Fracking in Louisiana

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Fracking in Louisiana
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Regulation
Regulatory agency Department of Natural Resources; Office of Conservation
Estate ownership Split
Resources
Fossil fuels present Oil, natural gas and coal[1]
Fracking
Other state fracking pages
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Fracking in Louisiana 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

Natural gas was first discovered in Louisiana in 1870 near Shreveport at a well being drilled for artesian water. The state's first oil well that produced in commercial quantities was drilled in 1901, marking the beginning of the oil and gas industry in the state. In 1906, the state legislature passed Louisiana's first oil and gas conservation law. Offshore drilling began in 1947. Production peaked at 728,494,272 barrels in 1969.[2]

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.[3]

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, Louisiana employed the following natural resources severance tax:

  • Wells producing at a full rate are taxed at a rate of $0.148 for each MCF of natural gas that is produced and 12.5 percent of the value of oil produced. These taxes can be suspended for the first 24 months or until the payout of a well occurs, if the oil or gas collected comes from a new discovery oil or gas well.

Of the revenue collected from this tax 20 percent goes to the producing parish (up to $500,000). Remaining funds are given to the Bond Security and Redemption Fund (up to an amount determined by revenue estimates). If the revenue collected exceeds revenue estimates, half goes to the Louisiana Investment Fund for Enhancement and the other half goes to the state general fund.[4]

Louisiana also has an oil field restoration fee of $0.015 for every barrel of oil and $0.003 for every MCF of natural gas produced. This revenue goes to the oilfield site restoration fund.[4]

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.[5] The federal government doesn't collect data on oil and natural gas royalty and land sales on private land. A 2014 study attempted to estimate these figures and determined that Louisiana (among the lower 48 states) was third in private royalty income in the nation. The study also found that for 2010:

  • Private oil revenue was $3,411 million
  • Private natural gas revenue was $8,330 million
  • Estimated royalty income was $1,468 million
  • Royalty income was 0.86 percent of state average income.[6][7]

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 Louisiana. Both the author and sponsor 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.[11]

The following data are taken from a study done by PricewaterhouseCoopers LLP (PwC), a research consulting firm, for the American Petroleum Institute about the economic impact of the oil and natural gas industry in 2011 in Louisiana. According to the PwC study, the oil and gas industry added $73.93 billion in total value in 2011, including direct, indirect and induced value. Of this $52.27 billion, or 25.1 percent of the state's total value added was direct, $12.69 billion was indirect and $9.97 billion was induced, totaling 35.5 percent of the state's total value in 2011.[11]

Employment

The PwC study attributes 412,649 jobs, or 16.2 percent of state employment in Louisiana in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry. The industry directly employed 130,316 people, or 5.1 percent of state total employment. Indirectly the industry employed 151,288 people and induced 131,045 jobs.

Direct, indirect and induced labor income, according to this study, was $24.21 billion, totaling 19.4 percent of Louisiana's labor income in 2011. Direct labor income from the mining sector was $10.91 billion, or 8.7 percent of the state's total. Indirect labor income totaled $8.11 billion and induced labor income was $5.19 billion.[11]

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.[12][13] 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.[14]

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.[15] 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."[16][15]

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.[13][17]

Earthquakes

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State energy policy

State fracking policy

Energy policy terms

Fracking in the U.S.

Energy use in the U.S.

Energy policy in the U.S.


See also
Local fracking on the ballot

Statewide fracking on the ballot

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.[18] 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.[19] 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.[18][20]

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.[18][19]

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.[14][21]

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.[22][23]

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.[24][25]

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.[14]

Departments, agencies and organizations

The Office of Conservation is an agency within the Louisiana Department of Natural Resources. The office is charged with the responsibility "to regulate the exploration and production of oil, gas and other hydrocarbons and lignite; to control and allocate energy supplies and distribution; and to protect public safety and the environment from oilfield waste, including regulation of underground injection and disposal practices." The office is comprised of the following divisions:[26][27]

  • Executive: "Coordinates and administers the various activities of the Office of Conservation."[26]
  • Engineering-Administrative: "Administers regulatory programs that prevent waste of nonrenewable oil and natural gas resources and protects the correlative rights of all Louisiana citizens concerned."[26]
  • Engineering-Regulatory: "Implements rules and regulations ... concerning the construction, maintenance, and closure of oilfield pits; plugging of oil and gas wells; and the inspection of well sites."[26]
  • Environmental: "Implements the ground water management program, the water well programs for driller licensing, well registration and enforcement (construction and plugging standards), and the exploration and production waste program for off-site (commercial) management of exploration and production waste."[26]
  • Geological Oil and Gas: "Administers a regulatory program to prevent waste of oil and gas, to conserve the natural resources of the state, to prevent the drilling of unnecessary wells and to protect the correlative rights of mineral owners through the application state laws, rules, regulations, and policies of the Office of Conservation."[26]
  • Injection and Mining: "Implements two major federal environmental programs which were statutorily charged to the Office of Conservation: the Underground Injection Control (UIC) program with federal oversight from the Environmental Protection Administration (EPA) and the Surface Mining Program with federal oversight from the U.S. Department of the Interior, Office of Surface Mining."[26]
  • Pipeline: "Regulates the intrastate pipeline operators to ensure safety and compliance as authorized under the Federal certification process found in Chapter 601, Title 49 of the United States Code."[26]

