culture of the city actually changed to one of "San Antonians do not litter", with the result that San Antonio became known as the cleanest city in the country. Once the streets were litter-free nobody wanted to be the first one to mess them up. If you saw a piece of litter on the sidewalk you picked it up without giving it a second thought. If you dropped a tissue on the street your friends gave you a hard time.

I think a positive, full-bore approach like this could change our cultural attitude about oil conservation. But to tell the truth about PCO, our "leaders" would have to break their financial ties to Big Oil and Big Auto... and there's the rub.

Is it possible for Americans to pull together again as a society the way we did during WWII with victory gardens and scrap drives? The way we did with the Lunar Space Program? Or have we become too balkanized and cynical?

When I was doing research for my book and writing it in 2008 and 2009 I interviewed current and former politicians, such as the one who endorsed my book.

I interviewed the CEOs of oil companies as well as of alternative energy companies.

I interviewed academics.

I interviewed private equity and venture capital managing general partners.

My conclusion was that the ideal restructuring of the U.S. economy leverages our strengths and weens us off of government subsidies of asset price inflation and government borrowing.

It imposes a steady, reliable and non-repealable increase in taxes on energy consumption over a decade. Tax revenues subsidize infrastructure spending and lower chicken-and-egg alternative energy adoption barrers*.

Capital gains tax cuts support our unique Entrepreneurial Economic Growth Engine:

I called it the TECI Economy. I describe it in speeches to business and political leaders, such as the Florida Council of 100 where I met Sen. Marco Rubio.

But none of this is going to happen. The CEO of one oil company put it to me this way: "You have get your readers to understand that the root of the problem is the ascendence of rent-seeking interests to positions of near absolute power over legislation over the past 30 years. Good luck."

I can sum up the problem with one story. After my keynote speech to the Building Owners and Managers Association I held a private one hour seminar for BOMA's top brass. One of them read aloud a section of my book where I argued for a reduction in government subsidies to the real estate industry and higher taxes. "How am I supposed to feel about that?" he asked.

BOMA is first and foremost a lobbying group that measures its success in terms of extension or expansion of tax legislation that is favorable to commercial real estate. His organization were paying me to address and advise them and here I was in my book recommending as a matter of public policy that real estate taxes should be raised and subsidies such as the mortgage interest rate deduction and government mortgage lending guarantees reduced in the interest of the economy and the U.S. as a whole. It was an awkward moment. Fortunately they loved my idea about how reduced commercial building energy use costs boost market cap via increased cash flow; the ROI on retrofits is compelling and no one had explained it to them before, and my forecast for increased concentration of populations in cities as a result of PCO and rising transportation costs. On balance their feedback to my speakers' agent was positive.

Think of any proposal before Congress that benefits the nation in the long run but hurts vested interests as one, long awkward moment.

No one will ever run on a platform that includes a reduction in subsidies to housing and increases in gasoline taxes. Who is going to finance that campaign?

A rational person does not plan for impossible things to happen. A rational person plans for the inevitable result of deterministic political processes. The question is, What are the processes? Where are they leading us?

Asset bubbles, understood as manifestations unique to our political economy -- where are the asset bubbles in Germany or France? -- follow a deterministic progression of stages with a inevitable outcome. The inability of our political system to reorient our economy around profits from production versus economic rents from asset price inflation, and the government deficits that reliance on rent-seeking produces indirectly, also has inevitable results. So too does an international monetary system dependent on the full faith and credit of a single country. So too dependence on cheap oil.

That is in essence what you are reading when you read my analysis. I put all of my effort into understanding the underlying processes are and where they are most likely to take us.

* Gulf Oil CEO Joe Petrowski told me can't ask shareholders to invest $200,000 per service station to add CNG service when there are virtually no vehicles that run on CNG, and vehicle manufactures cannot ask shareholders to invest $1 billion plus in CNG vehicle development when there are no CNG service stations to fuel them. Government can efficiently end this market stalemate by raising taxes on gasoline and using the revenue to subsidize CNG outfitting of stations. A CNG vehicle gets twice the mileage per dollar than a vehicle that runs on highly taxed gasoline. This will drive consumer demand for CNG vehicles, which demand can be economically met by manufacturers. Later as PCO pushes up gasoline prices taxes can be lowered to buffer the impact. As the CNG infrastructure is now in place, government does not need to subsidize it on an ongoing basis and consumers will foot the bill by financing the profits of CNG suppliers.

