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America’s Natural Gas Alliance (ANGA) hosted a reception at the Museum of Fine Arts in Houston on Jan. 23 and one of the pieces of “art” on display was a brand new, LNG-powered Peterbilt truck.

It was an impressive display of the latest technology for LNG-powered vehicles.  The truck was fitted with 120-gallon tanks that give the vehicle a range of about 600 miles.  The engine includes Westport Innovations’ high-pressure, direct-injection (HPDI) fuel injection technology.

ANGA was using the occasion to honor Texas State Sen. Tommy Williams for his landmark natural gas vehicle legislation, passed by the 2011 Texas Legislature, that will pave the way for wider-scale deployment of lower cost, cleaner fuel vehicles across Texas.

ANGA’s Texas State Committee presented Williams with the Blue Flame Award for his work with local and state elected officials to highlight the benefits of Senate Bill 20, his legislation that created the Texas Clean Transportation Triangle, which is a sustainable network of natural gas refueling stations connecting Houston, San Antonio, Austin and Dallas/Fort Worth along I-10, I-35, and I-45.

That would be the second major LNG transportation triangle in the country.  The first network is from San Francisco to Los Angeles to Salt Lake City.

As these networks begin to expand, the long-haul trucking industry is in for some big changes in fuels and delivery systems.  Clean Energy, T. Boone Pickens’ company, completed its latest LNG fueling station in Las Vegas near the UPS Depot.  This is another link in the chain of stations from Los Angeles to Salt Lake City.

President Barack Obama used the occasion, speaking at the UPS Depot, to promote gas-powered trucking. Obama proposed several federal initiatives including getting more natural gas vehicles on the road, offering new tax incentives to help companies buy more clean trucks, working with the private sector to help develop natural gas fueling stations and launching a competition to encourage new breakthroughs for natural gas vehicles, according to Clean Energy.

Clean Energy committed in 2011 to support development of “America’s Natural Gas Highway” from the West Coast to the East Coast and from the Canadian border to the Mexican border by building the backbone network of 150 fueling stations.  About 70 LNG stations are expected to be open in 33 states by the end of 2012 and the balance in 2013.

Having covered the LNG-powered transportation business for 11 years, I can say this effort has been a very long time in coming.  Development of LNG/CNG fuel stations was very sporadic and widely scattered across the country.

Now there is an even greater push for long-haul trucking to begin using LNG as a fuel.  Virtually every major trucking company has studied LNG for fuel, but the infrastructure was lacking.  Now, with a surplus of shale gas production, LNG-powered trucking is getting a huge boost in switching from diesel to natural gas.  It is excellent to see more widespread use of domestic natural gas resources in backing out petroleum imports.

And, it is not only LNG-powered trucks we’re beginning to see, but also ships.  According to a Jan. 6 announcement from the American Bureau of Shipping (ABS), offshore supply vessels (OSVs) in the U.S. Gulf Coast region are seen as likely targets for switching to LNG for propulsion fuel — at least partly replacing marine gasoil (MGO) or heavy fuel oil (HFO).

ABS recently classified two new LNG/diesel dual-fueled OSVs under construction in Houston for Harvey Gulf International Marine.

“This is likely to be the beginning of a trend for OSVs in the region.  The availability of LNG and the implementation of the U.S. [marine vessel] Emission Control Area (ECA) starting in August 2012 make it a natural choice for fuel both from the commercial and environmental point-of-view,” explained ABS chief engineer Kirsi Tikka.

The new Harvey LNG vessels “will be among the first to be classed under the ABS Guide for Propulsion and Auxiliary Systems for Gas Fueled Ships released in May 2011,” according to ABS.

Shane Guidry, Harvey Gulf International Marine chairman, added that “these will be the first dual-fueled LNG-powered vessels under the U.S. flag.”

Of course, the effort to power offshore vessels with LNG isn’t new.  In 1987, the University of Alabama (UA) placed an LNG-powered, 70-ft. shrimp boat into service in the Gulf of Mexico and operated it until 1990.  The LNG was used to freeze the shrimp as well as power the vessel, saving $10,000 per year in ice purchases, according to UA.

