Fracking in Alaska

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Fracking in Alaska
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Regulation
Regulatory agency Alaska Oil and Gas Conservation Commission
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 Alaska 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

Significant oil reserves were first discovered in Alaska in 1957, on the Kenai Peninsula at Swanson River. Alaska was admitted to the union as a state in 1959. In 1967, the Prudhoe Bay oil field was discovered on the state's North Slope. The Prudhoe Bay field is the largest oil field in North America. In 1969, the Kuparuk oil field, the second largest on the continent, was discovered.[3]

Four of the 10 largest oil fields in North America are located on Alaska's North Slope.[3]

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.[4]

Taxes, fees and revenue

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, Alaska employed the following oil and gas production tax:

  • "25% of production value (base rate)
  • Additional tax added:
    • 0.4% progressive tax added for each additional dollar of production tax value if monthly production value more than $30 but less than $92.50 per equivalent barrel of oil or gas
    • Progressive tax rate added equal to 0.1% of the difference between the average monthly production tax value and $92.50, if monthly production value is greater than $92.50
  • Maximum tax rate is 75% of production value
  • Several credits and exemptions available to incentivize well exploration and university donations.
  • Rate changes to 35% of production value in 2014 with no additional progressive tax."

Any revenue collected from litigation or assessment is deposited in the Congressional Budget Reserve Fund. Any remaining revenue is deposited in Alaska's general fund.[5]

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.[6]

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 Alaska. Both the author(s) and sponsor(s) of the studies 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.[10]

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 Alaska. According to the PwC study, the oil and gas industry added $19.28 billion in total value in 2011, including direct, indirect and induced value. Of this $15.69 billion, or 28.3 percent of the state's total value added was direct, $1.88 billion was indirect and $1.71 billion was induced. In total this accounted for 34.7 percent of the state's total value in 2011.[10]

Employment

The PwC study attributes 56,612 jobs, or 11.9 percent of state employment in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry in Alaska. The industry directly employed 18,745 people, or 3.9 percent of state total employment. Indirectly the industry employed 18,303 people and induced 19,563 jobs.

Direct, indirect and induced labor income, according to this study, was $4.5 billion, totaling 12.6 percent of Alaska's labor income in 2011. Direct labor income from the mining sector was $2.24 billion, or 6.3 percent of the state's total. Indirect labor income totaled $1.29 billion and induced labor income was $967 million.[10]

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.[11][12] 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.[13]

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.[14] 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."[15][14]

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.[12][16]

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.[17] 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.[18] 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.[17][19]

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.[17][18]

Water

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.[13][20]

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.[21][22]

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.[23][24]

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.[13]

Departments, agencies and organizations

  • The Alaska Oil and Gas Conservation Commission (AOGCC) is an independent state agency charged with regulatory authority over the oil and gas industry in Alaska. This includes oversight of oil and gas drilling, development and production, reservoir depletion and metering operations. The commission's mission statement is as follows:[25][26]
To protect the public interest in exploration and development of Alaska’s valuable oil, gas, and geothermal resources through the application of conservation practices designed to ensure greater ultimate recovery and the protection of health, safety, fresh ground waters and the rights of all owners to recover their share of the resource.[27]

—Alaska Oil and Gas Conservation Commission

AOGCC was established in 1978 as an agency within the executive branch.[28]
  • The Alaska Division of Oil and Gas is a subdivision of the Alaska Department of Natural Resources. The Division of Oil and Gas is "responsible for leasing of state lands for oil, gas and geothermal exploration." The division identifies the following primary responsibilities:[29]
  • Being responsible for conveying the mineral interest in oil, gas, and geothermal resources for the purpose of exploration, development, and production, on a timely and predictable basis, and * Ensuring that the state receives full value for the sale of these resources;
  • Advancing innovative programs such as exploration licensing and expanded exploration incentive credits that will promote exploration and development on both state and private lands in frontier interior basins;
  • Ensuring that all royalty, rental and bonus revenues due the state from leasing and production are received, and that shared federal royalties are properly received and allocated;
  • Ensuring that the surface operations of lessees and permittees are conducted in an environmentally, socially, and economically sound manner;
  • Advocating petroleum resource development throughout the state;
  • Developing and advocating marketing strategies for Alaska oil and gas, including negotiating royalty oil purchase agreements with in-state refineries; and
  • Providing technical and policy support on oil and gas issues for the DNR Commissioner's and Governor's office and Alaska's congressional delegation.[27]

—Alaska Division of Oil and Gas

  • The Alaska Department of Environmental Conservation was formed in 1971. The department's mission is "to conserve, protect and improve its (Alaska's) natural resources and environment and control water, land and air pollution in order to enhance the health, safety and welfare of the people of the state and their overall economic and social well being." The department is comprised of six divisions:[30]
    • The Office of the Commissioner is the chief administrative office of the department.[31]
    • The Division of Air Quality is responsible for "controlling and mitigating air pollution and for conserving the clean air that is enjoyed in most locations of Alaska."[32]
    • The Division of Environmental Health is responsible for the safety of drinking water, food and sanitary practices.[33]
    • The Division of Administrative Services is responsible for administrative support of the department, including accounting services, information technology services, budget review and facilities.[34]
    • The Spill Prevention and Response Division is responsible for handling spills of oil or other hazardous substances.[35]
    • The Division of Water is charged generally with protecting and improving water quality, including regulating water cleanliness and the treatment of wastewater.[36]