[shiny!]

Re: Odd solar power?

* Gulf Oil CEO Joe Petrowski told me can't ask shareholders to invest $200,000 per service station to add CNG service when there are virtually no vehicles that run on CNG, and vehicle manufactures cannot ask shareholders to invest $1 billion plus in CNG vehicle development when there are no CNG service stations to fuel them. Government can efficiently end this market stalemate by raising taxes on gasoline and using the revenue to subsidize CNG outfitting of stations. A CNG vehicle gets twice the mileage per dollar than a vehicle that runs on highly taxed gasoline. This will drive consumer demand for CNG vehicles, which demand can be economically met by manufacturers. Later as PCO pushes up gasoline prices taxes can be lowered to buffer the impact. As the CNG infrastructure is now in place, government does not need to subsidize it on an ongoing basis and consumers will foot the bill by financing the profits of CNG suppliers.

This is a great idea except it doesn't take politicians into account. All too often taxes are levied but then diverted to other uses than the ones for which they were intended. And after the need for the tax has passed, the taxes are seldom lowered or removed. It's against a politician's nature to eliminate a tax. Just look at the 80 year-old Universal Service Fund "fee" on phone bills that was instituted to put phone service in rural areas.

[llanlad2]

Re: Odd solar power?

What we are dealing with here are changes in behaviour. And everyone has different speeds at which they are comfortable with change. The best incentive to accelerate the process is the price mechanism. Forget about "energy policies", forget about "self sufficiency", forget about subsidies to the favored companies in "renewable" energy (which concept itself is false since energy cannot be created or destroyed). Just like cigarettes and alcohol, just tax the activities that society feels should be discouraged...and without question the change in behavior will follow.

Some proof of that is in the number of Learner Driver applications in the UK. They've fallen 20% in 5 years whilst motorcycle applications (from a much smaller base) have risen 60%. The causes: higher motoring costs (gas and much higher insurance premiums for the young) and higher youth unemployment.

Conclusion: The young will adapt the fastest as they don't even bother learning to drive in the first instance! They just move to cities where cars aren't needed.


driverstats.PNG

[A Dub]

Re: Odd solar power?

It's against a politician's nature to eliminate a tax. Just look at the 80 year-old Universal Service Fund "fee" on phone bills that was instituted to put phone service in rural areas.

So true. Look at stamp duty in England which was introduced in 1694 as a temporary, 4-year tax to fund a war against France. 318 years later, this 4-year temporary tax is still going strong and has been expanded. It used to be a flat, nominal amount, but now its a % of the value. Want to buy a house in England? If that house costs more than GBP125k (~$200k) then you'll pay stamp duty of 1% of the purchase price; if the house costs more than GBP250k (~$400k) then the rate jumps to 3%; 4% if more than GBP500k; 5% if more than GBP1 million and 7% if more than GBP2 million.

A few extra cents on a phone bill is one thing, how about a $12k tax on buying a $400k house? Imagine how the NAR would react to that!

[vt]

Re: Odd solar power?

A third political party not beholden to any vested interests, and utilizing the growth of political independents might possibly break the two party oligarchy. Getting 33% of the vote is not as hard as 50%, but it would not be easy.

[globaleconomicollaps]

Re: Odd solar power?

So true. Look at stamp duty in England which was introduced in 1694 as a temporary, 4-year tax to fund a war against France. 318 years later, this 4-year temporary tax is still going strong and has been expanded. It used to be a flat, nominal amount, but now its a % of the value. Want to buy a house in England? If that house costs more than GBP125k (~$200k) then you'll pay stamp duty of 1% of the purchase price; if the house costs more than GBP250k (~$400k) then the rate jumps to 3%; 4% if more than GBP500k; 5% if more than GBP1 million and 7% if more than GBP2 million.

A few extra cents on a phone bill is one thing, how about a $12k tax on buying a $400k house? Imagine how the NAR would react to that!

