Spot bids to blame for high electricity bills, AARP says

By ELIZABETH SOUDER - The Dallas Morning News - Thursday, May 7, 2009



AARP says it's found the real reason that Texas electricity prices are so high.

A study, released Tuesday and funded by AARP, concludes that Texas could cut consumer electricity prices by $956 million a year, or $52 annually for the average household, by making the wholesale power market more transparent.

The Electric Reliability Council of Texas, which operates the Texas power grid, waits 60 days to disclose information about some types of wholesale electricity bids. That gives power companies time to operate in secret and potentially manipulate prices, according to the report.

"Because of the lack of transparency, all [observers] know is that the prices are doing something odd. They don't actually know what's happening in the market that's causing the prices to be high," said Robert McCullough, head of McCullough Research and author of the report.

The report calls on state lawmakers to pass legislation filed by Sen. Rodney Ellis, D-Houston, and Rep. Todd Smith, R-Euless, to require that all spot market bids be disclosed within two days. The bills remain in committees in the Texas House and Senate.

The Public Utility Commission, which oversees ERCOT, addressed the transparency issue four years ago by requiring the grid operator to disclose in 48 hours information about the bids that set the market price. In the Texas market, the highest electricity bid that ERCOT accepts at any given moment sets the price for all generators – even those generators that turned in lower bids.

ERCOT must disclose information about all the other bids in 60 days.

Prior to the new rule, ERCOT took six months to disclose bid information.

"I think it works well. I think wholesale prices are down," said PUC Chairman Barry Smitherman. "I think firms, many firms, are reluctant to offer at high prices because they are afraid of the publicity associated with that. That kind of sunshine was exactly what we intended."

Waiting 60 days to reveal certain bids was part of a compromise to prevent a lawsuit. Constellation Energy said a 48-hour transparency rule would require wholesalers to reveal sensitive information and destroy their business.

TXU Wholesale, now a unit of Energy Future Holdings called Luminant, argued at the time that disclosing bid information could even help competitors raise market prices, not lower them.

A small fraction of power trades over the spot market. Most retail electricity companies buy power directly from wholesalers.

But the wholesale market tends to influence negotiation of those one-on-one deals, the report states. Ultimately, the wholesale trades affect all consumers.

The report also states a common complaint about deregulation among consumer advocates. In a regulated environment, the PUC sets consumer rates based on utility costs plus profit margin.

"Deregulation has broken the long-standing bond between what it actually costs to generate electricity and what consumers ultimately pay," the report states.

Commodity markets tend to set prices based on supply and demand, rather than the cost to provide the commodity.
Read more in the Dallas Morning News

Southlake gas drilling debate: Did city drag its feet or show needed caution?

By AMAN BATHEJA - Fort Worth Star Telegram - May 3, 2009
Gas drilling screeched to a halt in Southlake months ago, but it’s emerged as an issue in the mayoral race all the same.

Mayor Pro Tem John Terrell is vying with former Mayor Rick Stacy to be the city’s new leader.

Stacy argues that Southlake has been run ineffectually since he stepped down in 2003. As one example, he has repeatedly said the city missed out on a multimillion-dollar payday by not leasing its mineral rights before the natural gas market collapsed.

"It didn’t take 18 months to write the U.S. Constitution. Why would it take 18 months to write the ordinance?" Stacy said. "To miss that window of opportunity for the taxpayers, that cost us probably $12 [million] or $13 million."

The city spent well over a year holding public meetings on drilling before finally adopting a revised drilling ordinance last May. Before that, Southlake allowed drilling only in industrial areas. By last fall, the decline in natural gas prices had prompted most drilling companies to stop signing new leases.
Read more in the Fort Worth Star Telegram
On his campaign Web site, Terrell describes himself as "a prime architect" of the new ordinance. He said the city needed to make sure that residents had time to have their say. The city needed to have the revisions in place before leasing its minerals rights to ensure that a drilling company followed the stricter rules. The city will lease its mineral rights when natural gas prices rebound, he said.

"There’s always a way to spin any story," Terrell said. "To me, our safety and our property values were far more important than the city retaining and extracting our minerals early."

