projected unit costs of selected conventional fossil fuels over the period 2009-2030 in nys

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Projected Unit Costs of Selected Conventional Fossil Fuels Over the Period 2009-2030 in NYS. Source: NYSEPB (2009), Energy Price and Demand Long-Term Forecast (2009-2028). Annual growth rate factors provided in reference document have been extrapolated for the period 2029-2030. - PowerPoint PPT Presentation

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Page 1: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Page 2: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Fuel Type Projected Changes in Fuel Cost, 2009-2030

(2009 dollars/MMBTU)

2009 2030 Percent ChangeGasoline – all grades $19.30 $40.39 109%

Natural Gas - ElectricNatural Gas – Residential

$6.30$13.58

$10.14$16.19

27%19%

Natural Gas – CommercialNatural Gas – Industrial

$10.27$8.73

$13.06$11.98

27%37%

Projected Unit Costs of Selected Conventional Fossil Fuels Projected Unit Costs of Selected Conventional Fossil Fuels Over the Period 2009-2030 in NYS. Over the Period 2009-2030 in NYS.

Source: NYSEPB (2009), Energy Price and Demand Long-Term Forecast (2009-2028). Annual growth rate factors provided in reference document have been extrapolated for the period 2029-2030.

Page 3: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Externality Costs for Fossil Fuel GenerationExternality Costs for Fossil Fuel Generation

The hidden costs of:• Air pollution morbidity and mortality• Water pollution costs• Global warming damage. e.g. coastline loss,

agricultural and fish losses, human heat stress mortality, increases in severe weather and air pollution

• Worker health

3

Page 4: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Energy Technology 2005-2012* 2020-2030*

Wind Onshore 4a -10.5b ≤4a

Wind Offshore 11.3c -16.5b 7b-10.9c

Wave >11.0a 4-11a

Geothermal 9.9-15.2b 5.5 -8.8g

Hydroelectric 4.0-6.0d 4a

CSP 14.1-22.6b 7 -8a

Solar PV (Utility) 11.1-15.9b 5.5g

Solar PV (Commercial Rooftop) 14.9-20.4b 7.1-7.4h

Solar PV (Residential Rooftop) 16.5-22.7e 7.9-8.2h

Tidal >11.0a 5-7a

New conventional (plus externalities )f 9.6-9.8 (+5.3) =14.9-15.1

12.1-15.0 (+5.7) =17.8-20.7

Approximate fully annualized generation and short-distance Approximate fully annualized generation and short-distance transmission costs for WWS and new conventional power transmission costs for WWS and new conventional power (2007 U.S. cents/kWh-delivered), including externality costs. (2007 U.S. cents/kWh-delivered), including externality costs.

Page 5: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

The plan would:• Reduce NYS’s end-use power demand ~37%.

• Stabilize energy prices since fuel costs would be zero. • Create more jobs than lost because nearly all NYS energy would now be produced in-state, ~58,000 new, permanent, full-time jobs by 2025. • Reduce NYS air pollution mortality and its costs by ~4000/yr, and ~$33 billion/yr (3% of 2010 NYS GDP), respectively, repaying the 271 GW installed power needed within ~17 y.

• NYS’s own emission decreases would reduce 2050 U.S. climate costs by ~$3.2 billion/yr.

5

NO to HVHF, YES to a Much Better PlanNO to HVHF, YES to a Much Better Plan

Page 6: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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100% of electric capacity added in U.S. last month was renewable

The Federal Energy Regulatory Commission, the agency that announced that almost half of all new electricity generating capacity added in the U.S. in 2012 was renewable, has released its data for the month of January.

http://www.ferc.gov/legal/staff-reports/2013/jan-energy-infrastructure.pdf

Page 7: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

The Industry/Regulator/Legislator Merry-go-Round

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Former Pa. counsel to handle Range's legislative, regulatory affairs   Feb 21, 2013 - Range Resources Corp. has selected Terry Bossert as vice president of legislative and regulatory affairs for its Appalachia division, the company announced yesterday. Bossert is the former senior vice president of regulatory and government affairs for Chief Oil & Gas LLC and ex-counsel to the Pennsylvania Department of Environmental Protection. He will report to Scott Roy, former deputy chief of staff to Pennsylvania Gov. Ed Rendell (D), who left office in 2009.

