Fracking in Oklahoma

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Fracking in Oklahoma
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Regulation
Regulatory agency Oklahoma Corporation Commission; Oil and Gas Division
Estate ownership Split[1]
Resources
Fossil fuels present Oil, natural gas and coal[2]
Fracking
Year fracking began 1949
Other state fracking pages
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Fracking in Oklahoma 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 reported oil well in Oklahoma was completed in 1859 and in 1896, and the state's first commercial oil well was drilled near Bartlesville. Between 1897 and 1907 (the year Oklahoma was granted statehood), Oklahoma became the largest oil-producing area in the world. Nearly all of the state's 26 major oil fields were discovered prior to World War II. In 1967, the state's oil production industry began its gradual decline.[3]

Oklahoma was the site of the first commercial application of hydraulic fracturing, which occurred on March 17, 1949, at an oil well near Duncan.[4]

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

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, Oklahoma employed the following Gross Production Severance Tax, which is based on the monthly average crude oil and natural gas prices:

  • 7 percent when the price of oil is greater than $17 per barrel and $42.10 per MCF of natural gas
  • 4 percent if the price of oil is between $14 and $17 per barrel and natural gas is between $1.75 and $2.10 per MCF.
  • 1 percent if the price of oil is less than $14 and natural gas is less than $1.75 per MCF.

This revenue goes to the general revenue fund, the county highway fund, and counties (based on "an average daily attendance per capita distribution basis"). How revenue is distributed among these funds depends on the current oil and gas tax rates.[6]
Oklahoma's Petroleum Excise Tax is:

  • 0.095 percent of the taxable value of oil or natural gas.

Of this revenue collected from oil production 82.634 percent goes to the general revenue fund, 10.526 percent goes to the Corporation Commission Plugging Fund, 6.48 percent goes to the Interstate Oil Compact Fund of Oklahoma. Of the gas revenue collected 82.6045 percent goes to the general revenue fund, 10.5555 percent deposited to the Corporation Commission Plugging Fund, 6.48 percent goes to the Interstate Oil Compact Fund of Oklahoma.[6]
Oklahoma's Oil and Gas Production Fee is:

  • "$0.0035 per barrel of petroleum liquid produced
  • $0.00015 per MCF of natural gas produced."

Of the revenue collected from this tax, 3 percent goes to the Oklahoma Tax Commission Revolving Fund. The remaining revenue goes towards the Sustaining Oklahoma's Energy Resources Revolving Fund.[6]

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.[7] 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 Oklahoma (among the lower 48 states) was fourth in private royalty income in the nation. The study also found that for 2010:

  • Private oil revenue was $3,990 million
  • Private natural gas revenue was $7,000 million
  • Estimated royalty income was $1,374 million
  • Royalty income was 1.03 percent of state average income.[8][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 Oklahoma. 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.[13]

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 Oklahoma. According to the PwC study, the oil and gas industry added $39 billion in total value in 2011, including direct, indirect and induced value. Of this $23.16 billion, or 13.7 percent of the state's total value added was direct, $8.28 billion was indirect and $7.56 billion was induced, totaling 23.1 percent of the state's total value in 2011.[13]

Employment

The PwC study attributes 364,308 jobs, or 6.9 percent of employment in Oklahoma in 2011, to jobs created directly, indirectly, or induced, from the oil and natural gas industry. The industry directly employed 149,258 people, or 6.9 percent of state total employment. Indirectly the industry employed 102,830 people and induced 112,221 jobs.

Direct, indirect and induced labor income, according to this study, was $23.3 billion, totaling 22.9 percent of Oklahoma's labor income in 2011. Direct labor income from the mining sector was $13.87 billion, or 13.6 percent of the state's total. Indirect labor income totaled $5.14 billion and induced labor income was $4.29 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

Policypedia
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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.[20] There is a growing body of evidence suggesting that this growth in the number 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

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 2014 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 and 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 Oil and Gas Division (OGD), an agency within the Oklahoma Corporation Commission, regulates the state's oil and gas industry. OGD's mission statement is as follows:[28]
Our mission is to provide information, permitting, investigation, and compliance services to the oil and gas industry, mineral interests, landowners, and the general public so together we can develop the oil and gas resources of the state in a fair and orderly manner while protecting the environment and ensuring public safety.[29]