1,000-foot setback

City Attorney Allen Taylor echoed Terrell’s argument. He noted that a drilling company that signed a contract before the new ordinance was approved would not have had to honor the revised ordinance’s required 1,000-foot setback for wells.

In October, the city issued a request for proposals to lease the mineral rights on its property, 520 acres on 46 sites scattered around the city. The request specified that a proposal must include a bonus of at least $20,000 per acre and a royalty of 25 percent or more of all revenue from oil and gas produced from the land.

The city received no responses, city spokeswoman Pilar Schank said. City staff spent time working with the council to create the request and issued it once "it met expectations," she said.

Karen Whitaker helped organize the White Chapel Corridor group in Southlake, whose members received signing bonuses of over $20,000 an acre for its mineral rights last summer. She questions why the city didn’t sell its mineral rights last summer as well, soon after the new ordinance was approved.

"We hit it at the perfect time, and I think at that point, if you were hitting your ear to the ground, you would have known the time was right," Whitaker said.

Whitaker said the bonus money would have been put to good use and agrees with Stacy that the city dragged its feet. "We need a rec center for our teens. There’s infrastructure that needs to be completed to handle our growth," Whitaker said. "We don’t have that, and that was free money."

Shortsighted criticism?

Southlake resident Tommy Pennington said he is comfortable with how the city handled the drilling issue.

"I’d love to see the city get the money, but at the same time I think we have to have our plan be solid instead of asking for forgiveness later when the damage is done," Pennington said.

Gene Powell, publisher of the Barnett Shale Newsletter, said the intense competition by drilling companies to sign up property owners is probably gone for good.

"I don’t think we’ll ever see bonus money anywhere near the range it was," Powell said.

Despite the worry about missed opportunities, Powell said, the focus on bonus payments was shortsighted. "The publicity has really been over the bonus money, which is wrong," Powell said. "The real money is in the royalties."

Whenever drilling companies did start signing up people again, Powell said, he expected royalty offers would be around the same levels they were last year.
AMAN BATHEJA, 817-390-7695

DEQ: 'Nobody is owning up to it'

By Vickie Welborn and Kelsey McKinney - The Shreveport Times - April 30, 2009


SPRING RIDGE — An unidentified substance that apparently flowed from a natural gas drilling site into a pasture is being eyed as a potential cause of the deaths of 16 head of cattle Tuesday evening, according to the Louisiana Department of Environmental Quality.

Still more tests are being performed, however, to determine the nature of the substance and what caused the cows to drop dead. Analysis of soil and product samples could take up to a week or more, DEQ Northwest Regional Manager Otis Randle said.

DEQ zeroed in on a contaminated area measured at 20-by-20 yards where a "milky white substance" had pooled in the pasture. It is adjacent to the well that Chesapeake Energy Corp. is drilling on state Highway 169 near the corner of Keatchie-Marshall Road in south Caddo Parish.

Authorities believe the cows ingested the liquid before dying. Tracks went to and from the puddles, a Caddo sheriff's office spokeswoman said.

Chesapeake and its fracing contractor, Schlumberger, have denied knowledge of a chemical release on the site. "Nobody is owning up to it," Randle said late Wednesday.

There is no evidence of contamination beyond the impact area, he added.

"We're continuing to gather information just as the agencies are gathering information and interviewing contractors on site. Until results of the investigation are made, we'll have a much better understanding of what happened," Kevin McCotter, Chesapeake's director of corporate development, said when asked whether an on-site spill had occurred. "We're going to wait and get the results of the investigation. That will give everyone the best understanding of what happened."

Chesapeake on Wednesday afternoon vacuumed the "free product" that was visible, Randle said. Today, a company hired by Chesapeake will take soil samples and excavate the contaminated dirt.

Trailers crisscrossed the property Wednesday removing the dead cattle, for burial on the cattle owner's property in Keithville.

The dead cows were disposed of under the supervision of Louisiana Livestock Brand Commission inspectors, according to Cindy Chadwick, Caddo sheriff's office spokeswoman. They buried "according to directions and guidelines set forth by the Louisiana Dept. of Agriculture and in a manner prescribed by state veterinarian Dr. Mike Barrington," she said.

During documentation, the count was reassessed from 19 to 16. One living cow was taken to LSU School of Veterinary Medicine in Baton Rouge. Another living cow that appeared to be less affected was left in the pasture.

