Thursday, September 21, 2017

Fracking Regulation / Oversight -- Back To Square One -- September 21, 2017


September 22, 2017: yesterday Argus Media had a short article on this story (see below for story and link). When I read the article, it did not make sense to me, nor did it seem to be the complete story. I thought there must be more. In fact, there is. It turns out there is quite a bit more to it and this whole issue is a long way from being settled. The good news is that previous changes were accomplished by executive orders / rule-changing under the Obama administration, not by Congress.

A much more complete story is now posted by The Oil & Gas Journal.
A federal appeals court in Denver dismissed six environmental organizations’ appeal of a district court’s decision invalidating the US Bureau of Land Management’s regulation of hydraulic fracturing at oil and gas operations on onshore public lands. But the US 10th Circuit Court of Appeals also vacated the lower court’s ruling in the Sept. 21 decision and dismissed the appeal without prejudice, leading at least one environmental group to say that the decision affirmed BLM’s authority to regulate fracing.

The presidents of the Independent Petroleum Association of America in Washington and the Western Energy Alliance in Denver separately applauded the court’s decision to dismiss the appeal, which was pending as a new US president was elected and his administration began to rescind BLM’s fracing regulation.

“Given these changed and changing circumstances, we conclude these appeals are prudentially unripe. As a result, we dismiss these appeals and remand with directions to vacate the district court’s opinion and dismiss the action without prejudice,” Appeals Court Judge Mary Beck Briscoe wrote in the decision.

IPAA and WEA originally sued to overturn the BLM final fracing rule on Mar. 20, 2015. Judge Scott W. Skavdahl of US District Court for Wyoming set the regulation aside more than a year later after finding the agency did not have the necessary congressional authority to impose it.

“Today’s court decision confirms what IPAA has advocated all along: Dismissing the appeal would protect independent producers from the uncertainty of whether it was necessary to comply with regulations that are certain to be revoked,” IPAA Pres. Barry Russell said. “All three judges ruled unanimously that it would be a waste of judicial resources to proceed with this case.”  
Original Post
From Argus Media:
US court scraps limits on fracking oversight.
The decision marks a major victory for environmentalists, who said that keeping the 2016 ruling intact would have stripped the government's authority from regulating fracturing.
Sierra Club staff attorney Nathan Matthews said the decision would reinstate regulations that were developed under former president Barack Obama but never came into force.
Affects Federal and tribal land. 

WTI Remained Solidly Above $50 Today -- September 21, 2017

Silly rabbit! That didn't work out either. From The WST today
Silly Rabbit! Original Trix with artificial colors is back after customers revolt using radishes and turmeric instead of Red 40 and Yellow 6 didn’t work for children and adults alike.
Active rigs:

Active Rigs573368196185

Three new permits:
  • Operators: Kraken Operating (2); Lime Rock Resources
  • Fields: Burg (Williams); Stanley (Mountrail)
  • Comments:
One producing well (DUC) reported as completed:
Four permits renewed:
  • Hess: four CA-Stangeland permits in Williams County

The Political Page, T+244 -- September 21, 2017

NFL tickets for the 49ers - Rams game, tonight's Thursday night football game:
As of Wednesday, resale tickets were being offered on StubHub for as low as $14 to see the team host the Los Angeles Rams at 7 p.m. That price is just cheaper than buying a pair of $7.50 pretzels through the Levi's Stadium app and comparable to the price of a beer and a hot dog at the the three-year-old arena. According to the team's seat licensing map, the cheapest original face value for any seat is $85.
Where did "Kaepernik" come from? Oh, that's right. San Francisco. 

From NY Daily News:The Colin Kaepernick effect, and the great regret of the San Francisco 49ers.
Why? Because the 49ers don’t have a capable quarterback on their roster. C.J. Beathard is San Francisco’s rookie backup, who has yet to take a single snap. Brian Hoyer is the 49ers starter, but in two games this season, the nine-year journeyman who has played for seven teams, has only thrown for 292 yards, with two interceptions.
When tickets to the game are going for $14, I think there's more to this than just a lousy quarterback.  But this being San Francisco, I assume if Kaepernik suited up for the game (for either team) the arena would be sold out.


I keep seeing this poll being quoted: 42% of Americans don't want tax cuts.

About 42% of Americans don't pay federal taxes and receive benefits from those who do pay taxes. These 42% assume that if taxes are cut, their benefits are cut.

This is not rocket science. Those citing the poll seem to suggest they are surprised by the poll.