UA also completed preliminary designs and studies for CNG- or LNG-powered 130-ft. crewboats for Exxon in Santa Barbara, CA, in 1992 and for Amoco in New Orleans in 1994. The U.S. Coast Guard approved the Exxon preliminary design.

Statoil has been using LNG-powered service vessels in the North Sea for several years.

There is a wealth of information on LNG-fueled transportation available today.  We should use more of it and open up new domestic markets for natural gas.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

In the Monday Morning Report for Jan. 23 from the California Independent Producers Association and California Natural Gas Producers Association, the lead article was about Democrats from Ohio, California, Rhode Island and Michigan co-sponsoring the Gas Price Spike Act (House Resolution 3784).

Yes, our Congress is once again after a windfall profits tax.  This is the latest effort from people who wouldn’t know a balanced budget if it bit them and would find ways to fritter away any income from such legislation.

The bill would apply a windfall tax of 50% to 100% from profits on sales of oil and gas when those profits are between 100% and 102% of a “reasonable profit.”  The tax would escalate to 75% when profits are between 102% and 105% of reasonable.  And above 105% of reasonable, kiss it all good bye.

Dennis Kucinich (D-OH) is leading the charge to control oil company profits.  John Conyers Jr. (D-MI), Bob Filner (D-CA), Marcia Fudge (D-OH), Jim Langevin (D-RI) and Lynn Woolsey (D-CA) are also behind the effort.

Here is one of the major industries creating jobs in the U.S. and Congressional Democrats are out to hamstring that industry.

According to Kucinich, the tax revenues would be used to fund alternative transportation programs when oil and gas prices spike.  What exactly would alternative transportation be?  The money would be used to fund a tax credit to purchase a fuel-efficient cars and a grant program for mass transit programs.

The bill would set up a “Reasonable Profits Board” to determine what would be a “reasonable profit.”  Of course, the legislation provides no specific guidelines for determining that magical number.

The board would consist of three members nominated by the president.  Each member would serve a three-year term.  There would be no nominees from Congress.  Now, that’s a relief.

No industry representatives or anyone who has a financial interest in the oil and gas industry would be allowed to determine reasonable profits for that industry.

The Congressmen don’t know how big the grants would be or how much money might be collected from the tax.  You can bet they will be licking their chops on how to get their hands on that money to spend on their pet projects.  The original intent will be lost.

It makes you wonder if they actually do understand what that kind of legislation would do to oil and gas prices.  Without reinvestment in exploration and production, there will be less domestic oil and gas, and those oil and gas price spikes will be even worse.

Given the investment in the shale plays, natural gas price spikes have been few and far between recently.

In listening to President Barack Obama’s State of the Union message on Jan. 24, there is greater acceptance in the current administration about the contribution the oil and gas industry is to job creation and economic growth.

Lower natural gas prices, for example, will certainly boost his goal for bringing manufacturing back to the U.S.

Could the oil companies pay more taxes?  That is probable.  But a windfall profits tax is not the way to do it.  The oil companies wouldn’t be able to make the investment to tap into that 75% of federal offshore acreage the president said his administration was going to open up.

Contact the author, Scott Weeden, at sweeden@estreet.com.

An article on the Forbes website on Jan. 18 noted that Judge Daniel Hovland of the U.S. District Court in North Dakota dismissed criminal charges against three oil companies operating in the Bakken shale play for killing six birds in slush pits.

Brigham Oil & Gas, Newfield Production and Continental Resources were the target of the charges brought by the U.S. Dept. of Justice on behalf of the U.S. Fish & Wildlife Service.

It is a good example of the law of unintended consequences, which seems to be engaged frequently when government agencies go after one aspect of an issue without looking at the broader picture.  It sometimes looks as though these agencies are trying to make new laws rather than enforce the ones on the books.

Hovland’s ruling in this particular case provides an example of how far reaching some of these agencies’ decisions can go awry.

