Fracking in Alabama

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Fracking in Alabama
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Regulation
Regulatory agency Geological Survey of Alabama; State Oil and Gas Board
Estate ownership Split[1]
Resources
Fossil fuels present Oil, natural gas and coal[2]
Fracking
Other state fracking pages
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Fracking in Alabama depends on available energy resources, the location of these resources, applicable laws and regulations, politics, and the power of environmental and industry groups. Decisions by policymakers and citizens, including state and local governments and ballot initiatives, affect if and how fracking occurs in a state.

Fracking background

See also: Fracking

Hydraulic fracturing, or "fracking," is the process of injecting fluid--mostly water and sand, but with additional chemicals--into the ground at a high pressure to fracture shale rocks and release the oil and natural gas inside.

Recent technological advances in oil and gas drilling--horizontal drilling and hydraulic fracturing--have created a wealth of opportunities and challenges for states with fossil fuel reserves that can be accessed through the combination of these two technologies. The increased use of fracking has been an economic boon for many states, not only those with fracking, but also those with supporting industries, such as frac sand mining or associated machinery manufacturing.

Opponents of fracking argue that the potential negative environmental and human health impacts could be significant. Although wells have been fracked for over 65 years in the United States, concerns have been raised about whether federal, state and local regulatory agencies can keep up with the recent rapid increase in fracking activity, and adequately protect the environment and human health. As with any type of energy extraction, either traditional or renewable, there are economic, environmental and political tradeoffs.

History

The first oil wells in Alabama were drilled in Lawrence County in 1865. Commercial natural gas production began near Huntsville in the early 1900s. Significant natural gas reserves were discovered offshore in the late 1970s. Drilling for coalbed methane first occurred in Alabama's Black Warrior River watershed in the 1970s. In 1983, the Alabama Oil and Gas Board established the first comprehensive set of regulations for coalbed methane operations.[3]

Production

In 2000 in Alabama, 10,459,530 barrels of oil were produced. Production steadily declined, reaching 7,442,674 barrels in 2004. Oil production was volatile until 2010 when only 7,150,874 barrels of oil were produced, the lowest production level for the years shown. Production sharply increased after 2010 and in 2012, the most recent year for which data are available, 9,515,764 barrels of oil were produced.

Natural gas production steadily declined from 2000 to 2012. In 2000, 403,506,462 MCF of natural gas were produced. By 2012 production had almost halved and 216,897,806 MCF of natural gas was produced.[4]

Oil production in Alabama, 2000-2012.png
Natural gas production in Alabama, 2000-2012.png

Economic impact

The use of fracking, often in combination with horizontal drilling, has made it possible to extract supplies of oil and natural gas that were once economically unfeasible to extract. This has led to significant growth in the domestic oil and gas industry, and in the supply of domestically produced oil and natural gas. The growth in activity has impacted the economy in direct ways, such as increased capital investments (from both the U.S. and other countries), royalty and lease payments, and government revenues in the form of fees and taxes. The increased supply of natural gas and oil has also affected electricity prices, manufacturing, service industries and employment. In many places, fracking has increased employment in the mining (oil and gas) sector and supporting industries, such as the restaurant and housing sectors. Consumers and manufacturers have also benefitted thus far from lower oil and natural gas prices, and increased demand for pipeline, drilling and other ancillary equipment. As demand for natural gas and oil grows, however, prices are expected to rise.[5]

Taxes, fees and revenue

Oil and natural gas revenue Alabama, 2000-2012.png

Fracking booms can increase local government revenue through increases in property and sales taxes, which can help compensate for the costs detailed below. The primary revenue streams from fracking--mineral leasing revenues and severance taxes--go to state and federal governments. As of June 2013, Alabama employed the following oil and gas production tax:

  • "2% of gross value of gas or oil at point of production"
  • There are exceptions for wells permitted from July 1996 through June 20, 2002 and for offshore production in wells that are deeper than 8,000 feet.