Well, duh.

.... And For The 1% That Pay 50% Of Federal Taxes


September 25, 2017: in response to the original post, someone asked about charging (time and cost). This from yesterday's (Sunday) edition of the Chicago Sun-Times:
The Supercharger stations are equipped to deliver a “rapid” 72 kilowatts of power to cars; the average charging time is up to 45 minutes in urban centers. [72 kw = 180 miles based on figures later in the article; but the article did not say how rapid "rapid" was. This site suggests that 72 kilowatts takes 45 minutes to charge.]
“It lets you make a brief stop, charge your car very quickly and be on your way,” Tesla CEO Elon Musk said in a video announcement in 2013.
“Something unique about the Supercharger is that it’s not just free now, it’s free forever.”
The free charging pledge, however, was fleeting. Tesla owners who ordered cars after Jan. 1, 2017, will receive 400 kilowatts’ worth of free charges a year, which equals about 1,000 miles. After that, charging costs 15 cents per kilowatt in Illinois.  
September 23, 2017: another article, same story, from greencarreports. All the various Tesla models/options are overwhelming. The only thing that is consistent is how expensive these cars are, and how much more expensive the "real" car is that how it is being advertised. The base Model 3 may be advertised as $35,000 but it quickly escalates to $60,000 with features that most folks are going to want ... like extended range. The Model 3, being marketed as a car for the masses, is anything but.

Original Post
Tesla obsoletes its cheapest car -- The Verge, data points:
  • Tesla will stop making its Model S 75 this weekend
  • currently the least expensive Model S available, starting at $69,500
  • once the "S 75" is gone, the least expensive Tesla will be the Model S 75D (dual motors: one motor on both the front and rear axles); starts at $74,500
  • Model X also comes with dual motors
  • the only rear-wheel drive Tesla will sell will be the entry-level version of the Model 3
  • despite the heavily advertised $35,000 price tag for the Model 3, customers will more likely pay upwards of $50,000 to get the options they want
  • customers with preorders cannot even take delivery of the $35,000 base version yet
Re-posting Tesla guidance regarding production:
What is the most current Tesla guidance for Model 3 production? According to the linked SeekingAlpha article, posted July 31, 2017:
  • July, 2017: 30
  • August, 2017: 100
  • September, 2017:1,500
  • December, 2017: 20,000 
So, did Tesla meet its August guidance? No. Tesla delivered 75% of what it said it would.

Daimler: First European Company To Make EVs In US -- Making America Great -- September 21, 2017

A huge "thank you" to Don for sending me the link to this story.

This may be the biggest story of the week, but there have been so many incredible stories since November 8, 2016, it's really quite hard to keep up.

But here's another story.

Daimler (Mercedes-Benz) has announced it will compete with Tesla mano a mano. Data points at Bloomberg:
  • at its Alabama factory; Tuscaloosa, AL; yes, the Alabama factory that is in the US
  • $1 billion investment
  • 600 jobs in the region
  • plug-in vehicles AND batteries will be made at the factory
  • this will be Daimler's fifth battery plant globally
  • SUVs -- will take on Tesla's Model X
  • first Europe company to assemble plug-in autos in the US
  • Daimler in talks to expand its joint venture in China
  • Tesla still dominates US battery-electric vehicle sales
From the article:
Mercedes, which topped BMW as the top luxury auto brand in the U.S. last year, started assembling vehicles in Alabama 20 years ago. The factory has since emerged as one of the brand’s main manufacturing hubs worldwide, with some 70 percent of assembled vehicles slated for export to global markets. About 3,700 employees produce the GLE, GLE Coupe and GLS SUVs at the site, which added the the C-Class sedan for the North American market in 2014.
Daimler had at least three options where to invest this $1 billion: Germany, China, the US.

Daimler chose the US.

Daimler got the memo.

The Energy And Market Page, Part 2, T+244 -- September 21, 2017

Unemployment claims: huge, unexpected drop. The forecast was for first time claims to actually increase from 284,000 to 303,00 -- an increase of almost 20,000 first time claims. In fact, the number dropped. And it did not drop by an insignificant amount. The drop was huge. The number of first time unemployment claims dropped 23,000. If one adds the 20,000 forecast to the 23,000 decrease, the analysts were a) off in the direction of the move; and, b) off by more than 40,000 claims. 