Refresh my memory. Wasn't the stamp tax the proximate reason for the American revolution?

[lektrode]

Re: Odd solar power?

Refresh my memory. Wasn't the stamp tax the proximate reason for the American revolution?

nears as my limited educational background and rapidly depreciating memory can recall, yeah
The Stamp Act was essentially the fuse...

kind of a chuckle that it was considered a 'tax on knowledge'
since it was (eventually) levied on newspapers...

from the wiki.P:
1694 Stamp Act

A Stamp Duty was first introduced in England in 1694 following the Dutch model as An act for granting to Their Majesties several duties on Vellum, Parchment and Paper for 10 years, towards carrying on the war against France (5 & 6 Will. & Mar. c. 21).^[2] The duty ranged between 1 penny to several shillings on a number of different legal documents including insurance policies, documents used as evidence in courts, grants of honour, grants of probate and letters of administration. It raised around 50,000 pounds a year and although it was initially a temporary measure, it proved so successful that its use was continued.

[Thailandnotes]

Re: Odd solar power?

* Gulf Oil CEO Joe Petrowski told me can't ask shareholders to invest $200,000 per service station to add CNG service when there are virtually no vehicles that run on CNG, and vehicle manufactures cannot ask shareholders to invest $1 billion plus in CNG vehicle development when there are no CNG service stations to fuel them. Government can efficiently end this market stalemate by raising taxes on gasoline and using the revenue to subsidize CNG outfitting of stations. A CNG vehicle gets twice the mileage per dollar than a vehicle that runs on highly taxed gasoline. This will drive consumer demand for CNG vehicles, which demand can be economically met by manufacturers. Later as PCO pushes up gasoline prices taxes can be lowered to buffer the impact. As the CNG infrastructure is now in place, government does not need to subsidize it on an ongoing basis and consumers will foot the bill by financing the profits of CNG suppliers.

It's been 9 years since I first got into a LPG/CNG (L is Liquid, C is compressed) taxi in Bangkok. I was headed to Rayong (120 KM). The driver took the most circuitous route out of town. I finally asked him where in hell he was going just as we pulled into one of the only natural gas stations in the city. It's been fun to watch the build out. After Bangkok taxis converted, new buses were next. LPG and CNG stations started appearing further and further out of town. Then came 18 wheelers with tanks of NG behind the cabs. First adapters had their cars converted, then the major car companies began producing NG vehicles. The whole thing was the result of subsidies. As it became clear the government was going to keep NG prices low, and the cars became cheaper (There's a tax rebate for first time new car buyers), more and more people jumped on the bandwagon.

I would love to read an in-depth article on how it all happened. How did the politics work? Who were the losers and winners? Who fought against the change? Are the results as dramatic as they seem? Especially as the fuel and car subsidies are scheduled to end or be phased out in the coming year.

The normal media sources don't cover it and the details seem to be buried reports you have to buy.

[lektrode]

Re: Odd solar power?

The less-energy economy will creep up on folk.

not necessarily, bp.
and i didnt mean to ignore your comeback, finally had chance to reply....

But one day we get a 'hurricane' and then we notice. Who would have predicted the fuel and utility shortages in NY and NJ - its America for God's sake! And its those folk on the margins who got whacked. This is not the first time, nor will it be the last.

considering just how many time its occurred....
1973

1979

and never mind current policies
despite the best intentions, have led to one 'unexpected' gouge after another - for year after year....
(good thing we have the beltway and the regulators to save us...)

The damage to Japan's utility infrastructure was not limited to the direct physical damage caused by the earthquake and tsumani. The damage rippled into areas that no-one imagined. Japan's national energy policy is in tatters. Whole neighbourhoods are permanently uninhabitable.

dunno if i'd go that far - they're pretty adaptable over there.
too bad we here in The US arent - not so much anymore - anyway
oh sure - we get by - in spite of the best efforts of the well-intentioned.
i blame that on the beltway too - since eeeking out another 1/2 of 1% of the electorate gets more difficult every election cycle.

we could've solved the 'energy crises' a generation ago - not to mention acid rain, endless budget deficits to pay for endless wars over oil, global warming/climate change and found a cure for the common cold - no doubt - but for the luddite brigade and their irrational fears over who knows what to do with The Big N word....