The suit was based on the Migratory Bird Act of 1918.  The case was based on four mallards, one northern pintail, one red-necked duck and a say’s phoebe that were found in the slush pits.

As the judge pointed out, the Migratory Bird Act is too vague to be the basis for criminal charges.  As Forbes noted, he doubted that Congress meant to criminalize the deaths of birds by drilling operations.

The act was originally written to address poaching and out-of-season “taking” or “killing” migratory birds, not the accidental killing of those birds.

If the accidental killing of birds in slush pits is criminal, then there are a lot of law-breakers in the United States.  Cutting of trees and brush would be prohibited since that could kill birds.  Anyone driving a car that killed a bird would be guilty.  Cat owners, especially, would be liable for all those dead birds.  And, those nasty wind energy farms would have to be shut down immediately.

Forbes quoted the same U.S. Fish & Wildlife Service on just how many birds are killed by human activity every year.  About 100 million birds are killed by crashing into windows.  Up to 174 million are done in by power lines.  Another 60 million fall victim to cars.  Those wind turbines claim 33,000 birds per year.  And cats?  Those felines put an end to millions of birds each year.

The article added that 72 million birds die each year due to pesticides while oil field slush pits kill about 2.0 million.

Yet, that same government agency went after criminal charges against three oil companies for six birds.  It makes you wonder what the priorities are for those folks.

For the oil companies, it was very costly and time-consuming to have to defend the case.

Did the Justice Department really consider all the implications of this suit?  Was this a wise use of the department’s resources?  How many millions of lawsuits would have been filed if the decision was upheld?  And would the federal government put someone in jail for the accidental death of a few birds?

It boggles the mind.  Thankfully, the judge did look beyond the immediate implications of the lawsuit.

There are examples of the law of unintended consequences from nearly every government agency — the Environmental Protection Agency, Minerals Management Service (BOEMRE) and the Internal Revenue Service come to mind most quickly.

Given the need for regulation and enforcement, how can our government agencies be held accountable for addressing the most pressing needs?  When you hear about these situations, it is almost like watching Don Quixote jousting with windmills.  There are those bird-killing windmills again.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

In the Nov. 27, 2012, issue of The Houston Chronicle, there was an article about the Clear Creek nature preserve and ETC NGL Transport LLC.  It seems the NGL company wanted to build a pipeline across the 144-acre preserve.

The Bayou Land Conservancy manages the preserve for a trust that owns it.  The conservancy said that the preserve was the only “protected riparian habitat along Clear Creek,” according to the newspaper.

The preserve is about 20 miles south of Houston.  If you know anything about Houston, it is that open land is scarce.  And, property in its “natural and scenic condition” is even rarer.

The pipeline company threatened to use eminent domain to acquire the right of way.  The land owners were fighting that in court.

The Justice Pipeline will run 129 miles from Jackson County, TX, to Mont Belvieu.  The company was seeking a 115-ft-wide easement through the preserve.

The Clear Creek preserve was established by a federal judge to offset the environmental impact from two nearby industrial plants that were shut down.  The court order wanted the preserve kept in perpetuity.

The property already had a dozen pipelines running through it.  These pipelines were built before the court order was issued.  What’s one more pipeline?

In an article in the Jan. 5, 2012, issue of The Houston Chronicle, the pipeline company had agreed to route the pipeline around the preserve.  The pipeline will now go through a nearby golf course.  That is one way to come to a settlement that isn’t “par for the course.”

The preserve won in that no further damage from development would occur.  The water oak, cedar elm and loblolly pine trees won’t be cut down.  There will be a preserve in the middle of development for people to enjoy.

The company was the winner because it addressed the concerns of the landowner and rerouted the pipeline.  It can rightfully claim that it made a difference in providing a place for people to enjoy.  And, the pipeline will still be able to deliver NGLs with minimum impact in laying the pipe.