Neighbors who live across the highway expressed a desire to know what took place but shrugged off any concerns to their own health and welfare.

"No, I'm not worried yet," 77-year-old Billy Owens said as he got onto his riding lawnmower at his house on Highway 169. His wife, Loraine Owens, 57, and son, Chris Owens, 21, likewise said the only irritations they get from the increased oil and gas activity are the noise, lights and endless stream of saltwater trucks.

"That's what bothers me," Loraine Owens said as a saltwater truck went through the nearby intersection.

Chris Owens believes whatever happened to his neighbor's cows was contained on site. He's not worried about any contamination to a nearby pond where he's been fishing since he was a teenager. He caught fish there Sunday.

"They are making beaucoup of money over there. I don't think they will put their lives in danger," Chris Owens said. "They are walking around over there without masks, so I don't think there is anything harmful over there. Now, if they were in masks and suits and started dropping like flies, then I'd know something was up."

He and his father started noticing the cows falling in the pasture Tuesday afternoon. Neither Chris Owens nor Loraine Owens could recall the name of the property owner.

Sam Irwin, press secretary for the Department of Agriculture and Forestry, said initially 18 cows died and two were sick. But one of the sick ones later died. He was uncertain of the status of the other one.

"The calves were moved away and they're fine," Irwin said. Temporary fencing was strung up to separate the living cows from the dead ones.

A state veterinarian who responded to the scene described the affected cows as "lethargic" and "unwilling to move," Irwin said. He did not have a description of the cows' symptoms. Some who witnessed the deaths said the cows were bleeding and foaming at the mouth.

Preliminary results of a necropsy performed on one of the dead animals could be known today. Final results may not be available for a week, Irwin said.
Advertisement

He would not speculate about what could have caused the deaths. "A bunch of weird stuff can kill cattle," said Irwin, offering as an example a type of grass that cows can't digest, leading to bloating and death.

The sight of the cows falling dead is something William DuBose, of Keithville, will never forget. "It was just horrible."

DuBose, of Keithville, and C.C. Canady, of Keatchie, are members of United Neighbors for Oil and Gas Rights, and they went to Highway 169 after they got word that the cows were dying. DuBose said he had been videotaping the drilling and completions process as part of the group's watchdog efforts.

DuBose also witnessed a man attempt to save an unborn calf by performing a cesarean section on a pregnant cow that had collapsed. Dubose said the calf also died.

DuBose said he and Canady captured on video a yellowish-green substance that was spewing into the air and falling onto the ground. Caddo deputies also said a yellowish-green substance was covering the ground and a Chesapeake employee said it was a chemical used in the fracing process.

DEQ was unable to confirm the presence of any type of yellowish-green substance. "What we ran into today was milky white in color," Randle said Wednesday.

All drilling was suspended Tuesday, and operations will not resume until the all-clear is given, McCotter said. The well, identified as Branch II-H, was in the completions process. McCotter was uncertain when drilling began.

Various types of chemicals are used in the completions, or fracturing process. The water-based fracturing fluids are mixed with proponent materials and pumped under pressure thousands of feet into the ground to the Haynesville Shale formation to get it to release the trapped natural gas.

The additives in the fluid are considered proprietary by each company, but the composition can include chemicals such as surfactants, pH adjusting agent, friction reducer, acid, corrosion inhibitor, iron control and a biocide to prevent algae growth.

McCotter would not guess or comment on speculation that some type of spill may have occurred.
Advertisement

And asked whether Chesapeake had taken precautions to ensure that all chemicals used on site are contained within the boundaries, McCotter responded, "Once we were notified, the site was isolated. Then the cows were isolated. That was the appropriate action to take "» Chesapeake operates by all of the appropriate state and federal regulations in our drilling and completions."

If the investigation determines that a violation occurred, DEQ will be the agency to enforce environmental laws or regulations, Randle said. Any criminal violations would be handled by the state police or Caddo sheriff's office.

"I'm not saying any type of criminal activity occurred; I'm just saying if it happens they will be ones to enforce that," Randle said.

Chesapeake is cooperating fully with the investigation, authorities said.

All of the hubbub around the corner went unnoticed by James Willis. The 80-year-old was preparing a small garden beside his house on Keatchie-Marshall Road for planting.