This is how our economies will regress. Slow, slow, quick, slow, slow. No-one will have to 'give up anything'. You will no longer be able to avail of something you took for granted.

personally?
i'd rather 'get it over with' and go balls to the wall and MAKE SOMETHING HAPPEN - vs the slow and most likely painful grind down that The Rest of Us will get to suffer - while the 'we know whats best for you' crowd lives out their lives (and pensions) in relative comfort.

some are worried/scared about - supposedly - 'radiation' - meanwhile they think nothing of jumping into their cars and hurtling themselves at 60-70mph - down a 2lane road - assuming the oncoming vehicles will stay on their side of the line - i guess they feel safe because they have their seatbelts fastened...

you know what scares me, bp?

knowing that every time walk into an airport that i'll have to be subjected to - not only being intentionally irradiated - but groped, as i walk barefoot, beltless, shoeless and shivrin into some gauntlet thrown down by some gov unionized bunch of jackbooted morons that seem to think because i'm packin a 6oz tube of toothpaste that i somehow represent a threat to national security.

or that while stuck in one the daily local-gov-created trafficjamsfromhell, that i can be subject to an otherwise illegal, no-other-probable-cause harassment by the cops - because i dont have my seatbelt fastened in a zero-to10mph, bumper to bumper clusterf__k known as 'rushhour' - and then get fined upwards of 200bux - for a 'crime' that affects nobody but myself?

thats whats SCARY to me.

theres nothing here - below - that i'd argue with bp - and i didnt mean to sound like i'm the sort who goes out of his way to flaunt a lifestyle of conspicuous consumption - far from it - i might actually be considered 'the model of frugality' (since one doesnt survive long - self-employed - in a place like i have for the past 20+years - unless on someone elses dime, a trustfund baby, or otherwise on welfare/gov employ)

Some folk have this naive idea that 'technology will save us'. I doubt it will. We will be able to hang onto a lot of our existing stuff, but the 'new' stuff may have a hard time coming. Major industrial investment (long-term R+D) is being replaced by short-term profit extraction. Where will the resources come from to develop our alternative energies up to the industrial-level scales required? Land is no good - except for growing stuff. So that leaves Labour and Kapital. We have plenty of the former, but the latter? Looks a bit shy.

on this part i would beg to disagree, bp - we have PLENTY OF RESOURCE$ - they are just being squandered and mostly for political gain - by the POLITICAL aristocracy - as they suck up to some sliver or another of the electorate, in an effort to curry favour and their own re-election.

[shiny!]

Re: Odd solar power?

In case my previous post comes off as too negative, let me just clarify that I think EJ's idea of using a fuel tax to increase CNG cars and fuel stations makes a lot of sense. But the legislation would have to be written very carefully to make sure the politicians couldn't screw with it. If I'm going to pay an additional tax I want to be darned sure the money goes to the purpose for which it's intended, and the tax goes away when it's supposed to.

[Thailandnotes]

Re: Odd solar power?

In case my previous post comes off as too negative, let me just clarify that I think EJ's idea of using a fuel tax to increase CNG cars and fuel stations makes a lot of sense. But the legislation would have to be written very carefully to make sure the politicians couldn't screw with it. If I'm going to pay an additional tax I want to be darned sure the money goes to the purpose for which it's intended, and the tax goes away when it's supposed to.

That's why I wish I could understand the details of what has transpired around me. Beginning with taxis, new regulations seemed to happen almost overnight. Cabs were required to install meters. Older cabs disappeared. Fairs went way down. The air in Bangkok got a lot cleaner. The people who bought NG cars or had vehicles converted easily recouped their investments, but how did it work? It's a story waiting to be told, but almost nobody I talk to has scratched below the surface. Gas, diesel, NG prices at the pump here are high manipulated with taxes going up and down. Some fuels sell at market prices. Other are subsidizes and it changes fairly frequently. According to the Bangkok Post...

"Although the government plans to float the prices of liquefied petroleum gas (LPG) and compressed natural gas (CNG) to reflect the real costs, demand from motorists is expected to grow significantly in the coming years, say industry executives.