That is exactly the kind of public relations that the oil and gas industry needs.  When the industry can continue to show that it works with people rather than running roughshod over them, it makes it easier to build the infrastructure the country needs to supply energy to meet demand.

These land and wetlands conservancies along the Gulf Coast provide opportunities to protect natural habitat for waterfowl and wild animals.  It’s a much better picture to leave people with than crude oil spewing from a well in the Gulf of Mexico.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

A story in USA Today caught my attention this week because of its topic — Congress did not renew the three-decade-old subsidy for ethanol, saving an estimated $6 billion a year.  The subsidy expired on Dec. 31, 2011.

There were very few ripples from the ethanol industry over the demise of the 45-cent-per-gallon subsidy.  As the Renewable Fuels Association noted, “. . . the tax credit that long served as the boogeyman for anti-ethanol interests has expired.”

The association stated, “Without protest, U.S. ethanol producers allowed the $0.45-per-gallon tax incentive for ethanol blending to expire. The offsetting secondary tariff on imported ethanol will also expire. The domestic ethanol industry has evolved, policy has progressed, and the market has changed making now the right time for the incentive to expire.

“Ethanol producers never intended for the tax incentive to be permanent. Like all incentives, it was put in place to help build an industry and when successful, it should sunset. Unfortunately, the same mentality does not extend to century-old tax subsidies supporting 20th century petroleum technologies,” the association added.

Ethanol makes up 10% of the U.S. gasoline supply, which means that much foreign oil is replaced.  That’s a definite benefit to the U.S. balance of payments and deficit.

If you were buying E-10 fuel, then gasoline would cost an additional 4.5 cents per gallon without the subsidy.  It remains to be seen whether or not gas prices will go up.

It likely won’t have much impact in Oklahoma, for example.  For quite some time, the service stations and convenience stores in the state have advertised 100% gasoline with no ethanol on the gasoline pumps.
In states with air emissions problems, there will still be demand for ethanol.  After all, ethanol got a big boost when methyl tertiary butyl ether (MTBE) had to be replaced as an oxygenate in gasoline.  It is still required as an oxygenate.

After 30 years, it is time to see if ethanol can stand on its own merits as a fuel.  If an industry is not viable without subsidies, then it will continue to be a drain on government coffers.

And, there are other consequences to fuel subsidies — just ask Nigeria, India or Indonesia, for examples.  Each time the government attempted to allow fuel prices to increase to market rates, riots ensue.

Now the ethanol industry gets to stand on its own two feet and compete with — or cooperate with — the refining industry in meeting fuel standards.  It’s a game worth playing.

Speaking of level playing fields, have you ever wondered why the market for LNG-powered trucks has been slow to develop?  You might ask the Internal Revenue Service (IRS).

In August 1995, the IRS ruled that LNG (liquefied natural gas) is a liquid fuel and would be taxed as a “special motor fuel.”  Even though LNG goes into the engine cylinders as a gas, the IRS said it was a liquid.

Non-liquid fuels that substitute for gasoline and diesel, such as compressed natural gas, were taxed at 5.9 cents per gallon, while liquid substitutes were taxed at 18.4 cents per gallon.

The IRS concluded that since the Omnibus Budget Reconciliation Act of 1993 made no specific provision on the LNG tax rate, LNG would be taxed as a liquid.

I never heard if this particular ruling was ever changed, but I doubt it.  There was an opportunity to provide impetus to boost use of LNG in long-haul trucks, and the IRS used its interpretation of the law to squash it.

Now, 16 years later, there is all of this excitement for using LNG in long-haul trucks.  Maybe it’s a good time to revisit the IRS tax ruling and support something that would lower dependence on foreign oil, boost domestic natural gas demand and lower fuel costs for truckers.

But, that would probably make too much sense for the government.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

This will be one of those years when the oil and gas industry will be able to paraphrase Charles Dickens’ “A Tale of Two Cities.”  Call it “A Tale of Two Industries.”  The book would start with: “It was the best of times.  It was the worst of times.”

