CEO of Major Shale Oil Company 'Has Second Thoughts' on Fracking Rush
By Sharon Kelly
On Monday, The Wall Street Journal featured a profile of Scott Sheffield, CEO of Pioneer Natural Resources, whose company is known among investors for its emphasis on drawing oil and gas from the Permian Basin in Texas using horizontal drilling and hydraulic fracturing, or fracking.
Back in 2014, Sheffield told Forbes that he expected Pioneer could produce a million barrels of oil a day from the Permian basin by 2024 – up from 45,000 barrels a day in 2011.
Now, Sheffield, who left the helm of Pioneer in 2016 and returned this February, says that those million-barrel-a-day plans are looking increasingly doubtful as the industry has struggled to prove to investors that it's capable not only of producing enormous volumes of oil and gas, but that it can do so while booking profits rather than losses.
"We lost the growth investors," Sheffield told the Journal. "Now we've got to attract a whole other set of investors."
Doubts on Shale Gas and Shale Oil
Mr. Sheffield's comments on the shale oil industry's fiscal difficulties come on the heels of a warning from the former CEO of the country's largest natural gas producer about the shale gas industry's financial distress.
Steve Schlotterbeck, former CEO of America's largest producer of natural gas, described the impact of over a decade of fracking on Marcellus shale drilling companies at a recent petrochemical industry conference.
"In a little more than a decade, most of these companies just destroyed a very large percentage of their companies' value that they had at the beginning of the shale revolution," he said, in remarks reported by DeSmog on Sunday. "Excluding capital, the big eight basin producers have destroyed on average 80 percent of the value of their companies since the beginning of the shale revolution."
Doubts about the shale drilling industry's financial prospects have simmered nearly as long as the industry has been producing oil and gas. "There is undoubtedly a vast amount of gas in the formations," The New York Times reported in 2011, citing concerns among industry insiders dating back to 2009. "The question remains how affordably it can be extracted."
In the years since, shale drillers churned out massive volumes of fossil fuels, first shale gas then shale oil, pushing American oil production up 12 million barrels a day, according to Energy Information Administration figures cited by The Journal.
At the same time, they have spent hundreds of billions of dollars more than they've earned from selling the fossil fuels they drew from the ground.
"Over the past 10 years, 40 of the largest independent oil and gas producers collectively spent roughly $200 billion more than they took in from operations, according to a Wall Street Journal analysis of data from financial-information firm FactSet," the Journal reported. "During that time, a broad index of U.S. oil-and-gas companies fell roughly 10%, while the S&P500 index nearly tripled."
Schlotterbeck, the former CEO of EQT who now serves on the board of directors for the Energy Innovation Center Institute which offers training for workers in the oil and gas, solar, and construction trades, offered his view of the end results for investors at the petrochemical industry conference on Friday.
"The fact is that every time they put the drill bit to the ground, they erode the value of the billions of dollars of previous investments they have made," he said in his presentation. "It's frankly no wonder that their equity valuations continue to fall dramatically."
Belt-Tightening Comes Amid Regulations Rollbacks
Sheffield's own company has a rocky track record when it comes to translating production into profits.
"In August 2015, Mr. Sheffield said Pioneer's wells were expected to yield 45% to 60% returns on investment at the oil prices at that time, excluding costs such as administrative expenses and taxes. The company lost $218 million in the second quarter of that year," the Journal reported.
"The company acknowledged that capital spending exceeded operating cash flow in 2015, but said it is focused on changing that in 2019 and beyond," it continued.
The industry's financial troubles have caused drillers like Devon Energy to begin layoffs.
So too, is Pioneer.
"Among those who are leaving is Mr. Sheffield's own brother, Thomas Sheffield, the company's vice president of health, safety and environment," the Journal reported in its Monday profile.
That belt-tightening comes as the Trump administration has pushed to roll back federal environmental regulations.
More than 80 regulations and rules written to protect the environment have either been rolled back on Mr. Trump's watch or are in the midst of rollbacks, according to a tracker published by The New York Times.
Eighteen of those rules applied specifically to "drilling and extraction," the Times observed, and others affect the drilling industry, like the scrapping of methane emission reporting requirements for drillers and rules aimed at curbing methane leaks on public lands.
Timothy Dove, who helmed Pioneer from 2016 until February, had predicted the company could grow its fossil fuel production at least 15% a year while cutting cost overruns.
But those projections drew pushback from company insiders, the Journal reported.
"Several times in recent years, technical staffers raised concerns to management that Pioneer was being too aggressive with how it talked up its prospects to investors and potential business partners, according to people familiar with the matter," the Journal reported. "In one of those instances, the company eventually walked back internal production forecasts for some of its wells in the Permian, according to one of the people. In other instances, Pioneer continued to use what some of the people said were overly optimistic estimates."
The following year, Pioneer spent $549 million more than it earned from selling fossil fuels, the Journal reported, adding that oil prices had climbed $10 higher than the $55 a barrel that Dove had said would allow Pioneer to raise production while matching spending and earnings. Sheffield told the Journal that Pioneer's board of directors had been surprised to learn that the company's management had gone $350 million over the board's approved $500 million 2018 budget hike.
Mr. Sheffield told the Journal he was backing away from million barrel-a-day plans for Pioneer. But he also maintained it would be technically possible to produce at that rate, economics aside.
"But my point is the rock will produce over one million barrels a day," he told the Journal.
Few observers would doubt that drillers can produce vast amounts of fossil fuels from shale, given the industry's history of rapidly increasing production.
An unsettled question remains, however — as it has since the early days of the shale rush — at what cost?