—Oklahoma Corporation Commission, Oil and Gas Division

  • The Oklahoma Department of Environmental Quality (ODEQ) is the state's environmental protection agency. The department is comprised of five divisions: Air Quality, Land Protection, Water Quality, Customer Services and Environmental Complaints and Local Services. ODEQ's mission statement is as follows:[30]
The mission of the Oklahoma Department of Environmental Quality is to enhance the quality of life in Oklahoma and protect the health of its citizens by protecting, preserving and restoring the water, land and air of the state, thus fostering a clean, attractive, healthy, prosperous and sustainable environment.[29]

—Oklahoma Department of Environmental Quality

Major organizations

  • The Oklahoma Independent Petroleum Association (OIPA) is a trade group that represents the state's oil and natural gas industry. Founded in 1955, OIPA is the state's largest oil and gas trade group, representing over 2,500 members. OIPA 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."[31][32][33]
  • * The Oklahoma 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 national Sierra Club has voiced opposition to fracking.[34][35]

Natural gas use in Oklahoma

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

In 2011, more than 35 percent of Oklahoma's energy was used by the industrial sector. A little less than one-third was used for transportation, one-fifth was used for residential purposes and the rest was used for 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 coal and petroleum.[2]

Consumption of energy for heating homes in Oklahoma
Source Oklahoma 2011 U.S. average 2011
Natural gas 54.6% 49.5%
Fuel oil 0.1% 6.5%
Electricity 35% 35.4%
Liquid Petroleum Gases (LPG) 7.6% 5%
Other/none 2.7% 3.6%

Oklahoma produced 2,722.8 trillion BTU of energy in 2011. Nearly 80 percent of that came from natural gas and just over 16 percent came from crude oil. The remaining 4 percent came from coal and what the U.S. Energy Information Administration classifies as 'other,' which is "assumed to equal consumption of all renewable energies except biofuels."[36]

Natural gas is used to produce over 13 percent of electricity, with the rest produced using renewable energy resources. Natural gas is one of Oklahoma's largest industries. The state does not use all of the electricity that is produced, and ships the excess to other states, making the state a net interstate electricity exporter.[2]

Where electricity comes from in Oklahoma[37]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 1 0.02% 0%
Natural gas-fired 1,750 31.42% 0%
Coal-fired 2,603 46.74% 0%
Hydroelectric 145 2.6% 0%
Other renewables 1,075 19.3% 0%
Total net electricity generation 5,569 100% 0%
**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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Oklahoma Fracking News Feed

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See also

External links

References

  1. Oklahoma Geological Survey, "Oil and Gas Commonly Asked Questions," accessed July 25, 2014
  2. 2.0 2.1 2.2 U.S. Energy Information Administration, "Oklahoma Profile Analysis," December 18, 2013
  3. Oklahoma Geological Survey, "Oklahoma Oil: Past, Present, and Future," accessed July 25, 2014
  4. American Oil and Gas Historical Society, "Shooters - A 'Fracking' History," accessed July 25, 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. 6.0 6.1 6.2 National Conference of State Legislatures, "State Revenues and the Natural Gas Boom: An Assessment of State Oil and Gas Production Taxes," June 2013
  7. Geology.com, “Mineral Rights,” accessed January 29, 2014
  8. All the data presented below are in millions of nominal dollars. The royalty income figures assume a 1/8th royalty rate.
  9. Social Science Research Network, "U.S. Private Oil and Natural Gas Royalties: Estimates and Policy Considerations," March 12, 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. Oklahoma Corporation Commission - Oil and Gas Division, "Home page," accessed July 25, 2014
  29. 29.0 29.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  30. Oklahoma Department of Environmental Quality, "DEQ Mission Statement," accessed July 25, 2014
  31. Oklahoma Independent Petroleum Association, "About OIPA," accessed July 25, 2014
  32. Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
  33. Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
  34. Oklahoma Sierra Club, "Home page," accessed July 25, 2014
  35. Sierra Club, "Dirty, Dangerous, and Run Amok," accessed July 25, 2014
  36. U.S. Energy Information Administration, “State Energy Data System, Production,” accessed February 18, 2014
  37. U.S. Energy Information Administration, "Oklahoma Profile Overview," accessed March 5, 2014