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

Surprise! Anadarko to spend $2.5 billion on "massive" share buyback -- Reuters via Rigzone. Data points:
  • amounts to 10% of its outstanding shares at current prices
  • this was announced yesterday
  • APC: rose 2.4% yesterday
Oasis Midstream Partners begins trading today (OMP). Hess Midstream (HESM) is also trading.

Investment tip: I do not hold shares in CP or CNI and have no plans to do so. I am posting this for two reasons. The first reason is because a "talking head" on CNBC this morning recommended CP because of huge amounts of fracking sand coming from Canada. I was unaware of that; decided to check. It turns out the analyst was likely to be correct. At Athabasca Minerals check out the "Tech Report" pdf where the company discusses its frack sand initiative that began in 2014.  From the PDF, this connection with Canadian National Railway:
The Firebag Project is composed of three components; the mine site where the raw silica sand is mined, the Lynton trans-loading area, and the yet to be defined site in the Edson/Hinton site, where the ROM silica sand will be processed to produce a marketable frac sand product.
For the purposes of this report, the Edson/Hinton area will be referred to as the Edson area due to the uncertainty of the location of the processing plant at the time this report was authored. Also, in the cost analysis, the travel time of the rail cars on the Canadian National Railway Company (CN) rail line is to the town of Edson, Alberta.
The other reason is because I accumulated BNI (Burlington Northern) for years until Warren Buffett bought the company, and then I switched to another US railroad which has, all of a sudden, shown a bit of life. Again, see the disclaimer. I was more interested in the veracity of the analyst regarding Canadian fracking sand and less interested in the investment side of the story, but that was rewarding also. Both CNI and CP are trading near their 52-week high; the former was down insignificantly yesterday; the latter had a nice 1% jump yesterday.

As long as I'm rambling -- as long as Minnesota continues to block the expansion of the Enbridge crude oil pipeline and until the Keystone XL is built (if it's ever built), the Canadian railroads might be beneficiaries. 

Huge Drop In First Time Claims! The Political Page, T+244 -- September 21, 2017

Jobs: first time unemployment claims --
  • prior: 284K (a 14K drop from the previous report)
  • forecast today: 303K (range: 274K to 325K)
  • forecast today: at 304K, that would be a 20K jump
  • first time unemployment claims surged by 62,000 after Hurricane Harvey, up to 298,000, a five-year high
  • prior revised: 282K (a 16K drop from the previous report)
  • actual: 259K (a drop of 23,000)) -- huge 

The Energy And Market Page, T+244 -- September 21, 2017

Two roads diverged in a wood. I took the one less traveled by, and that has made all the difference. -- Robert Frost

Target: to add 100,000 seasonal workers this holiday season.

Walmart: will add 0 seasonal workers this holiday season. From CNN Money:
Walmart's move is a sign of the tightening labor market which has made it difficult for employers to fill open positions. There were a record number of unfilled job openings nationwide in the latest government reading of the labor market. More than 600,000 of the open positions were from retail. 
Really? A sign of the tightening labor market? Walmart took the same strategy last year: instead of hiring 100,000 seasonal workers, Walmart gave their workers additional hours, which internal polling suggested the workers preferred more money.

Labor force participation, recent, source:

Labor force participation, 10-year:

Costs: think of the costs involved in hiring 100,000 seasonal workers. Hiring process; training; government forms; OSHA compliance; pilferage; benefits (or not).

Taco Bell To Add Alcohol To Their Menu

At Daily News:
  • not at current drive-through Taco Bells
  • alcohol will be available at new Taco Bells
  • 350 new restaurants in big cities: Detroit, Pittsburgh, Nashville, New York
  • Manhattan: to get 50 new locations (currently only 6 Taco Bell locations in Manhattan) 
A good spot for seasonal workers to unwind after work.

The Light-Heavy Crude Oil Spread Is Narrowing -- RBN Energy -- September 21, 2017

Active rigs:

Active Rigs553368196185

Peak oil: for the archives. Now that we are solidly above $50 for a bbl of oil, time to re-read this May 8, 2017, interview with Art "Peak Oil" Berman: "don't get used to today's low oil prices." For the archives.