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Feb 22, 2013 - In the third day of budget hearings Thursday, …Sen. Jim Ferlo, D-38, voiced surprise that nine of every 10 violations cited by DEP inspectors at Marcellus Shale gas wells in 2011 resulted in no fines. “How do you reconcile that?” the Pittsburgh lawmaker asked. “The idea of an issuance of a notice of violation is not to issue a fine. The idea is to bring conduct which is potentially volatile to the attention of the operator so the operator can do something about it,” Krancer said.  But that wasn’t enough for Ferlo, who is a member of the Senate Environmental Resources & Energy Committee. “You’re the secretary of DEP and the citizens are demanding that there be proper enforcement and proper citations to correct the behavior of an industry that, in my opinion, has run amok, despite your perception of the industry. Citizens feel very shortchanged right now,” Ferlo said. “I’m sorry for that perception on your part. I think it’s an incorrect perception,” Krancer responded.  http://www.phillyburbs.com/news/local/courier_times_news/dep-secretary-krancer-hit-on-marcellus-shale-smallmouth-bass/article_446821c4-2d21-55d3-a497-d995674c994a.html

Regulations Without Strict Enforcement Are Regulations Without Strict Enforcement Are Just Words on PaperJust Words on Paper

Page 9: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

A Dispassionate View of the Industry. A Dispassionate View of the Industry.

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“…oil and gas companies are not in business to steward the environment, save the family farm or pull depressed areas out of economic decline. If these things should by chance happen, they are merely peripheral to the primary mission of the companies and certainly were never considered in corporate exploration and production plans. Further, given shales’ steep declines and thus limited lives, such benefits will be short-lived as well. It would be the height of naïveté to assume that such companies have altruistic intent towards a region or its residents. They do not. Oil and gas companies are in business to extract hydrocarbons as cheaply and efficiently as possible and get them to the customer that will pay the highest price. If they can shave dollars off already thin margins by refusing to use pollution control devices then that is precisely what they will do if it is not mandated, regardless of whether this will increase costs for a region due to pollution or negatively impact other industries. Even though pollution and degradation involve real costs, they are not borne by the industry that perpetrates them in today's economic accounting. This is especially true of the oil and gas industry as they are exempt from federal environmental protection statutes.”

Rodgers, Energy Policy Forum, February 2103

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Why Is High-Volume Fracing from Long Laterals Why Is High-Volume Fracing from Long Laterals in Shales a Higher Risk to Public Health?in Shales a Higher Risk to Public Health?

• Requires much higher well density, many wells per square mile.

• Requires much more industrial development over large areas, heavy equipment operating 24/7/365.

• Requires much higher volumes of fracing fluid, millions of gallons per well.

• Produces much higher volumes of waste fluids and solids containing hazardous materials: frac fluid chemicals, heavy metals, NORMS, NOx, VOC’s.

• Produces higher volumes of fugitive emissions of methane.

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Page 11: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

• As number of wells and volumes of waste increase, probability of accidental releases of hazardous materials into air and groundwater increases.

• Cumulative effects on air and water and health from these and from purposeful emissions into the atmosphere and releases into groundwater are unknown.

• Increased production, processing, storage, transportation and burning of natural gas and its liquid companions (e.g. ethane, propane, butane) increases emission of GHG’s, exacerbates climate change

11

Why Is Slickwater, High-Volume Fracing from Why Is Slickwater, High-Volume Fracing from Long Laterals a Higher Risk to Public Health?Long Laterals a Higher Risk to Public Health?