The revenue collected from this tax is placed in the state general fund "to defray costs associated with the conservation and regulation of oil and gas production."[6]

The table in this section shows that from fiscal year 2000 to fiscal year 2013 $1,529,973,959 in revenue was collected from oil and gas production activity in Alabama. The revenue data is broken up into the oil and gas privilege tax revenue (a tax on producing or severing oil or gas in the state) and oil and gas production tax revenue. In fiscal year (FY) 2000-2001 Alabama collected $107,023,702 in oil and gas tax revenue. Revenue peaked for the years shown in FY 2005 to 2006 when $222,502,140 was collected.[7][8]

Royalties and land sales

The United States is one of the few countries where property owners can own the right to use and build on their land, known as surface rights, but they may not own the rights to the minerals located under their property. Depending on the state the mineral rights may have been sold in the past and may now belong to someone other than the surface owner. In fact, those mineral rights may belong to more than one individual, a company, or many individuals, who now have the right to extract those minerals, and in some states this can happen without the permission of the property owner. This can cause tension between the mineral owner, or whoever is leasing the mineral rights, and property owner.[9]

Economic impact studies

Below is a study about the economic impact of the oil and natural gas industry (also categorized as the mining industry in some studies) in Alabama. Both the author(s) and sponsor(s) of the study have been listed.

Study for the American Petroleum Institute

Economic modeling
IMPLAN and REMI are two econometric modeling systems used in both the private and public sectors to predict economic outcomes of policy changes. While these systems are widely used and highly respected, their results are theoretical and may not be universally accepted.

Because the oil and gas industry has grown so rapidly, there is not a wealth of data regarding its economic impacts. Instead economists use forecasting models, such as IMPLAN and REMI, to predict the impact increased fossil fuel extraction is having on the economy. These studies usually measure both direct impacts, i.e., the jobs and income being added within the oil and gas industry, and indirect impacts, i.e., jobs created throughout the supply chain. These studies also include induced impact, i.e., jobs created through increased spending due to growth in the industry.[13]

PricewaterhouseCoopers LLP (PwC), a research consulting firm, completed a study for the American Petroleum Institute about the economic impact of the oil and natural gas industry in 2011 in Alabama. According to the PwC study, the oil and gas industry added $11.33 billion in total value in 2011, including direct, indirect and induced value. Of this $6.11 billion, or 3.4 percent of the state's total value added was direct, $2.53 billion was indirect and $2.69 billion was induced. In total, this accounted for 6.4 percent of the state's total value in 2011.[13]

Employment

The PwC study attributes 103,278 jobs, or 4.2 percent of employment in Alabama in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry in Alabama. The industry directly employed 33,926 people, or 1.4 percent of state total employment. Indirectly, the industry employed 30,166 people and induced 39,186 jobs.

Direct, indirect and induced labor income, according to this study, was $4.9 billion, totaling 4.2 percent of the state's labor income in 2011. Direct labor income from the mining sector was $1.79 billion, or 1.5 percent of the state's total. Indirect labor income totaled $1.56 billion and induced labor income was $1.56 billion.[13]

Environmental impact

Because of the sudden and unprecedented growth in fracking across the United States, getting high-quality, unbiased, state-specific information on the environmental impacts of fracking can be difficult. Most studies that would fit those first two qualifications are government studies that focus on the nation as a whole. As such, much of the information that follows in this section may only apply generally to the state. State-specific information has been added where possible.

Air

As with any type of energy extraction, there are several areas of risk when it comes to air quality. In the case of fracking, these risks include air pollutants such as volatile organic compounds (VOCs) and methane. Some environmental groups have raised concerns that methane could be leaked during the extraction process, resulting in unnecessary pollution.[14][15] Most of this pollution occurs during the well completion phase. Fracking operations can also emit known carcinogens, which have been linked with increased rates of cancer.[16]

Emissions

With regard to carbon dioxide, when natural gas is used to generate electricity in power plants, it produces fewer carbon emissions than coal-fired power plants. According to a 2014 study by the National Oceanic and Atmospheric Administration, "as a result of the increased use of natural gas, CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increase in natural gas use.[17] During the extraction process, however, methane is emitted, and methane actually traps 20 times more carbon dioxide than other greenhouse gases. Nevertheless, according to the International Energy Agency (IEA), CO2 emissions in the United States dropped by 3.8 percent in 2012, due in large part to the "increased availability of natural gas, linked to the shale gas revolution."[18][17]

