As Commodity Prices Face Pressure and Oil Stays High, Will Farmers Embrace Natural Gas?

2012 promises to be a difficult year for farmers as an estimated 4.8% increase in U.S. corn production, coupled with increased planting of the crop worldwide, puts downward pressure on prices. Corn, which has doubled in the past two years due to demand for cattle feed, is expected to drop by 30% to $4.035/bushel next year in Chicago trading. The record U.S. wheat harvest which is also projected next year should depress wheat prices as well, according to a Bloomberg article.

But oil prices are expected to remain high.  Barclay’s senior economist Alia Moubayed said that the Saudis need $91 oil as a “break even point” in an interview on Bloomberg’s “Surveillance” yesterday. Social unrest swept the Middle East in 2011, and the Saudi government has attempted to quell dissent by promising increased social benefits. The Saudis need higher oil prices to keep those promises. Saudi Arabia’s massive production capacity means that they are a longtime swing producer who can influence the world oil price by simply increasing or decreasing production. U.S. oil producers also need $80 oil to stay profitable. Below $80 they begin slowing drilling and decreasing production.

This combination of higher input costs and lower grain prices, coupled with the recent price boom in farmland, promises to squeeze profits for farmers in 2012. This has many farmers looking for ways to cut costs.

Natural gas may be part of the answer. “Though there are costs to converting diesel powered machinery to run on a diesel/natural gas blend, a 20-30% savings in diesel fuel promises a quick return on investment for high volume diesel users.” said C&E Clean Energy Solution’s Brian Carpenter. Continue reading

Economic Impact of the Fayetteville Shale

The report says Fayetteville Shale activities of the oil and gas industry have been important to Arkansas because:

  • Average annual pay in the oil and gas extraction industry was $74,555 in 2010, twice the average pay of all industries in the state.
  • Mineral leases and royalty payments provide additional income to Arkansas residents. The study says that over the 2008-2011 period more than $1.2 billion in mineral
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CNG and LNG vehicles see increased demand in U.S. and Canada

A recently completed analysis of the U.S. and Canadian Natural Gas Vehicle Market found that while there are cost and infrastructure challenges to the broader use of Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) vehicles, demand for natural gas vehicles has increased.

Using 2009 numbers, it was found that the amount of natural gas demanded for transportation use is 3.2 billion cubic feet, the equivalent of 27.7 million gallons of gasoline.

The analysis, conducted by TIAX, LLC, is a thorough and independent assessment of the key technical, economic, regulatory, social, and political factors and challenges that shape the market for natural gas vehicles. This week, the first portions of TIAX’s analysis addressing CNG and LNG Infrastructure were released and can be found on ANGA’s website.

The report sections on CNG and LNG infrastructure are the most comprehensive and technical assessments about the current state of CNG and LNG transportation. In these sections, TIAX confronts the “chicken and the egg” conversations about natural gas vehicles; namely, do we need more natural gas vehicles to spur infrastructure development or do we need more infrastructure to be developed so that more natural gas vehicles can be put to use?

Read more here.

T. Boone Pickens preaches his energy “gospel”

T. Boone Pickens is preaching the benefits of natural gas. Here’s a little bit of what he says:

“Natural gas will do everything we want it to do,” he says. “It’s 130-octane fuel, it’s 25 percent cleaner than oil — and we have an abundance of it. It doesn’t require refining; it comes out of ground at 130 octane; run it through a separator and it’s ready to use. It will be very simple for us to make this transition.”

While natural gas-powered vehicles are nothing new — people have been converting vehicles for decades — Pickens says booming supplies of U.S. natural gas and falling prices make it ideal for the backbone of the nation’s transportation fleet: trucks.

“Wind, nuclear, and solar are fine, but if we’re going to do anything about our dependency on foreign oil, we have to address transportation.”