Page 12: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

GOOD MECHANICAL INTEGRITY

TARGET PRODUCING ZONE12

Page 13: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

CEMENT CHANNELING

PRESSURE BUILDS UP

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE

CASI

NG

CEM

ENT

FORM

ATIO

N

13

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LEAK THROUGH CASING

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FORM

ATIO

N

CASI

NG

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE

PRESSURE BUILDS UP

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INSUFFICIENT CEMENT COVERAGE

PRESSURE BUILDS UP

CONDUCTOR PIPE

SURFACE CASING

PRODUCTION CASING

FRESH WATER AQUIFER ZONE

SHALLOW PRODUCING ZONE

INTERMEDIATE PRODUCING ZONE

TARGET PRODUCING ZONE15

Page 16: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

16Photo Courtesy of Bob Donnan

Surface Impacts on Health/Environmental: Pads, Pipelines.Surface Impacts on Health/Environmental: Pads, Pipelines.Impoundments, FlaresImpoundments, Flares

Page 17: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Surface Impacts on Health/Environmental: Pads and PipelinesSurface Impacts on Health/Environmental: Pads and Pipelines

…and these will be located wherever permission is given

Photo Courtesy of Bob Donnan

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Surface Impacts on Health/Environmental: Pads, Pipelines.Surface Impacts on Health/Environmental: Pads, Pipelines.ImpoundmentsImpoundments

Photo Courtesy of Bob Donnan

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CARTER IMPOUNDMENT, PA Marcellus

Surface Impacts on Health/Environmental: Waste ImpoundmentsSurface Impacts on Health/Environmental: Waste Impoundments

Are needed even with “recycling”

Photos Courtesy of Bob Donnan

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Buffalo, Pa, Compressor Station

Photo Courtesy of Bob Donnan

Surface Impacts on Health/Environmental: Surface Impacts on Health/Environmental: Pipelines and Compressor StationsPipelines and Compressor Stations

Page 21: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Observation: What Does This All Look Like Observation: What Does This All Look Like “Downhole”?“Downhole”?

Laboratory-Scale Experiment: • A Block of Real Rock• Apply earth-like pressure to all 6 sides• Drill It, Right Down the Middle• Case It• Cement It• Perforate it• Frac It, with Red Dye in the Frac Fluid• Break Open the Block• See What Happened

Page 22: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

One Can See Perforations and Hydraulic FracturesOne Can See Perforations and Hydraulic Fractures

22

4 in.

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Nobel Winner F. Sherwood Rowland: Nobel Winner F. Sherwood Rowland: On The Responsibility of Scientists On The Responsibility of Scientists

23

“Is it enough for a scientist simply to publish a paper? Isn’t it aresponsibility of scientists, if you believe that you have found something that can affect the environment, isn’t it your responsibilityto actually do something about it, enough so that action actually takesplace?” “If not us, who? If not now, when?”

Rowland, at a White House climate change roundtable in 1997.

http://thinkprogress.org/romm/2012/03/12/442296/sherry-rowland-sounded-alarm-ozone-layer/#more-442296

Page 24: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Key Data for Key Data for EstimationEstimation of Well of Well Productivity and Economics: PAProductivity and Economics: PA

24From: Chesapeake Energy (CHK) published pro forma data

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Blowout Through Nearby, Unknown, Abandoned WellBlowout Through Nearby, Unknown, Abandoned Well

Pearsall, TexasNovember, 2010

MYTH:MYTH:You should not worry about mistakenly stimulating You should not worry about mistakenly stimulating an abandoned well.an abandoned well.

➣ "There are approximately 4,000 abandoned or unreported wells on DEC's priority plugging list."  

➣ "There are approximately 35,000 wells for which DEC has no records.“

NYS DEC, October 5, 2011

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~1800 ft

~1500 ftMYTH: Fracs in shales stay in shaleMYTH: Fracs in shales stay in shale

Thickness of shale layer: 100-300 ft

Page 27: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Difficult to Keep Un-Natural Fractures “In Pay Zone”Difficult to Keep Un-Natural Fractures “In Pay Zone”

27Base Image Courtesy of Southwestern Energy

Hydrofracture Intersects Existing Fault

Page 28: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Horn River Area, NE British ColumbiaHorn River Area, NE British Columbia

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PA DEP Waste Production Database:PA DEP Waste Production Database:38 % 38 % of Frac Fluid Recycled in 2011of Frac Fluid Recycled in 2011

29

Industry claims of “nearly 100% recycling” are not supported by DEP data

Page 30: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Drilling Rig Count in PADrilling Rig Count in PA

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Drilling Rig Count in OhioDrilling Rig Count in Ohio

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New Scientific Data on Methane Contamination of Water WellsNew Scientific Data on Methane Contamination of Water Wells

32www.pnas.org/cgi/doi/10.1073/pnas.1100682108

Page 33: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

The “New” Intermediate Casing MythThe “New” Intermediate Casing Myth

Additional Well Casing to Prevent Gas Migration: In most cases, an additional third, cemented well casing is required around each well to prevent the migration of gas. The three required casings are the surface casing, the new intermediate casing and the production casing. The depths of both surface and intermediate casings will be determined by site-specific conditions.