A 2014 report from the U.S. Environmental Protection Agency found a decrease of 3.3 percent in overall greenhouse gas emissions and a 12 percent decrease in methane emissions from 2011 to 2012. Natural gas extraction is the second largest producer of methane, after cattle.[15][19]

Earthquakes

The central and eastern United States have been experiencing an increased number of earthquakes over the last few years, according to the U.S. Geological Survey (USGS), the government agency responsible for such data. Studies from the USGS have not found fracking directly responsible for this increase in felt earthquakes; however, the USGS is looking into regulations that would use seismic data to determine thresholds dictating when and where fracking can occur.[20] There is a growing body of evidence suggesting that this growth in the number of earthquakes has been caused by the increased use of injection wells to dispose of fracking wastewater. While fracking has been rarely known to cause earthquakes, there is an established scientific link between earthquakes and the disposal of fluids in deep, underground injection wells. Once a well has been fracked, the water returned to the surface is called wastewater, and contains large amounts of salt and other contaminants.[21] Some of this water can be recycled, but that water which can't be recycled is often stored in injection wells. These injection wells are generally considered the safest and most cost-effective place for wastewater to be stored. Injection wells are located thousands of feet underground and are encased in cement. Multiple drilling wells often rely on one disposal well for wastewater storage. The U.S. Environmental Protection Agency estimates there are 144,000 of these wells across the United States receiving 2 billion gallons of frack fluid per day.[20][22]

Induced seismology, or man-made earthquakes, have been around for decades and can be caused by mining, damming rivers and injecting fluids into underground wells. Earthquakes are caused by injection wells when water pumped into underground wells causes the faults under the earth to slip. Even though scientists at the USGS have been able to cause earthquakes intentionally by carefully injecting liquid into the earth, the link between injection wells and earthquakes is not fully understood. One of the largest concerns for scientists and regulators is that they do not have the tools to predict whether wastewater will cause seismic activity. These concerns are compounded by the lack of knowledge about where faults are located across the central and eastern United States. The USGS is just beginning to map these areas in more detail in order to understand the seismic risks. As of June 2014, these earthquakes have typically been small, two or three in magnitude on the Richter scale, but at least one scientist has raised concerns that earthquakes could grow in intensity if old injection wells continue to be used for storage.[20][21]

Water

Oil rigs off the coast of Alabama

When it comes to water protection and fracking there are four main areas of risk: the depletion of fresh water sources, spills and leaks of fracking fluid into water, mismanaged produced water and flowback, and stormwater pollution. Stormwater, flowback, produced water and wastewater can be harmful because they contain total dissolved solids and naturally occurring radioactive materials. Because of the recent rapid growth in fracking, there are still many uncertainties about the effects of fracking on water. There are studies that link fracking to groundwater contamination, but they remain controversial. The U.S. Environmental Protection Agency is releasing a report in spring 2015 on the potential impacts of fracking on drinking water, and is working on effective programs for managing these potential risks.[16][23]

One of the main criticisms of fracking is that the process uses a disproportionately large amount of water. Up to 10 million gallons of fresh water may be required to frack one well. A 2014 study from the Bureau of Economic Geology at the University of Texas found, however, that the amount of water used in a traditional well, versus a hydraulically fractured well, is not appreciably different. According to one of the researchers, Dr. Bridget Scanlon, "The water used to produce oil using hydraulic fracturing is similar to the water used in the U.S. to produce oil using conventional techniques." The only difference between the amount of water used during the two oil or gas production techniques, is when in the process water is used. The study was funded by the Alfred P. Sloan Foundation.[24][25]

Health

Because of the recent, rapid growth of fracking, little is known about the potential impacts to human health. Government agencies dealing with human health issues have raised concerns about some chemicals that can be released during the fracking process, including VOCs. The Centers for Disease Control are working with the EPA and federal, state and local agencies to better understand potential impacts.[26][27]