Some of the industry’s greatest successes in 2011 have been counterbalanced by some of its biggest challenges.  From the eastern Mediterranean Sea to North Africa to the South China Sea to the Gulf of Mexico, politics and petroleum have changed the face of global power.  Some of the biggest challenges are waiting in the future.

The best of times in the eastern Mediterranean Sea was topped off at the end of the year by Noble Energy’s announcement of an estimated 7.0 trillion cubic feet (Tcf) of natural gas reserves offshore Cyprus.  The company noted that fields in the Levant Basin have tapped an estimated 33 Tcf of reserves.

The worst of times comes from the politics in the region.  Turkey is rattling sabers around Cyprus as it watches the exploration success on the Greek side of the island.  And, the conflicts around Israel are well known.  Terrorists have blown up the gas pipeline from Egypt to Jordan via Israel at least 10 times this year.

And, that brings the industry to North Africa.  Political upheavals in Egypt, Tunisia and Libya have altered the playing field for the industry in the region.  Although Libya continued to ramp up the production that was curtailed during the overthrow of the former regime, no one knows exactly how the oil and gas industry will change with the new regime.  The same could be said for Egypt.

In the Middle East, Iran is feeling its isolation and the impact of economic sanctions.  The Iranian government is ending the year by threatening to shut down oil and LNG shipments through the Strait of Hormuz.  The Iranian navy was conducting exercises in the Persian/Arabian Gulf to flex its muscles.  The politics of oil could get very ugly in the Middle East in 2012.

The confrontation over Iran’s development of nuclear weapons is heating up substantially.  The United Arab Emirates are building an oil pipeline through Oman to bypass the Strait of Hormuz because of the threat of closure.  The stage is set for more widespread military conflict than just Kuwait and Iraq.

In the South China Sea, China and Vietnam are butting heads over which country owns what part of the seabed.  This is brought on by successful exploration efforts by Vietnam.  This is yet another flashpoint that centers around an oil industry success.

And, now we are experiencing the best of times in North America.  The shale plays have made the U.S. the largest natural gas producer in the world again.  That same shale development is likely to make oil production grow dramatically during 2012.

However, the worst of times come along with that success.  The fallout from the Macondo disaster in the Gulf of Mexico continues to temper offshore exploration and development.  The silver lining in this accident is the increased emphasis on safe operations offshore.  That was a definite wake-up call for the industry.

The controversy over hydraulic fracturing falls under the worst-of-times category.  Just when the U.S. is reversing the decline in oil and natural gas production, the question of whether or not drilling and fracturing operations contaminate groundwater supplies could derail the current boom in the industry.

That same problem with contaminating aquifers has created a major political dilemma for both parties over the approval of the Keystone XL Pipeline that would carry crude oil from Alberta to Houston.

Both of these issues come down to rhetoric over reality.  Of course, in today’s society with the Internet and social media, rhetoric is much more widely dispersed, more quickly to the detriment of reality.  And, at the same time, that technology can be used to topple governments.

In the end, foreign conflicts may trump the fears over hydraulic fracturing and Canadian syncrude.  We hope that cooler heads prevail and that is not the case.  We look for equitable solutions that will satisfy both sides of the issues.

But, 2012 will still be a very lively year in the oil and gas industry.  We wish you the best of times.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

That’s what it will cost Chevron if Brazilian federal prosecutors in Campos, Rio de Janeiro state, are successful in a $10.6 billion lawsuit claiming environmental and social damages over a 3,000-barrel oil spill.  The lawsuit is also asking for the suspension of operations offshore Brazil by Chevron and Transocean.

Of course, such an action would have much wider impact than that single well.  Ten of the 61 rigs operating in Brazilian waters are owned by Transocean.  Nearly one-sixth of the offshore rigs would be put out of service, hampering operations severely.

Since the Macondo disaster in the Gulf of Mexico, any oil or gas leak is front-page news.  Taking into account the $40 billion that BP has booked against that accident, the cost of the Macondo spill is a little over $8,100 per barrel.