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As-Built Casing Layouts for As-Built Casing Layouts for 2 PA Marcellus Wells That2 PA Marcellus Wells ThatContaminated Water WellsContaminated Water Wells

Page 35: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Natural Gas Price is VolatileNatural Gas Price is Volatile

37

$3.96 Today

Page 38: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

MIT Study On Economics of Shale GasMIT Study On Economics of Shale Gas

38Jacoby et al., Economics of Energy & Environmental Policy, Vol. 1, No. 1, pp. 37-51, 2011

$3.96 Today

Page 39: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

MIT Study on Economics of Shale Gas WellsMIT Study on Economics of Shale Gas Wells

39Jacoby et al., Economics of Energy & Environmental Policy, Vol. 1, No. 1, pp. 37-51, 2011

Page 40: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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Page 41: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Time scale GWP heat/ Methane Methane (years) electricity from gas from coal

(gC/MJ) (gC/MJ)

Howarth et al. 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14

Hughes 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14

Skone 100 25 electr. 0.34 0.17 Jiang et al. 100 25 electr. 0.40 Not reported Worldwatch 100 25 electr. 0.34 0.094

Wigley 0 – 200 n/a electr. 0.34 – 1.4 0.107 U.S. EPA (2011) n/a n/a n/a 0.75 0.04

Comparison of Modeling Assumptions and Key ResultsComparison of Modeling Assumptions and Key Results

41

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1. Howarth R W, Santoro R, Ingraffea A. Clim. Change 106, 679–690 (2011).*

2. Skone T. http://cce.cornell.edu/EnergyClimateChange/NaturalGasDev/Documents/PDFs/SKONE_NG_LC_GHG_Profile_Cornell_12MAY11_Final.pdf

3. Hughes D. Post Carbon Institute, 2011; http://go.nature.com/gkboqm

4. Osborn S G et al. Proc. Natl Acad. Sci. USA, 108, 8172–8176 (2011). *

5. Kumar S. WorldWatch Institute, http://www.worldwatch.org/despite-methane-emissions-upstream-natural-gas-cleaner-coal-life-cycle-basi.s

5. Jiang M et al. Environ. Res. Lett. 6: 034014 (2011).*

6. Wigley T. Clim. Change (2011). DOI 10.1007/s10584-011-0217-3.*

7. Hultman N et al. (2011). Environ. Res. Lett. 6: 044008,doi:10.1088/1748-9326/6/4/044008*

8. Cathles LM et al. Clim. Change (2012) DOI 10.1007/s10584-011-0333-0. *

9. Howarth R W, Santoro R, Ingraffea A. Clim. Change, In press, 2012. *

Many Reports/Papers Since April, 2011Many Reports/Papers Since April, 2011

** = Peer Reviewed = Peer Reviewed

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Page 44: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

The Cathles The Cathles et al. et al. Paper: Paper: Our Cornell Colleagues’ Criticisms of Our 1Our Cornell Colleagues’ Criticisms of Our 1stst Paper Paper

44

1) a physical argument that large flows of gas are not possible while frac fluids fill the well;

2) an assertion that venting of methane to the atmosphere

would be unsafe;

3) a statement that we incorrectly used data on methane capture during flowback to estimate venting;

4) an assertion that venting of methane is not in the economic

interests of industry.

Page 45: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Our 2Our 2ndnd Paper Refutes These Arguments, Paper Refutes These Arguments, And Provides New Supporting DataAnd Provides New Supporting Data

1) a physical argument that large flows of gas are not possible while frac fluids fill the well.

Large flows do occur because flowback is two-phase, not dissolved gas; and there is 10 to 100 times more flowback from shale wells than from conventional wells.

