More Fun With Fracking

I intended to do a big book-sales post today, but our DSL modem may be dead, so there was no Internet in Chateau Steelypips this morning, and I forgot to copy the relevant files onto a thumb drive, so it will have to wait. Maybe this afternoon.

In lieu of that, here's some other stuff on shale gas drilling in the Northeast, following on Tuesday's post:

-- It's always nice to have my half-assed writing about economic issues supported, even indirectly, by people who know something about the subject writing similar things. Thus, Felix Salmon on cost-benefit analyses of oil drilling:

Under something known as the Revised Program Outer Continental Shelf Oil and Gas Leasing Program 2007-2012, the Bureau of Ocean Energy Management, Regulation and Enforcement does a very basic cost-benefit calculation when deciding whether or not to allow drilling in a certain spot: it looks at the costs, and then at the benefits, and then if the benefits outweigh the costs, it gives the go-ahead.

What this calculation misses is the significant option value of doing nothing. The oil is, after all, not going anywhere -- and if you don't drill for oil right now, there's a good chance that the costs of drilling for oil in the future, both economic and environmental, will be lower than the costs of drilling for oil in the present

This is based on a policy paper from NYU, so it's even scholarly...

-- Speaking of policy and politics, the Attorney General of New York is threatening to sue the Federal government to force a review of drilling practices:

Attorney General Eric T. Schneiderman today pledged to sue the federal government if it doesn't commit in 30 days to conducting a full environmental review of proposed regulations that would allow natural gas drilling - including the potentially harmful "fracking" technique - in the Delaware River Basin. The Basin includes the New York City watershed and portions of Broome, Chenango, Delaware, Schoharie, Green, Ulster, Orange and Sullivan Counties, and provides approximately 50 percent of the drinking water used by over nine million New York residents and visitors every day.

-- Why is the AG willing to go to court over this? Well, all you need to do is look to the latest news from Pennsylvania, where a flawed well is spilling polluted water leading to a suspension of drilling activities while they try to figure out what they screwed up.

Good times, good times...

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Apparently you have Schrodinger's DSL modem...shouldn't that be "there was no internet, so our modem may be dead" and not vice-versa?

By Dan Riley (not verified) on 22 Apr 2011 #permalink

so ı think about ; What this calculation misses is the significant option value of doing nothing. The oil is, after all, not going anywhere -- and if you don't drill for oil right now, there's a good chance that the costs of drilling for oil in the future, both economic and environmental, will be lower than the costs of drilling for oil in the present

You might find this article from the New York Times interesting. It makes the claim that industry insiders, as well as an analysis of actual well production, indicate the actual value of shale gas might not be what has been asserted to the public.

http://www.nytimes.com/2011/06/26/us/26gas.html

By CCPhysicist (not verified) on 27 Jun 2011 #permalink