Major organizations

  • The Alaska Oil and Gas Association (AOGA) is a non-profit organization and trade group for the state's oil and gas industry. AOGA's stated mission is to "foster the long-term viability of the oil and gas industry in Alaska." The organization was founded in 1966.[37][38]
  • Cook Inletkeeper is a non-profit education and advocacy organization whose stated mission is to "protect Alaska's Cook Inlet watershed and the life it sustains." The organization has advocated for tighter fracking regulations in the state, including full disclosure about the contents of fracking fluids and water monitoring in areas where fracking is occurring.[39][40]

Natural gas use in Alaska

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

In 2011, the industrial sector consumed almost half of Alaska's total energy consumption. Meanwhile, 31.5 percent of energy consumption was used for transportation, which is due to the high jet fuel demands of military and commercial air traffic to Asia. Residential and commercial demand accounted for the remaining 19 percent. Most of that demand was for heating and lighting during winter months.[2]

Consumption of energy for heating homes in Alaska
Source Alaska 2011 U.S. average 2011
Natural gas 47.6% 49.5%
Fuel oil 31.8% 6.5%
Electricity 12% 35.4%
Liquid Petroleum Gases (LPG) 1.4% 5%
Other/none 7.1% 3.6%

Alaska produced 1,641.9 trillion BTU of energy in 2011, the 12th most in the United States. Crude oil is the largest source of energy production in the state, accounting for 72 percent of total production. Natural gas accounted for much of the rest of the state's production, totaling 25 percent. Other sources, including coal and renewable resources, were produced in negligible amounts.[41][42]

Where electricity comes from in Alaska[43]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 62,000 12.11% 0.21%
Natural gas-fired 239,000 46.68% 0.02%
Coal-fired 54,000 10.55% 0%
Hydroelectric 147,000 28.71% 0.05%
Total net electricity generation 512,000 100% 0.01%
**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.

Natural gas accounts for 25 percent of Alaska's total energy production. In 2012, Alaska produced 351 billion cubic feet of natural gas. This estimate does not include the amount of gas pumped underground for re-pressurization or used as fuel for equipment in oil fields. Most natural gas is consumed at production sites. This is because natural gas consumption for home heating is low in Alaska due to a lack of infrastructure for transportation. Current production exceeds domestic needs, and plans for a pipeline to the lower 48 states aren't yet commercially feasible.[44]

News items

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

Alaska Fracking News Feed

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See also

External links

References

  1. Inletkeeper.org, "Know Your Property Rights!" accessed July 22, 2014
  2. 2.0 2.1 U.S. Energy Information Administration, "Alaska Profile Analysis," updated June 19, 2014
  3. 3.0 3.1 Resource Development Council, "Alaska's Oil and Gas Industry," accessed July 22, 2014
  4. 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
  5. National Conference of State Legislatures, "State Revenues and the Natural Gas Boom: An Assessment of State Oil and Gas Production Taxes," June 2013
  6. Geology.com, “Mineral Rights,” accessed January 29, 2014
  7. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  8. REMI, "About Us," accessed September 17, 2014
  9. REMI, "Clients," accessed September 17, 2014
  10. 10.0 10.1 10.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  11. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  12. 12.0 12.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  13. 13.0 13.1 13.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  14. 14.0 14.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  15. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  16. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  17. 17.0 17.1 17.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  18. 18.0 18.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  19. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  20. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  21. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  22. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  23. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  24. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  25. Alaska Oil and Gas Conservation Commission, "Mission," accessed July 22, 2014
  26. Alaska Oil and Gas Conservation Commission, "Welcome to the AOGCC," accessed July 22, 2014
  27. 27.0 27.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  28. Alaska Oil and Gas Conservation Commission, "History," accessed July 22, 2014
  29. Alaska Division of Oil and Gas, "Division of Oil and Gas 101," accessed July 22, 2014
  30. Alaska Department of Environmental Conservation, "DEC History," accessed July 22, 2014
  31. Alaska Department of Environmental Conservation, "Welcome to the Commissioner's Office," accessed July 22, 2014
  32. Alaska Department of Environmental Conservation, "Division of Air Quality Information," accessed July 22, 2014
  33. Alaska Department of Environmental Conservation, "Division of Environmental Health," accessed July 22, 2014
  34. Alaska Department of Environmental Conservation, "Welcome to DAS," accessed July 22, 2014
  35. Alaska Department of Environmental Conservation, "Spill Prevention and Response," accessed July 22, 2014
  36. Alaska Department of Environmental Conservation, "More About Water," accessed July 22, 2014
  37. Alaska Oil and Gas Association, "History - 1960s," accessed July 22, 2014
  38. Alaska Oil and Gas Association, "About," accessed July 22, 2014
  39. Inletkeeper.org, "Action Alert - Speak Out on Fracking!" accessed July 22, 2014
  40. Inletkeeper.org, "About Us," accessed July 22, 2014
  41. Energy Information Administration, "Alaska Overview," December 18, 2013
  42. U.S. Energy Information Administration, "State Energy Data System, Production," accessed February 18, 2014
  43. U.S. Energy Information Administration, "Alaska Profile Overview," accessed February 5, 2014
  44. U.S. Energy Information Administration, "Alaska Profile Analysis," December18, 2013