The Louisiana Department of Environmental Quality (LDEQ) was established in 1984. The department's stated mission is "to provide service to the people of Louisiana through comprehensive environmental protection in order to promote and protect health, safety and welfare while considering sound policies regarding employment and economic development." The department is divided into four major offices, two of which deal in regulatory matters: the Office of Environmental Services and the Office of Environmental Compliance.

Major organizations

  • The Louisiana Oil and Gas Association (LOGA) is a non-profit organization and trade group that represents the state's oil and gas industry. Founded in 1992, LOGA's primary goal is "to provide our industry with a working environment that will enhance the industry." LOGA is listed as a "cooperating association" by the Independent Petroleum Association of America, which is a national trade group that "advocates its members' views before the U.S. Congress, the Administration and federal agencies."[28][29][30]
  • The Delta Chapter of the Sierra Club is a statewide chapter of the Sierra Club, an environmental advocacy group founded in 1892. The chapter's stated mission is "to explore, enjoy and protect the wild places of the earth; to practice and promote the responsible use of the earth's ecosystems and resources; to educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out these objectives." The chapter has voiced opposition to fracking.[31][32]

Natural gas use in Louisiana

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

In 2011, two-thirds of Louisiana’s energy use was for industrial purposes. About 18 percent was for transportation. The rest was used mostly in residential and commercial buildings for heating, cooling, lighting and other functions. Most of the energy used in the state was in the form of natural gas, followed by petroleum.[1]

In Louisiana, electricity heats a majority of homes, followed by natural gas, which heats 35.3 percent of homes.

Consumption of energy for heating homes in Louisiana
Source Louisiana 2011 U.S. average 2011
Natural gas 35.3% 49.5%
Fuel oil 0% 6.5%
Electricity 61% 35.4%
Liquid Petroleum Gases (LPG) 2.7% 5%
Other/none 0.9% 3.6%

Electricity produced and consumed in Louisiana is primarily from natural gas. Louisiana is a top producer of natural gas, and one-fifth of Louisiana’s total natural gas production is used to generate electricity. Natural gas produces about half of the state’s total electricity generation, much higher than the national average. The state’s electricity generation from petroleum has declined, while generation from natural gas has increased.[1]

Where electricity comes from in Louisiana[33]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 7,000 0.09% 0.02%
Natural gas-fired 4,275,000 53.85% 0.42%
Coal-fired 1,333,000 16.79% 0.08%
Nuclear 1,554,000 19.58% 0.2%
Hydroelectric 38,000 0.48% 0.01%
Other renewables 212,000 2.67% 0.11%
Total net electricity generation 7,938,000 100% 0.19%
**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.

News items

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See also

External links

References

  1. 1.0 1.1 1.2 U.S. Energy Information Administration, "Louisiana Profile Analysis," December 18, 2013
  2. Louisiana Mid-Continent Oil and Gas Association, "History of the Industry," accessed July 24, 2014
  3. 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
  4. 4.0 4.1 National Conference of State Legislatures, "State Revenues and the Natural Gas Boom: An Assessment of State Oil and Gas Production Taxes," June 2013
  5. Geology.com, “Mineral Rights,” accessed January 29, 2014
  6. All the data presented below are in millions of nominal dollars. The royalty income figures assume a 1/8th royalty rate.
  7. Social Science Research Network, "U.S. Private Oil and Natural Gas Royalties: Estimates and Policy Considerations," March 12, 2014
  8. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  9. REMI, "About Us," accessed September 17, 2014
  10. REMI, "Clients," accessed September 17, 2014
  11. 11.0 11.1 11.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  12. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  13. 13.0 13.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  14. 14.0 14.1 14.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  15. 15.0 15.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  16. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  17. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  18. 18.0 18.1 18.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  19. 19.0 19.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  20. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  21. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  22. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  23. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  24. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  25. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  26. 26.0 26.1 26.2 26.3 26.4 26.5 26.6 26.7 Louisiana Department of Natural Resources, "Office of Conservation - Divisions," accessed July 24, 2014
  27. Louisiana Department of Natural Resources, "Office of Conservation," accessed July 24, 2014
  28. Louisiana Oil and Gas Association, "About the Louisiana Oil and Gas Association," accessed July 24, 2014
  29. Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
  30. Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
  31. Sierra Club - Delta Chapter Louisiana, "Fracking in Louisiana," accessed July 24, 2014
  32. Sierra Club - Delta Chapter Louisiana, "About Us," accessed July 24, 2014
  33. U.S. Energy Information Administration, "Louisiana Profile Overview," accessed February 25, 2014