Archive for December, 2010

« Newer Entries
h1

EPA acts on a natural gas drilling groundwater case

December 9, 2010

Michael Giberson

From the EPA news release:

(DALLAS – December 7, 2010) Today, the U.S. Environmental Protection Agency (EPA) has ordered a natural gas company in Forth Worth, Texas, to take immediate action to protect homeowners living near one of its drilling operations who have complained about flammable and bubbling drinking water coming out of their tap. EPA testing has confirmed that extremely high levels of methane in their water pose an imminent and substantial risk of explosion or fire. EPA has also found other contaminants including benzene, which can cause cancer, in their drinking water.

EPA has determined that natural gas drilling near the homes by Range Resources in Parker County, Texas, has caused or contributed to the contamination of at least two residential drinking water wells. Therefore, today, EPA has ordered the company to step in immediately to stop the contamination, provide drinking water and provide methane gas monitors to the homeowners. EPA has issued an imminent and substantial endangerment order under Section 1431 of the Safe Drinking Water Act. Parker County is located west of Fort Worth, Texas.

The natural gas company in question is Range Resources Corporation. They issued a statement denying (naturally) that they are causing any groundwater problems in the area:

Based on our findings to date, it’s very clear that our activities have not had any impact on the water aquifer in southern Parker County or the subject water wells. Range’s wells are completed in the Barnett Shale formation which is over a mile below the water zone. The investigation has revealed that methane in the water aquifer existed long before our activity and likely is naturally occurring migration from several shallow gas zones immediately below the water aquifer. Despite these findings, we remain committed to working with regulators and residents to determine the cause and to assist with any remediation the Texas Railroad Commission determines is warranted. Range will also offer to provide drinking water to residents in the area while the investigation continues.

A related news story from the Fort Worth Star-Telegram discusses similar complaints by other people claiming groundwater problems caused by development of the Barnett shale and actions by the Texas Railroad Commission, the state agency with the obligation to police such issues.

Here is a copy of the EPA’s letter to Range Resources.

Clearly this episode is far from over.

 

Posted in Uncategorized | 5 Comments »

h1

Is it time to become concerned about the possible macroeconomic effects of oil prices?

December 8, 2010

Michael Giberson

With crude oil prices reaching near the $90/bbl level, James Hamilton inquires as to whether is it time to become concerned about the possible macroeconomic effects of higher oil prices.

Posted in Economics, Energy markets | Comments Off

h1

Speed blogging

December 8, 2010

Michael Giberson

Speed blogging = copying a Zetland trope so I can clear these items off my “to blog” list:

Robert Rapier on the Renewable Fuels Association‘s wild efforts to hold onto all possible subsidy and policy advantages that it can grab.  Elsewhere, the Wall Street Journal reports the emergence of a left-right coalition in Congress against extension of ethanol subsidies. (via Environmental Economics and Market Power)

Also don’t miss Rapier’s “Cellulosic Ethanol Reality Begins to Set In.”

Matthew Lewis explains Steven Levitt’s premium pricing puzzle.  A while back Levitt observed gasoline pricing data that showed the premium paid for premium (high octane) fuel became larger compared to the price of regular gasoline as the overall price of gasoline increased. Levitt was puzzled, his economics leading him to expect a fixed price difference. Lewis explains that the data Levitt observed (USA Today‘s “Weekend Gas Gauge”) was faulty. USA Today relies on AAA’s price data which accurately records regular gasoline prices and simply assumes a fixed percentage mark-up to estimate mid-grade and premium gasoline prices.

Robin Hanson at Overcoming Bias points to an intriguing bit of experimental social science. Researchers manipulated the perceived status of leaders in a public good contributions game, players tended to mimic the contributions of high-status leaders but not low-status leaders. When punishment was an option in the experiments, low-status leaders punished more and were punished by other players more. (See “Cooperation and Status in Organizations” by Catherine Eckel, Enrique Fatas, and Rick Wilson in the Journal of Public Economic Theory).

Al Roth at Market Design, “College football teams are hard to rank” commenting on the New York Times, “Who’s No. 1?” I wonder, “Hard to rank compared to what?” Doesn’t some version of Arrow’s Impossibility Theorem apply to BCS or any other system of ranking football teams? Maybe some other ranking system would work better, but my guess is that ranking ranking systems is also hard, so how are we going to pick a better ranking system?