"No, not really. I ain't bothered by it," Willis said of any worries related to the cows' deaths.

The drilling yards from his home also is not a bother, he said. "I'm not afraid of it or nothing."

With that, Willis resumed his hoeing.

Drilling, water quality debated in Pantego

By ROBERT CADWALLADER - Special to the Star-Telegram - April 11, 2009
PANTEGO — Like many of this town’s 2,700 residents, Harriet Irby finds the city’s high- sodium water nasty to drink and harmful to spray on some grasses and plants.

Irby, an environment and animal-care advocate, is running for the Pantego Town Council and trying to spark community debate over the city’s first gas well, expected to be drilled in the next couple of months.

She is worried about potential leaks that could contaminate the city water supply and many private irrigation wells.


Arlington, Fort Worth and other cities in the area rely primarily on surface water.

But concerns about gas drilling’s impact on water quality have already been raised in other areas, particularly in rural areas west of Fort Worth that rely on groundwater.

"There’s all sorts of ways water supply can be impacted," said Irby, who is running for Place 4 in the May 9 election. "The people need more information."

Many others rebuff those concerns, citing the exploration industry’s safety record and confidence that the town can all but eliminate risks through diligent water testing.

And the gas-production revenues from Carrizo Oil and Gas could help ease the pain of slowing sales tax revenues.

"Over the last year, this council created the first-ever gas drilling ordinance for Pantego, and we put everything into our ordinance that we could to protect our water supply," said Councilman Jason Williams, Irby’s election opponent.
"We’ll have to watch during the drilling and fracing and throughout the production of gas to make sure our water is protected."

The council appointed an ad hoc committee of 17 residents last summer to address the water’s taste and how to ensure its safety during gas drilling and production.

The group is set to present its recommendations at the April 27 council meeting.

Irby challenges some of the committee’s testing to get base-line readings on sodium content.

She hired a different laboratory that determined that the salt level at her own tap was about one-fifth the level that the committee’s lab found at the closest municipal well to Irby’s house.

"I question the integrity of the data this committee is using to make decisions about our entire municipal water supply," Irby said.

Don Surratt, a committee member who is challenging Place 5 Councilman Calvin Kost, said he’s confident in the committee’s work.

He is invested in the outcome: His irrigation well is within 500 feet of the gas drill site.

"I do have a concern, but the town is going to test my well water before and after drilling," he said. "If Carrizo does everything that’s required when they drill their well, there should be minimal chance that anything would be polluted as far as the aquifer is concerned."

Carrizo officials did not return multiple phone calls seeking comment.

Despite the industry’s safety record with the thousands of wells drilled in the Barnett Shale, problems do occur.

In November, a Parker County family sued an energy company and its pipe layer, alleging that a saltwater spill from a steel pipe connecting gas wells to saltwater injection wells killed hundreds of trees and other vegetation and contaminated soil and a stock tank.

A 2007 report by the Texas Commission on Environmental Quality said that while water quality in the Trinity River Aquifer is acceptable for most municipal and industrial uses, there were 12 cases of oil-field-related pollution in Cooke, Montague, Parker and Wise counties in a previous groundwater contamination report.

For flavor — and some say health, for those on sodium-restricted diets — many Pantego residents drink bottled water.

Many also have individual irrigation wells to avoid potential harm to plants.

Those wells are much shallower than their municipal counterparts, which tap into the more reliable but saltier deep end of the water table.

The water committee has studied options, including the long-considered and expensive idea of tying into Arlington’s water system.

Irby and others say that would markedly raise water rates and further burden the town’s large population of senior citizens.

Kost said that he wants to hear what the committee has to say but that he has no complaints about the water.

"I like it — I drink it straight," Kost said. "And it’s better than Arlington’s water by 100 percent."



Staff writer Mike Lee contributed to this report

Read more in the Fort Worth Star Telegram

Drillilng in the Barnett Shale contributes to air pollution in the NT Region

See video and documentation on Blue Daze

Video: Emissions Created From Hydraulic Fracture of Barnett Shale Gas Well

Part of the reason the EPA is being sued.

If you live in D/FW and drink water

You might want to ask the Texas Railroad Commission this question:

WHERE DID THE WATER GO?