"Pattaravut Yeamsavad, the president of Theo Group Co, Thailand's top supplier of auto gas kits, said gas will remain popular in the transport sector due to its competitive price.

"Once the LPG price is increased to reflect the global price, it will still be as low as half of the petrol price," he said.

If the LPG price hits US$1,000 a tonne, this year's peak price seen in May, the ex-refinery price in Thailand will be only 15-16 baht a litre compared with 24-25 baht for petrol.

The LPG price has eased to about $800 per tonne, said Mr Pattaravut.

He expects LPG demand in the transport sector to expand by at least 50% next year, above the annual growth rate of 30% in recent years.

The increase of CNG demand, however, is projected at below 10% due to a shortage of gas refill stations.

Thailand has 1,000 LPG gas refill stations but only 600 CNG stations.

The number of LPG-fuelled vehicles reached 700,000 last year, while those consuming CNG totalled 300,000.

"If a network of gas refill stations has enough coverage to enable motorists to spend less time waiting, then the demand for CNG will grow at the same rate as LPG," said Mr Pattaravut.

The government's subsidy of 50,000 baht per car will expire at year-end, he said, citing another reason why CNG demand will be lower next year.

The number of LPG-fuelled vehicles is expected to grow sharply to top 2 million units this year, said Mr Pattaravut.

Gas kit suppliers also plan to penetrate car assemblers to tap high demand in the original-equipment manufacturer (OEM) market.

Thammarong Tanaamphai, the managing director of AG Amphaigas Co, which is the sales agent for Poland's AG Gas Centrum, said the company is negotiating with major assemblers in Thailand but declined to give details.

Thailand is one of the global leaders in the OEM market for CNG, with the number of gas-based vehicles rising to 103,685 last year from 15,738 in 2009.

Ozkan Sarikaya, the managing director of Atikta (Thailand) Co, which represents a Turkish gas kit manufacturer, said the company has picked Thailand as its sales centre for Southeast Asia.

Each country in the region has chosen LPG and CNG as fuels to cope with the rising cost of living, he said.

"Everywhere, gas prices are less than half the petrol price, prompting us to believe in the potential of auto gas kits in the global market, especially in Thailand," said Mr Sarikaya.

Thailand will host NGV Bangkok 2012 from Nov 1-3. The event is expected to draw 150 exhibitors and 8,000 visitors.

[lektrode]

Re: Odd solar power?

That's why I wish I could understand the details of what has transpired around me. Beginning with taxis, new regulations seemed to happen almost overnight. Cabs were required to install meters. Older cabs disappeared. Fairs went way down. The air in Bangkok got a lot cleaner. The people who bought NG cars or had vehicles converted easily recouped their investments, but how did it work? It's a story waiting to be told, but almost nobody I talk to has scratched below the surface. ...

+1
well... maybe somebody is starting to?
since eye note that:
The Gas Station of the Future Just Opened

or it did sometime this past june....
and they just did an update/correction on this story (or eye just happen to notice it 2nite, whatevah...)

course the guy who's running this deal - was working for BOS based @ventures no less - is also soaking up govbux to open em,
so Our Mileage May Vary....

[lektrode]

Re: Odd solar power?

what seems kind of strange is that altho LPG propelled vehicles have been around quite awhile now - fleets etc, if none other than LPG distributors - one would have thot that cheap propane wouldve resulted in more use of them? (any place but out this way apparently, since we still getting gouged for it - depite the big price drop - that and the latest proposal to bring in LNG is already being protested - by the usual suspects, since that will mess up the plans for 'alternatives' ???)

[bill]

Re: Odd solar power?