45

Page 46: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

2) an assertion that venting of methane to the atmosphere would be unsafe.

EPA (2011) reports 85% of flowback gas from unconventional wells is vented, less than 15% flared or captured; methane density only 58% that of air and is extremely buoyant when vented (recall video); venting is NOT illegal:“excess gas encountered during drilling, completion or stimulation shall be flared, captured, or diverted away from the drilling rig in a manner than does not create a hazard to the public health or safety”

46

Our 2Our 2ndnd Paper Refutes These Arguments, Paper Refutes These Arguments, And Provides New Supporting DataAnd Provides New Supporting Data

Page 47: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

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3) a statement that we incorrectly used data on methane capture during flowback to estimate venting.

We used data on captured gas as a surrogate for vented emissions, similar to EPA (2010) because industry does not measure or estimate the gas that is vented during flowback. Most data we used were reported to the EPA as part of their “green completions” program, and they provide some of the very few publicly available quantitative estimates of methane flows at the time of flowback. (Note new EPA regulations start in 2012).

Our 2Our 2ndnd Paper Refutes These Arguments, Paper Refutes These Arguments, And Provides New Supporting DataAnd Provides New Supporting Data

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Our 2Our 2ndnd Paper Refutes These Arguments, Paper Refutes These Arguments, And Provides New Supporting DataAnd Provides New Supporting Data

4) an assertion that venting of methane is not in the economic interests of industry.

According to EPA (2011b), break-even price at which the cost of capturing flowback gas equals market value of captured gas is slightly under $4/Mcf. See next slide.

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Page 50: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Time scale GWP heat/ Methane Methane (years) electricity from gas from coal

(gC/MJ) (gC/MJ)

Howarth et al. 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14

Hughes 20 / 100 33 / 105 both 0.56 – 1.3 0.045 – 0.14

Skone 100 25 electr. 0.34 0.17 Jiang et al. 100 25 electr. 0.40 Not reported Worldwatch 100 25 electr. 0.34 0.094

Wigley 0 – 200 n/a electr. 0.34 – 1.4 0.107 U.S. EPA (2011) n/a n/a n/a 0.75 0.04

Comparison of Modeling Assumptions and Key ResultsComparison of Modeling Assumptions and Key Results

50

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Horn River Area, NE British ColumbiaHorn River Area, NE British Columbia

52

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Nobel Winner F. Sherwood Rowland: Nobel Winner F. Sherwood Rowland: On The Responsibility of Scientists On The Responsibility of Scientists

54

“Is it enough for a scientist simply to publish a paper? Isn’t it aresponsibility of scientists, if you believe that you have found something that can affect the environment, isn’t it your responsibilityto actually do something about it, enough so that action actually takesplace?...If not us, who? If not now, when?”

Rowland, at a White House climate change roundtable in 1997.

http://thinkprogress.org/romm/2012/03/12/442296/sherry-rowland-sounded-alarm-ozone-layer/#more-442296

This is called science-based advocacy

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Waste Injection Wells:The Hidden Risks of Pumping Waste Underground

55

A ProPublica review of well records, case histories and government summaries of more than 220,000 well inspections found that structural failures inside injection wells are routine. From late 2007 to late 2010, one well integrity violation was issued for every six deep injection wells examined — more than 17,000 violations nationally. More than 7,000 wells showed signs that their walls were leaking. Records also show wells are frequently operated in violation of safety regulations and under conditions that greatly increase the risk of fluid leakage and the threat of water contamination.

Structurally, a disposal well is the same as an oil or gas well. Tubes of concrete and steel extend anywhere from a few hundred feet to two miles into the earth.

http://www.propublica.org/article/injection-wells-the-poison-beneath-us

Operators are required to do so-called "mechanical integrity" tests at regular intervals, yearly for Class 1 wells and at least once every five years for Class 2 wells. In 2010, the tests led to more than 7,500 violations nationally, with more than 2,300 wells failing. In Texas, one violation was issued for every three Class 2 wells examined in 2010.