Counterpoint: From Brad McMillan, the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by Brad McMillan. Brad's summary:
I suspect that the next 10 years will be very similar to the later stages of the last industry consolidation, as this process continues. The economy and investors will see stable prices, which has largely been the case since the initial collapse. But we will also see prices that increase over time, which so far has also been the case. Oil will no longer be a free market, with the wild price cycles that entails, but a more managed one. In many respects, it will look much more like, say, the 1990s than the boom period (in oil prices) from 2003 to 2008 or the bust period from 2014 to recently.
Overall, the effects should be positive. Markets and the economy thrive on stability. While the collapse in oil prices was a tailwind for many sectors, the damage to the energy sector wiped out many of those gains. Moving forward, energy should be neither a significant headwind nor tailwind, but a solid foundation—which is what a sector this vital should be.
Lukoil: peak oil? What peak oil? Lukoil sees its production increasing over the next 8 - 10 years as new fields are brought on line. Lukoil is Russia's second-largest oil producer. Lukoil's new fields: in the Caspain and in Iraq. Meanwhile, Lukoil's VP expects OPEC to maintain cuts: "the deal with OPEC will be extended and in general it will become, if not perpetual, for sure a long-term deal, beyond 2018."

Bloomberg agrees with Lukooil's assessment: the oil glut will persist
Crude prices have rebounded to a three-month high and the world’s bloated fuel inventories are shrinking, signaling that nine months of production cuts by the alliance of the Organization of Petroleum Exporting Countries and nations including Russia are at last paying off.
Yet as U.S. shale oil continues to thrive and seasonal demand wanes, the surplus that has weighed on markets for three years looks set to come back.
US crude oil inventories: have increased significantly for each of the last three weeks. Re-balancing is back to almost a full year. Posted elsewhere.

The WTI curve: the curve is showing "some signs of shifting to backwardation. The last time this happened was in May, 2017, but it reverted back to full contango in June. Right now, the curve is not quite inthe full backwardation we had until 2014, but it's a start." -- Bloomberg.
  • contango: prices collapse; traders willing to buy cheap oil, put it in storage to sell it at a higher price later
  • backwardation: prices rise, as traders sense a imminent shortage of oil, paying more for it now so they can get necessary deliveries sooner
RBN Energy: the narrowing light-heavy crude oil spread and what it means for US refineries.

Markets: Dow and  S&P 500 hit new records yesterday. At 22,500, a rise of 500 points amounts to a trivial 2% "jump" in the Dow. Likewise, a 500-point drop is a 2% drop. So, when I see the Dow up another 10 - 20 points, it's not particularly exciting. Maybe I'm missing something.

AAPL: I see GoogleFinance has AAPL as one of the top ten movers in pre-market trading ... drum roll ... down 0.04%.

DAPL-gate: comes to an end. At The Bismarck Tribune, data points:
  • no fine
  • DAPL does not admit guilt
  • DAPL will plant three trees for every alleged tree removed (industry standard is to plant two trees for every alleged tree)
  • DAPL developer to provide manual on how to communicate better
Cars: it was interesting to hear that Ford will shut down "car manufacturing" for five manufacturing plants for a total of ten (10) weeks, but will continue to manufacture SUVs and pick-up trucks. No links. The story is probably easy to find if interested. Tells me all I need to know about availability of gasoline and diesel for the next year or so.

Natural gas optimism, worth re-posting from RBN Energy: natural as producers boost their already bold 2017 production outlook.
An analysis of mid-year 2017 guidance shows that the nine natural gas-focused exploration and production companies we’ve been tracking are still fully committed to the very aggressive exploration and development spending they outlined at the beginning of the year. These Gas-Weighted E&Ps slightly upped their total 2017 capital budgets to $8.87 billion, a whopping 59% boost from their 2016 investment — well above the 44% and 29% increases announced by the Oil-Weighted and Diversified E&P peer groups, respectively. The gas-focused producers also increased their 2017 production guidance by 1% to 1.046 billion barrels of oil equivalent (Bboe), in contrast to the mid-year reductions in 2017 output announced by the other two peer groups. Today, we continue our review of updated capital spending plans by 43 U.S.-based E&Ps, this time with a look at companies that focus on natural gas.
EQT is boosting its organic capex by 66% in 2017, but this significant spending is dwarfed by its merger-and-acquisition dealmaking. The company spent $1.7 billion in 2016 and early 2017 adding acreage in its core southwestern Pennsylvania/northern West Virginia production area before announcing the blockbuster $8.2 billion purchase of Rice Energy in June 2017. The EQT/Rice transaction, the largest corporate E&P deal in the U.S. since 2012, will increase EQT’s production by 59% and make it the largest U.S. natural gas producer. The Rice purchase significantly increases EQT’s contiguous acreage in its core areas, expanding opportunities for the longer lateral drilling that will boost the company’s organic output by 13% this year.