Texas will be producing oil at slowly but steadily declining trend rates for many years to come. There are still a lot of known reserves in Texas. What will determine the actual outcome will be crude oil price and the cost to find, develop and produce [which includes potential carbon taxes]. If you want to see the effect that changing oil price has on Texas reserves have a look a the chart at this link: http://www.eia.gov/dnav/pet/hist/Lea...CRR01STX_1&f=A

well update in EF

http://fuelfix.com/blog/2012/12/02/f...he-eagle-ford/

Print






GONZALES COUNTY — 12-2-2012 The best spots in the Eagle Ford Shale play were a closely guarded secret a few years ago as oil and gas companies quietly leased thousands of acres.
Today, the word is out.
It’s spreading though corporate regulatory filings, word-of-mouth gossip and data tracked by everyone from industry analysts to government regulators.
Even though companies have largely locked in their acreage, an intense race to find the sweetest spots means that nearly as soon as an oil and gas company hits a good well, other companies cluster drilling rigs nearby — often within sight of each other — to try to replicate the results.
The roar of the truck traffic, the tedious lines at the convenience store or the roustabout’s dust-caked boots are a visible sign of what’s happening a mile or more below the surface as companies use horizontal fracturing to break open shale rock and release trapped hydrocarbons.
The counties inundated by the most workers and 18-wheelers are also the most profitable for oil and gas companies.
The Eagle Ford Shale reaches across 25 Texas counties. But more than 60 percent — 141 of the play’s 227 drilling rigs — are operating in five counties: La Salle, Karnes, McMullen, Gonzales and DeWitt, according to the Baker Hughes Rig Count, a barometer of the health of the drilling industry and an indicator of where companies are most interested in drilling
Rigs are clustering along the Gonzales-Karnes county line, and lining up across all of DeWitt County, except for the southeastern quadrant.
Farther west, neighboring La Salle and McMullen counties have earned a reputation for being what’s colloquially called “more oily,” producing more crude oil or natural gas liquids than the currently
uneconomic dry gas.
La Salle County has the most active drilling rigs of any in the Eagle Ford — 36 as of Nov. 16 — and they are concentrated on the northwest swath of the county. Neighboring McMullen County had 31 drilling rigs, all in its northern half.
“It’s an area that for whatever reason is more economically productive,” said Harvey Howell, a third-generation, San Antonio-based oilman. “For the sheer volume of dollars you have to pump into this thing, you have to go where you can get the most back fastest.”
J. Michael Yeager is CEO of BHP Billiton Petroleum, the Houston-based oil and gas arm of the Australian mining giant that bought Petrohawk Energy Corp. last year for $15.1 billion. Petrohawk was among the earliest companies in the shale play and in 2008 drilled the first successful Eagle Ford well in La Salle County.
BHP is running 30 drilling rigs in the Eagle Ford, and many of those are in DeWitt County.
Eagle Ford wells cost $7 million to $10 million, but Yeager said they pay back within half a year.
“The Eagle Ford has become the most profitable field in the world,” Yeager said. “Fifty percent of every well is oil, and we get $100 a barrel for that oil.”
Becca Followill of U.S. Capital Advisors LLC said companies operating in Gonzales, DeWitt and Karnes counties have seen initial rates of return higher than 50 percent, with some wells as high as a 70 percent.
“There’s always sweet spots in the oil and gas industry,” Followill said.
Part of the Eagle Ford’s profitability has been practical in nature, including relatively quick access to coastal refineries. Moving oil by rail from the Bakken field in North Dakota can add $10 to $12 to the production cost per barrel, Followill said.
“Infrastructure has been put in place much more quickly in the Eagle Ford,” Followill said. “It’s a favorable environment and terrain. There’s been drilling in South Texas before. It’s not like we’re going into areas of Ohio where they’ve never had drilling.”
But really, the high profitability all comes down to the rocks.
“I think it’s a function of geology,” Followill said. “It’s nice to have the infrastructure, but it really comes down to the geology.”
The Eagle Ford Shale was deposited millions of years ago in the Cretaceous Period when much of Texas was a shallow sea. It’s 50 miles wide and extends about 400 miles across the state, from the border to East Texas.
The formation generally produces more oil on its northern arc; more natural gas, or “dry gas” on its southern arc; and more natural gas liquids such as propane and butane in-between. Wells generally bring up a bit of everything.
For now, the Eagle Ford is a liquids play. Depressed natural gas prices have prompted companies to shift drilling to areas of the Eagle Ford that produce a greater percentage of crude oil or natural gas liquids.