Those aren’t the only spills making headlines.  ConocoPhillips had to shut in the Penglai 19-3 oil field in Bohai Bay offshore China, which was producing 40,000 barrels per day (b/d).  The oil company said it spilled 700 barrels of oil and 2,500 barrels of drilling mud.  The government said it spilled more than that.  The media was calling for criminal charges in the case.

The local companies aren’t immune to spills either. China National Offshore Oil Corp. Ltd. (CNOOC) reported a leak in a subsea gas pipeline in the South China Sea.  Two offshore platforms were shut in while the company worked on repairing the leak.  The lost production could lead to gas shortages in Guangdong Province.

On Dec. 18, Shell halted drilling operations on its Appomattox field in the Gulf of Mexico after it reported that 319 barrels of drilling mud leaked from a booster line connected to the well.  That leak involved another one of Transocean’s rigs, the Deepwater Nautilus.  Shell temporarily abandoned the well while work on the rig to repair the problem is being done.  That could take several weeks, costing millions of dollars.  The rig won’t return to the well until Shell and regulators are assured the repairs are complete and the rig can operate safely.

Shell’s biggest oil-spill headache, though, is offshore and onshore Nigeria.  A 40,000-bbl spill occurred on Dec. 20 while transferring oil to a tanker on the Bonga field offshore.  The field’s production capacity is around 200,000 b/d, which is shut in while the spill is being cleaned up.

In the Niger Delta, though, is where the biggest oil spills have occurred.  The majority of the oil spills in that region occur when Nigerians attempt to steal oil from the pipelines, leading to major ruptures.  Shell’s not the only company that has faced that problem.  A United Nations agency estimated that it would take 30 years to clean up the Niger Delta, which is a major environmental problem

But, the biggest oil spills of all belong to Russia.  Although, these aren’t major oil spills, the accumulative effect of oil leaks in Russia’s aging oil and gas infrastructure is massive.  A recent article describing the leaks estimated that the equivalent of the Macondo spill happens every two months in Russia.  That is a lot of oil.  Pictures of oil-covered ponds in the newspapers focused worldwide attention to the environmental damage.

Although Mother Nature has amazingly recuperative powers, oil leaks of this magnitude easily overwhelm the ecology in the areas where the spills occur.  The industry has to do a better job of stopping and cleaning up those spills.

Prior to the Macondo accident, the biggest U.S. oil spill was the blowout of the Wild Mary Sudik on March 26, 1930, in Oklahoma City.  An estimated 800,000 bbls of oil sprayed over central Oklahoma during an 11-day period.  You probably won’t find any trace of the blowout these days.  And, you didn’t hear anything about the well during the Macondo coverage.

However, in today’s world, it is not the battle in the judicial courts that must be won, but the battle in the court of public opinion.  The industry has a long way to go to achieve that.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

The first offshore lease sale in federal waters since the Macondo oil spill was held in New Orleans on Dec. 14.  It was a dog-and-pony show for the Department of the Interior with Sec. Ken Salazar in attendance to convince the oil industry how much the Democratic administration is doing for the business.

The night before, Republicans pushed legislation through the House of Representatives that would require the construction of the Keystone XL pipeline from Canada to Texas.  The only trouble is that the pipeline construction was tied to Social Security payroll tax cuts that would affect some 160 million Americans.

At the press conference announcing passage of the legislation, Speaker of the House John Boehner (R-OH) stood in front of a countdown clock that read “If Congress doesn’t act, middle-class taxes increase in 18 days, four hours, 52 minutes and 39 seconds.”  Congress had been crossed out so the sign read “If the Senate doesn’t act.”

Of course, Republicans are well aware of President Barack Obama’s promise to veto any bill that includes forcing the pipeline construction.  It is unlikely the legislation will pass the Senate anyway.

What do these two events that happened this week have in common?  These are both examples of the political posturing that occurs in place of a national energy policy.

In the absence of a national energy policy, the oil industry remains a lightning rod for what’s wrong with profit-making companies making “obscene” profits.

