Energy Issues

 Vol. 233 No. 11

After more than 20 years of writing columns, coming up with a new topic worries me from time to time. But, every month, one or two (or more) pieces of information cross my desk, which are so incredible that they beg to be talked about. Below are three such pieces of commentary.

Nigeria’s oil bandits. A friend of mine recently passed along to me an article on Nigeria’s attempts to rein in the country’s oil bandits, who regularly breech pipelines to steal oil. The article, which appeared in The Wall Street Journal on Aug. 22, made fascinating reading. The problem was huge. Before the current program to stop the thefts, bombings and kidnappings began, Nigerian oil production occasionally fell to 500,000 bopd (production today stands at about 2.6 million bpd of low-sulfur crude). While the country’s economy is diversifying, oil production is still its life blood, accounting for 80% of the country’s revenue. The oil bandits were crippling the country. So, last year, Nigeria’s state oil company took action. They began to pay the bandits in exchange for their agreement to cease stealing oil and end the mayhem. The country is now spending hundreds of millions of dollars a year on the program. Is it working? The article provides a number of examples that makes one wonder.

For example, there is the case of Alhaji Dokubo-Asari, whom the government pays $9 million per year to keep his 4,000 followers from stealing oil. If divided evenly (which, it most probably is not), that amounts to more than $2,000 per year for Asari and each of his men—more than twice the average family income in Nigeria. Who says crime doesn’t pay? According to the article, the government also offered Mr. Dokubo-Asari $1,000 apiece for each of his 3,182 AK47 rifles. He took the deal and used the money to purchase more rifles for use in the Niger Delta oil thefts. He is rather open, and proud, about that boondoggle.

Stories like this abound. Initially, the program was successful and theft fell significantly. However, the payoffs and newly found jobs under another part of the anti-theft program did not pay nearly as well as stealing oil. Many are now returning to the Delta, and Shell’s Nigerian unit estimates that more than 150,000 bopd is currently stolen from Nigerian pipelines. Again, who says crime doesn’t pay?

Celebrity follies. Another example of an incredible incident is the recent launch of an anti-fracing coalition by Yoko Ono and her son Sean Lennon. Other celebrities, including Lady Gaga, Paul McCartney and Alex Baldwin, have joined the coalition. In a letter sent to New York Governor Andrew Cuomo, the group called fracing “a danger to New Yorkers. Inevitably, the process leads to the release of toxic chemicals—many of which are unknown and unreported—into our air and water.” But Ono is hopeful. “Eventually logic will overcome everything,” she said. “Logic and love.” Stopped laughing yet?

I am a big fan of the Beatles, one of the most gifted bunch of musicians ever to walk the planet. But, as this piece of nonsense proves, musicians aren’t necessarily brainiacs. Or maybe they are. What better way for these attention hounds to get free publicity and promote a loyal, though misguided, following.

The same can be said of actors. Promised Land, a sequel to the anti-fracing movie Gasland, is set to be released next month. It features Matt Damon, John Krasinski of the TV show The Office and Frances McDormand of the movie Fargo. The movie tries to paint a picture of devastating effects that fracing could have on fragile rural economies that depend on agriculture and tourism. I haven’t seen the movie, but I wouldn’t be surprised if leaking gas from a Marcellus well set a tourist on fire. I am guessing that Damon, Krasinski and McDormand know just about as much about hydraulic fracturing as Yoko Ono and crowd.

All this would be laughable, were it not that a lot of folks are benefiting, or will benefit, from fracturing and shale gas development in the states of Pennsylvania and New York. A just-released Standard & Poor report says that the Marcellus, with an estimated 330 Tcf, could contain “almost half of the current proven natural gas reserves in the U.S.” It also noted that Marcellus shale gas is the cheapest in the nation to drill and produce. This immense resource will certainly be a godsend to the economies and people of Pennsylvania and New York. In Pennsylvania, it is already.

Shale benefits. A recent article by Tom Yerace in TribLIVE (http://triblive.com) puts the economic benefits into perspective. Manor Township in Armstrong County, Pennsylvania, had budgeted expenditures of just over $1 million in 2012. Manor’s Marcellus impact fee take for 2012 amounts to $128,000, or nearly 13% of its budget. In Washington Township, Westmoreland County, the Alle-Kiski community received $380,000 or almost 17% of its budget for 2012. According to Washington Township Board of Supervisors Chairman Rich Gardner, “We’re substantially behind on a number of projects that we are going to take care of. We have intentionally been avoiding raising taxes the past several years because of the economy. This is substantially going to help with that. We were looking at a tax increase or a significant reduction in something this year without this money.” This money comes from an impact fee of $50,000 levied on each well drilled. It does not include royalties, damages or any other fees. For Manor Township alone, the 25 wells drilled generated $1.25 million to be split between the state, county, Manor Township and its surrounding communities. This scenario, and similar ones, are occurring across Pennsylvania and will occur over a sizeable area of New York state.

It appears again that the egos of the rich and famous must be fed, even though it might be at the expense of the common folk. Incredible.