The price of crude oil is hovering between $85 and $100 a barrel. Meanwhile, natural gas prices that in 2008 rose above $12 are now below $4 per million British thermal units.
More than 70 percent of the rigs working in the Eagle Ford are drilling primarily for oil, while 23 percent are focused on gas, according to Baker Hughes.
Allen Gilmer, chairman and CEO of Drillinginfo, said the Eagle Ford’s quality varies across South Texas, but the five counties with the most drilling rigs are hot spots for a reason.
Gilmer said Gonzales and DeWitt counties are “looking really good for oil.”
Karnes County has good oil production in the northwest corner and good natural gas liquids in the southwest corner, and neither in the southeastern corner. But Gilmer said that when dry gas prices rise, southeastern Karnes County will be “the center of all goodness.”
“The first places to emerge for economics for dry gas are going to be right in that area,” Gilmer said. “Karnes is pretty well-blessed.”
Oil production isn’t as good in Atascosa County, but picks up again around the La Salle County line. La Salle County and McMullen County are both strong for oil production. And while McMullen County isn’t
a great area for natural gas liquids, Gilmer said there’s a sweet spot for wet gas in the northeastern part of the county.
Most companies are loath to talk about the specifics of their drilling program for competitive reasons.
“They’re cagey about where they think it’s good. And they’re cagey about what they’re doing to make it produce,” Gilmer said.
But information filters out anyway, often through quarterly earnings calls with analysts or by the old-fashioned method: small-town gossip.
Yeager said companies have about 90 days before word spreads about a good well, often through small talk.
Because companies typically drill as close as possible to the edge of their lease line — giving them the ability to drill horizontally across the biggest percentage of their acreage — competing companies often are operating within sight of each other.
Yeager said that as soon as a neighboring operator hears about a good well, “that SOB is right up next to your well. They’re right there,” he said.
Some of the most specific information on operations can be found in the quarterly reports filed by publicly traded companies or in company conference calls with investment analysts.
In a Nov. 6 call with analysts, David Roberts, chief operating officer and executive vice president of Marathon Oil Corp., said the company was running 18 drilling rigs in the Eagle Ford and four full-time fracking crews, and that half of the company’s activity is in Karnes County, a quarter is in DeWitt or Gonzales counties.
“So the three core counties is where we do most of our work,” Roberts said.
Roberts called the Eagle Ford a “company maker” and said it’s “some of the best real estate in North America, if not the world today.”
The company’s third-quarter report noted that one of its Gonzales County wells reached a production level of 6,275 barrels per day, and of that, 4,646 barrels were oil and natural gas liquids.
EOG Resources holds the largest acreage position in the Eagle Ford, including more than 570,000 acres in the oil window, according to Hart Energy, and has said this year in calls with analysts that it completed 28 “monster wells” in a six-month period, which it defines as having initial production rates from 2,500 and 4,800 barrels of oil per day, plus gas and natural gas liquids.
In Gonzales County, one of its wells tested at 4,598 barrels of oil per day. The company said it expects to shift more resources to the Eagle Ford and Bakken next year because those are “black oil” plays.
As companies focus on those sweet spots for production and profitability, it’s driving a frenzy of logistics activity. Trains and trucks are moving supplies and oil, while processing plants and thousands of miles of pipelines are being built to move natural gas.
DeWitt County Judge Daryl Fowler thinks of Cuero as the divide between quiet, rural life and frenzied oil field activity. “Everything west of there is wet liquids, which is what they’re after,” Fowler said. “The natural gas is on the east side of that line.”
He estimates, based on the more than $71 million in state severance taxes paid by DeWitt County producers in six months this year, that the county produced something in the neighborhood of $1 billion in oil and gas.
Near Harwood in northern Gonzales County, the oil field activity is evident in the wail of a train’s whistle and the clink that echoes through the yard as contract workers sledgehammer new track into place.
Since last summer, the Texas, Gonzales and Northern Railway Co. has doubled its track to 25 miles. The rail line still moves traditional commodities such as grain and chickenfeed, but now it’s also moving fracking sand — and lots of it. The rail line has gone from three employees to 30 to handle the volume, and several oil field service companies such as Halliburton have built facilities there.
“This will all be filled up with tracks and warehouses,” manager Jason Gill said, gesturing to a grassy area that still looks more ranch than industrial site. “This is a good place. You wouldn’t have thought it a few years ago.”