Socioeconomic impact

Fracking can also present challenges to communities. Increased oil and natural gas production happens in boom or bust cycles, and often these cycles disproportionately occur in rural communities. Large scale fracking booms can also lead to increases in crime, such as substance abuse, sex trade and domestic abuse. An influx of oil and gas workers also strains housing and traffic resources. This lack of housing can push oil and gas workers into so-called 'man camps,' which are "clusters of mobile homes, RVs, and trucks," or into hotels. A fracking boom also puts heavy traffic on roads, which can strain infrastructure, increase traffic accidents, and increase the likelihood of oil spills. Local governments respond by hiring more police, social workers, health care workers and emergency response personnel, thereby spending more of their budgets on roads and social programs. Currently, much of the tax revenue generated by the oil and gas industry goes to the federal and state government, not the local governments.[16]

Departments, agencies and organizations

  • The State Oil and Gas Board of Alabama (OGB) is the primary regulatory agency over oil and natural gas exploration, production and development in the state. The board is charged with the statutory responsibility of "preventing waste and promoting the conservation of oil and gas while ensuring protection of both the environment and the correlative rights of owners." The board is comprised of three members, all of whom are appointed by the governor to six-year terms. The State Geologist serves as the State Oil and Gas Supervisor and an ex-officio member of the board. For administrative purposes, the board is a constituent agency of the Geological Survey of Alabama.[28]
  • The Alabama Department of Environmental Management (ADEM) was formed in 1982 as a result of the passage of the Alabama Environmental Management Act. The department is generally responsible for administering and enforcing federal and state environmental policy. ADEM's mission statement as follows:[29]
Responsibly adopt and fairly enforce rules and regulations consistent with the statutory authority granted to the Alabama Environmental Management Commission (AEMC) and the Alabama Department of Environmental Management (ADEM) to protect and improve the quality of Alabama's environment and the health of all its citizens. Monitor environmental conditions in Alabama and recommend changes in state law or revise regulations as needed to respond appropriately to changing environmental conditions.[30]

—Alabama Department of Environmental Management

  • The Alabama Environmental Management Commission (AEMC) is responsible for developing state environmental policy. Like ADEM, AEMC was formed in 1982 with the passage of the Alabama Environmental Management Act. The board is comprised of seven members appointed by the governor to six-year terms. Members must be confirmed by the Alabama State Senate.[29]

Major organizations

  • The Alabama Natural Gas Association (ANGA) is a non-profit organization and trade group dedicated to "promoting the natural gas industry through a well trained work force dedicated to safety and customer service along with an increased long-term demand for natural gas through a unified statewide marketing strategy." ANGA was founded on September 16, 1966.[31]
  • The Coalbed Methane Association of Alabama (CMAA) is a non-profit organization and trade group headquartered in Birmingham. Founded in 1986, CMAA is comprised of "individuals and companies engaged in the development of coalbed methane resources in Alabama."[32][33]
  • The Southern Environmental Law Center (SELC) is a non-profit environmental advocacy group. The organization was founded in 1987. SELC has pursued legal cases against fracking in North Carolina, Alabama, Tennessee and Virginia.[34][35]
  • Wild South is a non-profit environmental advocacy group dedicated to the preservation of public lands in the south. In its current form, Wild South was formed in 2007 from the merger of a conservation group by the same name headquartered in Alabama and the Southern Appalachian Biodiversity Project. Wild South has been involved in a campaign to block the sale of oil and gas leases in Alabama's national forests (particularly the Talladega National Forest).[36][37]

Natural gas use in Alabama

For more information on energy consumption in Alabama, see "Energy policy in Alabama"

In 2011, almost 42 percent of Alabama’s energy use was for the industrial sector, and one quarter was for transportation. The rest was used mostly in residential and commercial buildings for heating, cooling, lighting and other functions.[2]

Consumption of energy for heating homes in Alabama
Source Alabama 2011 U.S. average 2011
Natural gas 29.8% 49.5%
Fuel oil 0.2% 6.5%
Electricity 60.8% 35.4%
Liquid Petroleum Gases (LPG) 7.6% 5%
Other/none 1.4% 3.6%