I guess if I’m copying one of David Zetland’s tropes I ought to offer a HT in the general direction of Aguanomics. Here is his “Gasland – The Review.” It is an inflammatory film, and Zetland is fired up.

Posted in Economics, Energy markets, Miscellany, Sport and fitness | 4 Comments »

h1

What scientific information or data does the Department of Interior intend to rely upon in fracking policy actions?

December 8, 2010

Michael Giberson

U.S. House Republicans sent a short note over to the U.S. Department of the Interior, inquiring as to Interior’s plans for regulatory or policy changes with respect to hydraulic fracturing on public lands.  My favorites from among the questions asked:

  • What scientific information or data does DOI intend to rely upon to form the bases for such activities or regulatory actions?

and

  • What interactions has DOI had with the Council on Environmental Quality (CEQ) or the Executive Office of the President relating to hydraulic fracturing activities? Please provide all documents in possession of DOI related to such interactions.

The first of my favorites is actually a useful question for folks interested in science-grounded, reality-based public policy.  The second is a barely disguised declaration that House Republicans are getting ready to fight DOI on the issue.

(HT to Sheila “Win-win” McNulty at the FT EnergySource blog.  On the “win-win” see here.)

Posted in Energy markets, Politics, Regulation | 1 Comment »

h1

Best “Investigation/Price Gouging/Showdown/Violence” Romance Movie

December 6, 2010

Michael Giberson

According to the Internet Movie Data Base, just one movie shows up when you search on keywords  ”Investigation/Price Gouging/Showdown/Violence” in the Romance genre: The Boss of Big Town. It is a 1942 film in which, “A criminal plot to control produce and dairy products during the wartime emergency is foiled by an courageous undercover city market official.”

Haven’t seen it – and haven’t been searching IMDb for investigation-price gouging-showdown-violence romance films either, the link just showed up in search results.  But the search result led me to wonder what other films have been tagged “price gouging.”

The answer: five total. In addition to The Boss of Big Town, IMDb lists:

  • Falling Down (1993, “An unemployed defense worker frustrated with the various flaws he sees in society, begins to psychotically and violently lash out against them.”)
  • Bend of the River (1952, “Two men with questionable pasts, Glyn McLyntock and his friend Cole, lead a wagon-train load of homesteaders from Missouri to the Oregon territory.”)
  • Pack Train (1953, “Baddies McLain and Riker charge settlers what the traffic will bear for supplies. When Autry attempts to help out, the outlaws go after him.”)
  • Wagon Train (1940, “Pecos businessman Matt Gardner is buying up freighters, or wagon trains of food supplies, at cheap prices through intimidation.”)

Five TV episodes are also tagged “price gouging” in the IMDb, four of which are from The Simpsons.

Posted in Economics, Film | Tagged | Comments Off

h1

Designing electricity auctions

December 2, 2010

From the inbox, notice of the new Utilities Policy, this a special issue on designing electricity auctions edited by Thomas P. Tangerås, drawn from a workshop in Stockholm, September 2009 hosted by the Research Institute of Industrial Economics.  Tangerås introduces the topic:

What are the boundaries of the market in a system with strong requirements on centralized management of power flows, production and consumption? To what extent can decisions be decentralized to market participants? Increasing shares of volatile intermittent energy production place additional strain on the transmission system and on alternative production sources to absorb the fluctuations. Are the current balancing markets designed to handle extreme short-term fluctuations? Do wholesale electricity markets provide ample investment signals, or is it necessary to introduce additional capacity markets? If so, how should these markets best be designed?

In Sweden and elsewhere, a perpetual discussion revolves around whether electricity producers make excessive profits at the expense of consumers. Electricity markets are vulnerable to the exercise of short-run market power because demand is price insensitive, and production is concentrated to a small number of firms. How do electricity markets really perform? And if markets are susceptible to the exercise of market power, are there more efficient auction designs which distribute more of the surplus to consumers?

The answers to these questions are far from obvious, as witnessed by the numerous auction designs circulating in the universe of liberalized electricity markets.