There are 18 million 18-wheelers in the U.S., he says. If converted to natural gas, the industry’s carbon emissions would drop by 30 percent, fuel costs would drop, and imports of OPEC oil would be slashed by 60 percent. Continue reading

Rep. Bill Cassidy’s Plan to Multiply CNG Stations

Rep. Bill Cassidy explains his bill, H.R. 1712, that would remove the limits on retail sales for natural gas producing companies such as Chesapeake and Apache:

Unfortunately, the main obstacle is a lack of natural gas fuel infrastructure in our country. Currently in the United States, there are only 449 CNG fueling stations accessible to the public, which is dwarfed by the more than 157,000 gasoline stations.

There are a number of proposals to spur natural gas infrastructure development in Washington. Not surprisingly, when it comes to Congress, the most talked about option involves subsidies for both natural gas vehicles and for the actual CNG fuel itself. While we should be using all of our available natural resources to aid in lowering the costs of transportation, the reality is that our country has neither the money to subsidize development nor the expertise to pick winners and losers in the energy and transportation sectors.

As opposed to subsidies, I believe that a simple change to our tax code would help those companies that develop natural gas look at domestic retail infrastructure development as a serious option. For background purposes, it is important to understand the differences between independent and major oil and gas producers. Under our tax code, independent producers of oil and gas, such as Apache and Chesapeake, are different from major oil and gas companies, such as ExxonMobil or Shell, as independents are limited to $ 5 million in revenue from retail sales. Whether intentional or not, this antiquated provision is keeping companies that from investing in CNG fueling stations all over the country. Continue reading

The Clean Energy Shell Game

In the past, environmentalists considered natural gas to be a clean energy. Robert Bryce explains in his recent article on National Review “The Sierra Club Opposes Clean Energy”:

. . . the Sierra Club supported natural gas because, as Michael Brune, the group’s executive director, put it, the group’s leaders believed at the time that this fuel could “play a necessary role in helping us reach the clean energy future our children deserve.” But in February of this year, the Sierra Club changed its direction on natural gas and Brune declared that the “only safe, smart, and responsible” way to address America’s energy needs is to look beyond coal, oil, and natural gas and to focus on “sources such as wind, solar, and geothermal.”

Bryce notes that even new coal plants are meeting and exceeding EPA Standards on “dirty” emissions:

The Prairie State Energy Campus, a $5 billion state-of-the-art coal-fired plant located in southwestern Illinois, will soon begin generating electricity. The 1,600-megawatt facility, the biggest coal-fired power plant to be built in in the U.S. in many years, will produce 0.182 pounds of sulfur dioxide and 0.07 pounds of nitrogen oxide per megawatt-hour. That’s about half the allowable levels of those pollutants under the EPA’s Cross-State Air Pollution Rule, which is scheduled to take effect in 2014.

So, why is there so much opposition to coal and even more so to natural gas? Bryce notes the real reason: “The promotion of ‘clean energy’ is not really about eliminating traditional pollutants such as sulfur dioxide, nitrogen oxides, and ozone; it’s aimed at cutting carbon dioxide emissions.”

So, what is it? “Dirty” energy is now defined as carbon dioxide, a gas which makes our soda and our beer bubbly, and which every animal exhales with each breath. Anything that is asserted to contribute to global warming is now a “dirty” energy: Continue reading

EIA: Marketed gas output increases in top 5 gas-producing states

The U.S. Energy Information Administration (EIA) said in a report that combined marketed natural gas production from the top five natural gas producing states—Texas, Louisiana, Wyoming, Oklahoma, and Colorado—increased by about 7.5% in 2011, although their share of total U.S. natural gas output fell slightly to about 65%.

Marketed natural gas production from these states in 2011 totaled 15.7 trillion cubic feet (Tcf), according to annual data from the U.S. Energy Information Administration. The drop in their combined share of total U.S. production reflects increased contributions from other states, particularly those in which operators significantly expanded development of shale gas formations. Shale gas production from states such as Pennsylvania helped boost overall U.S. natural gas output by almost 8% in 2011.
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