However, the oil industry also represents what’s right with profit-making companies — investing in America’s energy future, increasing the number of U.S. jobs, providing the energy that keeps lights on and houses warm and keeping our mobile society moving.

Yet administration after administration — whether it is Democratic or Republican — has seen every effort to create a workable energy policy fall by the wayside in the face of all the political posturing.

There is no clear path to follow regardless of the energy source.  Burning coal increases emissions, but over half of the country’s baseload power generation is with coal.  Crude oil is the basis of the transportation industry, including cars, trucks, trains and airplanes.  Yet, oil spills are blamed for ruining the environment.  Natural gas is the cleanest-burning fossil fuel, but an aging pipeline infrastructure is leading to headline-grabbing explosions.  Nuclear energy provides the cheapest electricity except for hydroelectric power.  But, nuclear power comes with a waste fuel problem that lasts for millennia.

And every time a new administration comes in, the energy industry is buffeted by all of the posturing that replaces a national energy policy.

The need for an energy policy became apparent after the oil embargo in 1973.  In 1974, the Federal Energy Administration (FEA) was formed and John Sawhill was named head of the agency during Republican Richard Nixon’s administration.  At the time, I was a reporter on The Daily Oklahoman in Oklahoma City.  I went along with Republican Sen. Henry Bellmon, who invited Sawhill to take a tour of the oilfields in western Oklahoma.  The head of the FEA had never seen an operating drilling rig or oilwell before that trip.

In the mid-1970s, the United States was running out of natural gas.  Perhaps you might have heard that before.  The Energy Supply and Environmental Coordination Act of 1974 allowed the federal government to prohibit electric utilities from burning natural gas or petroleum.  The ban on burning natural gas for power generation was extended during Jimmy Carter’s Democratic administration.  The price of gas was so low that most oil and gas companies weren’t looking for gas.  Surprisingly, if you don’t look for it, you won’t find it.

By the way, the Strategic Petroleum Reserve was set up in 1975 in case there was another oil embargo.

What has been missing in all of the laws enacted since that time is any kind of sound, sensible energy policy to guide development.  However, the political posturing and grandstanding around energy has taken on a life of its own.

Of course in today’s politics, you have to be either ultra-liberal or ultra-conservative — none of this middle-of-the-road stuff that would result from compromise.

It would take a president and a Congress that weren’t afraid of losing the next election to be able to hammer out a national energy policy that addresses all of the issues from what type of energy to produce to how the environment is impacted to the cost of energy.

Who wants to step up to the plate and hit that home run?

There was a short item from the Mohave Daily News on the further end of an era in the coal business.  Mohave County, AZ, supervisors voted to approve an agreement to remove a coal-slurry pipeline that runs east to west across the county through Kingman, AZ, to Bullhead City.

The Mohave County Airport Authority wants to build a new fire station at the Laughlin/Bullhead International Airport.  A section of the pipeline runs under the runway and taxiway.  The coal slurry once fueled the 1,580-MW Mohave Generating Station in Laughlin, NV, which was shut down on Dec. 31, 2005.

Coal slurry at one point in time was going to be the answer to moving large volumes of coal without needing coal trains.

This coal-slurry pipeline was 273 miles long, running from the Black Mesa Mine in northeastern Arizona to Laughlin.  It operated from 1969 until 2005.

Coal slurry was going to be the next great source of energy.  But, like today’s hydraulic fracturing requirements, water issues led to its demise.  The slurry was 50% coal and 50% water.  It took a lot of water to move the coal.

Now, the pipe is being removed.  There might still be some shorter coal-slurry pipelines in operation in the U.S. and other countries.  But the hype around coal slurry has faded.  The problems with the lack of water and the emissions from burning coal have ended major use of that technology.

At the opposite end of the energy spectrum is the exploration that is going on offshore Greenland.  That work is just beginning.  There have only been 14 wells drilled offshore Greenland and no commercial discoveries have been made.

Cairn Energy has been at the forefront of these first exploration efforts offshore Greenland and have borne the brunt of the comments about the drilling program and the protests against the drilling from Greenpeace.