List of articles in Utilities Policy, Volume 18, Issue 4, (December 2010):

  • Designing electricity auctions: Introduction and overview by Thomas P. Tangerås
  • Three-part auctions versus self-commitment in day-ahead electricity markets by Ramteen Sioshansi, Shmuel Oren, Richard O’Neill
  • Production inefficiency of electricity markets with hydro generation by Andy Philpott, Ziming Guan, Javad Khazaei, Golbon Zakeri
  • Are the British electricity trading and transmission arrangements future-proof? by Richard Green
  • Using forward markets to improve electricity market design by Lawrence M. Ausubel, Peter Cramton
  • Virtual power plant auctions by Lawrence M. Ausubel, Peter Cramton
  • The supply function equilibrium and its policy implications for wholesale electricity auctions by Pär Holmberg, David Newbery
  • Using restructured electricity supply industries to understand oligopoly industry outcomes by Frank A. Wolak

In related news, Texas power system operator ERCOT flipped the switch on its nodal market design yesterday, and so far the lights remain on.  (Actually, I couldn’t find any news stories this morning reporting that the lights remain on, but since the Houston Chronicle is giving us this story, rather than details of horrifying market failure, I’m inferring that things must be working okay.) Lots of market data is available here.

Posted in Electricity, Energy markets | Tagged , | Comments Off

h1

Polish gas choices: LNG imports, shale gas resource development, and/or trusting Gazprom

December 1, 2010

Michael Giberson

The is significant industry optimism concerning the potential for shale gas development in Poland (more here), with estimates sufficiently high to suggest that Poland  could shift its supply base away from heavy dependence on Gazprom and Russia’s good will to domestically produced gas from shale.  Granted exploration for shale gas in Poland is new and the resource may not turn out to be as good as expected.  Poland is also seeking to build an LNG import terminal on the Baltic Sea coast.  Nonetheless, and despite opposition from the European Union, Poland has recently entered into a another long term agreement that continues its dependence on Gazprom.

Craig Pirrong assesses the developments in an article at Seeking Alpha: “Poland: Marry Gazprom in haste, repent at leisure.” As Pirrong points out, the uncertainty surrounding shale gas resources in Poland is good reason to avoid making a long-term commitment now.   Real options analysis, Pirrong said, suggests that “considerable uncertainty with an appreciable upside potential means that it is wise to avoid locking into long term commitments until that uncertainty is resolved.”

That the state-owned monopoly gas production and distribution company  chose to lock into a long term commitment with Russia rather than explore its domestic resources more completely suggests to Pirrong that Polish officials have either been “suborned by Gazprom/Russia” or are just clueless.  Either way, not good news for Polish industry or consumers.

 

Posted in Energy markets, Politics | Tagged , , | 2 Comments »

h1

The rule of capture in Pennsylvania oil and gas law

December 1, 2010

Michael Giberson

Via the Agricultural Law Resource and Reference Center at Pennsylvania State University, a presentation on “The rule of capture in Pennsylvania oil and gas law” (see also this summary). Among other things, the presentation clears up my question (in yesterday’s post on oil production in the state) about the current relevance of the rule of capture in Pennsylvania.

In brief, yes the rule of capture still applies, but many of the adverse consequences that could flow from the legal approach are mitigated by the state’s 1961 Oil and Gas Conservation Law (see summary).

Pennsylvania’s Oil and Gas Conservation law provides for well spacing, pooling and tools for compulsory unitization for oil and gas developments.  The law applied only to production from underground resources in the Onondaga horizon (an underground geological feature) and below on the theory that the resources nearer the surface had already been extensively developed.  Interestingly, the Marcellus Shale, currently the subject of great interest, lies above the Onandaga horizon.

Related: a video produced by Penn State’s Agricultural Extension service explains whether the rule of capture allows someone to “steal” gas from their neighbors.

Summary: It isn’t stealing if your neighbor didn’t own it in the first place, and they don’t own it under the rule of capture until it is produced. (I’m brushing over some important legal details, I’m sure.)  On the other hand, you can’t send your drill horizontally under your neighbor’s property – that would trespassing.

Also related: A writer at the Huffington Post advocates use of the legal doctrine of “anticipatory nuisance” to sue  neighbors before they begin drilling for gas on their property.

Posted in Economics, Energy markets, Environmental policy, Law | Tagged , | Comments Off

« Newer Entries
Follow

Get every new post delivered to your Inbox.

Join 47 other followers