Alabama produced 1,401.2 trillion BTU of energy in 2011. Of that, 33 percent came from coal, 29 percent came from nuclear power and 16 percent came from natural gas. The remaining 22 percent came from what the EIA classifies as "other" renewable energies. Most of this "other" generation came from hydroelectric sources.[38]

Natural gas is used to produce around 16 percent of total energy generation, and is increasingly being used in the electric power sector. Overall, natural gas production from the Black Warrior Basin and Cahaba Coal Fields has declined significantly since the late '90s. Only two natural gas pipelines originate in Alabama: the Enterprise Intrastate-Alabama and Enbridge Pipelines. These pipelines feed the southeast region of the United States.[39]

Where electricity comes from in Alabama[40]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 7,000 0.06% 0.02%
Natural gas-fired 3,730,000 31.4% 0.37%
Coal-fired 4,037,000 33.98% 0.23%
Nuclear 3,218,000 27.09% 0.41%
Hydroelectric 634,000 5.34% 0.2%
Other renewables 241,000 2.03% 0.12%
Total net electricity generation 11,880,000 100% 0.29%
**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.

Alagesco, the Alabama Gas Company and MobileGas are the only investor-owned natural gas utilities. Alegesco is the largest, serving approximately 350,000 customers.[41]

News items

This section displays the most recent stories in a Google news search for the term "Alabama + Fracking"

All stories may not be relevant to this page due to the nature of the search engine.

Alabama Fracking News Feed

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See also

External links

References

  1. Reuters, "Special Report: U.S. builders hoard mineral rights under new homes," October 9, 2013
  2. 2.0 2.1 U.S. Energy Information Administration, "Alabama Profile Analysis," updated December 18, 2013
  3. Geological Survey of Alabama, State Oil and Gas Board, "Oil and Gas Industry," accessed July 22, 2014
  4. State Oil and Gas Board, "State of Alabama Calendar Year Oil & Gas Production," accessed July 23, 2014
  5. IHS, "US unconventional oil and gas revolution to increase disposable income by more than $2,700 per household and boost US trade position by more than $164 billion in 2020," accessed September 17, 2014
  6. National Conference of State Legislatures, "State Revenues and the Natural Gas Boom: An Assessment of State Oil and Gas Production Taxes," June 2013
  7. Alabama Department of Revenue, "Annual Report," accessed July 23, 2014
  8. Alabama Department of Revenue, "General Summary of State Taxes, 2013"
  9. Geology.com, “Mineral Rights,” accessed January 29, 2014
  10. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  11. REMI, "About Us," accessed September 17, 2014
  12. REMI, "Clients," accessed September 17, 2014
  13. 13.0 13.1 13.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  14. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  15. 15.0 15.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  16. 16.0 16.1 16.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  17. 17.0 17.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  18. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  19. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  20. 20.0 20.1 20.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  21. 21.0 21.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  22. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  23. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  24. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  25. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  26. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  27. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  28. Geological Survey of Alabama, State Oil and Gas Board, "State Oil and Gas Board," accessed July 22, 2014
  29. 29.0 29.1 Alabama Department of Environmental Management, "ADEM Overview," accessed July 22, 2014
  30. Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  31. Alabama Natural Gas Association, "About," accessed July 22, 2014
  32. Coalbed Methane Association of Alabama, "Home page," accessed July 22, 2014
  33. Coalbed Methane Association of Alabama, "History," accessed July 22, 2014
  34. Southern Environmental Law Center, "About SELC," accessed July 22, 2014
  35. Southern Environmental Law Center, "Fracking in the Southeast," accessed July 22, 2014
  36. Wild South, "Kill the Drill," accessed July 22, 2014
  37. Wild South, "About Us," accessed July 22, 2014
  38. U.S. Energy Information Administration, "State Energy Data System, Production," accessed February 18, 2014
  39. U.S. Energy Information Administration, "About U.S. Natural Gas Pipelines," accessed February 27, 2014
  40. U.S. Energy Information Administration, "Alabama Profile Overview," accessed February 5, 2014
  41. Alabama Public Service Commission, "Natural Gas," accessed February 27, 2014