It was interesting to read the various responses to the drilling program.  One major news agency called the program a major failure.  Greenpeace was crowing over the dry holes that were drilled.

But, frontier areas are funny.  If you watch how areas are developed, there is almost always a very long period with limited exploration success.  The Falklands Islands are an example of this.  Only fairly recently have the companies in that region begun to have exploration success.

If you remember some of the first Arctic exploration, then the Mukluk well offshore Alaska stands out as the most expensive wildcat ever drilled at that time.  Another famous duster was the first well drilled in the Destin Dome offshore Florida.

Although the drilling efforts could be considered failures, those wells taught the oil companies how to find oil and gas.  Every frontier region is different and you don’t always find the best way to uncover resources in the first well you drill.

Today, with the advent of 3D seismic and other technological advances, the industry can find prospects with more certainty.

It is always funny to read articles by folks that are not familiar with the industry.  Just from the seismic, they can tell you exactly how much oil and gas will be found.  However, you don’t know what is in the formation until you start turning to the right.

What worked in the Gulf of Mexico didn’t work in the North Sea.  It would be good for all those naysayers to remember that the industry drilled 35 wells in the central North Sea before it learned how to find oil and gas.

Greenland is only getting started.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.

Every once in awhile, a story comes by that adds a light touch to the natural gas business.  Since Cheniere Energy is working hard to generate income, we have another suggestion for adding to their bottomline — the Sabine Pass Indoor Skiing Facility.

Imagine being able to snow ski in south Louisiana.  Does that sound unlikely?  Architects are currently working with a Dutch company to build an indoor skiing facility in Barcelona, Spain.

And, what do you think would be the key to making snow?  That would be cold energy from liquefied natural gas (LNG).

The idea of bringing snow skiing to warmer climes already has been realized at Ski Dubai, which is operated by Majid Al Futtaim Properties, in a very hot part of the world.

Snow World, the Dutch company, operates two indoor skiing facilities in The Netherlands.  About three years ago, it began looking for a site in Barcelona.

B01 Arquitectes, Barcelona, believes in eco-friendly projects.  The firm contacted Snow World and suggested a carbon-neutral facility.  After all, Barcelona does have an LNG import terminal where lots of cold energy is released each time a shipment of LNG is regasified.

The architecture company invited the Dutch firm to build the facility as part of a harbor project that is also included in an effort by Barcelona to turn the city into a green-power showcase.  One facility in the city already burns plant trimmings and other natural wastes from the city’s parks to generate power.

Now, the architects want to tap into the wasted cold energy of LNG.  The skiing facility would cost about $55 million.  Construction could begin as soon as 2015, or sooner if Ecoenergies Barcelona Sud and Dalkia can sign up enough cold-energy customers.

The Japanese have been using cold energy from LNG for years to provide refrigeration for the fish processing industry as well as for other applications.

Currently, the Barcelona LNG terminal uses seawater for heating up the LNG with the cold water returned to the Mediterranean Sea.  Ecoenergies instead would use another fluid similar to antifreeze for heat transfer.  The fluid would be piped to a nearby facility where the cold energy could be stored as ice for use by any customers needing air-conditioning or for other types of industrial processes.

The cold energy could also run snow-making equipment for the indoor facility.  And, the promoters have set their sights on the 2022 Winter Olympics.  Barcelona is bidding to host those Olympics.  The LNG could supply enough cold energy for a skating rink for the figure skating or ice hockey.  You might as well set your sights high if you’re in the LNG business.

That brings us back to south Louisiana.  Snow skiing on the banks of the bayou has a certain ring to it.  So, for a mere $55 million, Cheniere could turn its LNG facilities into a southern ski mecca.

I know that Charif Souki, Cheniere’s chairman and chief executive officer, who has a good sense of humor by the way, would appreciate this latest suggestion for boosting the LNG business in the U.S.  And, I would hope I get a season’s pass for sending along the idea.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.