Reposted with permission from our media associate DeSmogBlog.
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It's going to be back-to-school time soon, but will children go into the classrooms?
The American Academy of Pediatrics (AAP) thinks so, but only as long as safety measures are in place.
Keeping Schools Safe<p>What will safer schools look like?</p><p>In a <a href="https://jamanetwork.com/journals/jama/fullarticle/2766822" target="_blank">JAMA article</a> published last month, <a href="https://www.jhsph.edu/faculty/directory/profile/1781/joshua-m-sharfstein" target="_blank">Dr. Joshua Sharfstein</a>, a pediatrician and professor at the Johns Hopkins Bloomberg School of Public Health, outlined suggestions — many of which are similar to AAP's.</p><p>Remote learning protocols must stay in place, especially as some schools stagger home and in-building learning. If another shutdown needs to occur, children will rely on distance learning completely, so it must be easy to switch to, he said.</p><p>He suggested giving parents a daily checklist to document their child's health. Kids should be screened quickly on arrival and be given hygiene supplies. Maintenance staff should use appropriate PPE and have regular cleaning schedules. A notification system should be in place if a case is identified, Sharfstein recommended.</p><p><a href="https://www.albany.edu/rockefeller/faculty/erika-martin" target="_blank">Erika Martin</a>, PhD, an associate professor of public administration and policy at University at Albany, said nutrition assistance and health services should be included. She called for tutoring programs with virtual options as well as technology access.</p>
Supporting Staff<p>Teachers and staff will be affected by safeguarding measures, noted <a href="https://directory.sph.umn.edu/bio/sph-a-z/rachel-widome" target="_blank">Rachel Widome</a>, PhD, an associate professor of epidemiology and community health at University of Minnesota.</p><p>"In order for all of the in-school precautions to work well, we'll be asking a lot of teachers and staff," Widome told Healthline. In addition to their usual workload, they'll now be asked to monitor mask-wearing, ensure children are keeping distance, and be aware of any symptoms.</p><p>Along with Sharfstein, Widome called for an increase in financial support. More employees will likely be required so teachers and staff members can keep up with the added demands.</p>
Should Kids Go Back?<p>While these guidelines may help get some schools to reopen, many people don't think children should go back to school over fears they could contract the disease and spread it to other vulnerable family members like grandparents, infant siblings, or their parents.</p><p>In a <a href="https://pediatrics.aappublications.org/content/early/2020/07/08/peds.2020-004879" target="_blank">Pediatrics</a> commentary, <a href="https://www.md.com/doctor/william-raszka-md" target="_blank">Dr. William V. Raszka, Jr.</a>, an infectious disease specialist at The University of Vermont Medical Center, argued that schools should open because school-aged children are far less important drivers of COVID-19 than adults.</p><p>But he says the risk and benefit is not equal among all students ages 5 to 18.</p><p>"Elementary schools are arguably higher priority for face-to-face schooling, since younger children are at lower risk for infection and transmission, and since parental supervision of younger children's distance learning may be particularly challenging," added Sorensen, who penned a <a href="https://jamanetwork.com/channels/health-forum/fullarticle/2767411" target="_blank">June article in JAMA</a> with reopening tips. "That means middle and high schools are more likely to emphasize distance learning."</p><p>Specific student populations, such as special education students and students with disabilities, would also benefit greatly from more time spent in face-to-face environments, Sorensen said.</p>
What Parents Can Do<p>Parents should ask for and receive frequent updates from schools about plans for the fall. They should also be informed about plans if and when COVID infections are identified, Sharfstein said.</p><p>"I'd like to see parents investing now, during the summer, in doing things that can slow and stop the spread of the virus in their communities," Widome said.</p><p>"Now is a good time for kids to practice wearing masks and get used to them as they may be wearing them for longer stretches if school starts up in person," Widome suggested.</p><p>She recommends parents try different mask designs and materials to see what children are more comfortable wearing.</p><p>"If you are using cloth face coverings, it's good to have extras on hand," Widome added.</p><p>Parents should model healthy behavior at home and while out in public — another thing that could affect how well children adapt to reopening practices, Sorensen said.</p><p>"Children may want to know more about face coverings," added <a href="https://www.linkedin.com/in/leescott/" target="_blank">Lee Scott</a>, chairwoman of the Educational Advisory Board at <a href="https://www.goddardschool.com/" target="_blank">The Goddard School</a>. "Dramatic play, such as creating or wearing a face covering, may help some children adjust to this concept." Schools can also show children photos of what faculty members look like in their masks so the students are familiar with that appearance.</p><p>Johns Hopkins University recently released its eSchool+ Initiative, a slew of resources surrounding education during the pandemic. These include a <a href="https://equityschoolplus.jhu.edu/reopening-checklist/" target="_blank">checklist for administrators</a>, report on <a href="https://equityschoolplus.jhu.edu/ethics-of-reopening/" target="_blank">ethical considerations</a>, and a tracker of <a href="https://equityschoolplus.jhu.edu/reopening-policy-tracker/" target="_blank">state and local reopening plans</a>.</p>
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<div id="fea63" class="rm-shortcode" data-rm-shortcode-id="9a6f211c2bc5aedd34837944cb8eeedf"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1281000111481294849" data-partner="rebelmouse"><div style="margin:1em 0">Water in Illinois is overwhelmingly public. Why is Tammy Duckworth sponsoring a bill that aims to change that? https://t.co/1V36Kkd99s</div> — The American Prospect (@The American Prospect)<a href="https://twitter.com/TheProspect/statuses/1281000111481294849">1594249201.0</a></blockquote></div>
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