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Industry Performance in NYS: Industry Performance in NYS: Plugging Abandoned WellsPlugging Abandoned Wells

57

“…of 48,000 abandoned oil and gas wells total, 13,000 were plugged and approximately 35,000 were not plugged as of 1994 …”

Bishop, HISTORICAL ANALYSIS OF OIL AND GAS WELL PLUGGING IN NEW YORK: IS THE REGLATORY SYSTEM WORKING?, NEW SOLUTIONS, 23(1) 103-116, 2013

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In the large U.S plays, shale gas development has only just begun,

and it requires a large number of large, multi-well, clustered pads and

significant ancillary infrastructure

Page 59: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

Wellbore Integrity: Recent Operator Wellbore Integrity: Recent Operator Performance in the Pennsylvania Marcellus PlayPerformance in the Pennsylvania Marcellus Play

59

1,609 wells drilled in 2010.97 well failures.

6% rate of failure.

1,972 wells drilled in 2011.140 well failures.

7.1% rate of failure.

1346 wells drilled in 2012120 well failures.

8.9% rate of failure.

Consistent with previous industry data, and not improving.

Palepko data

Page 60: Projected Unit Costs of Selected Conventional Fossil Fuels  Over the Period 2009-2030 in NYS

What Are the Implications of What Are the Implications of Leaking Wells?Leaking Wells?

60

Each leaking well has the potential for contamination of one or more private or public water sources, and will leak volatile organic compounds into the atmosphere.

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High Volume Hydraulic Fracturing Proposed RegulationsHigh Volume Hydraulic Fracturing Proposed Regulations6 NYCRR Parts 550-556, 5606 NYCRR Parts 550-556, 560

Among My Comments and RecommendationsAmong My Comments and Recommendations

61

Recommendation: As a minimum, DEC should perform and publish its own statistical analysis of documented incidents of hydrocarbon migration into underground sources of drinking water in the Marcellus play in Pennsylvania, and develop its own prediction of immediate and long-term rate of well failuresfor shale gas development in New York.

Recommendation: It is not possible to perform a rational cost-benefit analysis of shale gas development in New York without a science-based, probabilistic estimate of the number of expected well contamination incidents due to faulty wells. DEC should estimate the cost associated with mitigation of such contamination in its economic analysis of shale gas development. Each leaking well will, unless completely stopped from leaking natural gas, contribute to methane emissions and exacerbation of climate change. DEC should estimate the impact of such emissions on NYS goals for reduction of CO2eq .

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Our Energy Plan for New York StateOur Energy Plan for New York State

Jacobson et al., Energy Policy, Feb. 2013

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Natural Gas Price is Volatile and Natural Gas Price is Volatile and Will Inevitably Rise, As Will the Price of OilWill Inevitably Rise, As Will the Price of Oil

63

$3.96 Today

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We Own the Wind, the Sun, the We Own the Wind, the Sun, the Water: Their Fuel Cost is Water: Their Fuel Cost is Zero.Zero.

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Wind, water and solar energy will provide a stable, renewable source of electric power not subject to the same fuel supply

limitations as fossil fuels and nuclear power. Due to the eventual depletion of coal, oil, natural gas, and uranium

resources, their prices will continue to rise.

We Own the Wind, the Sun, the We Own the Wind, the Sun, the Water: They Make Us Energy Water: They Make Us Energy

Secure and IndependentSecure and Independent

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Fuel Type Projected Changes in Fuel Cost, 2009-2030

(2009 dollars/MMBTU)

2009 2030 Percent ChangeGasoline – all grades $19.30 $40.39 109%

Natural Gas - ElectricNatural Gas – Residential

$6.30$13.58

$10.14$16.19

27%19%

Natural Gas – CommercialNatural Gas – Industrial

$10.27$8.73

$13.06$11.98

27%37%

Projected Unit Costs of Selected Conventional Fossil Fuels Projected Unit Costs of Selected Conventional Fossil Fuels Over the Period 2009-2030 in NYS. Over the Period 2009-2030 in NYS.

Source: NYSEPB (2009), Energy Price and Demand Long-Term Forecast (2009-2028). Annual growth rate factors provided in reference document have been extrapolated for the period 2029-2030.

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Externality Costs for Fossil Fuel GenerationExternality Costs for Fossil Fuel Generation

The hidden costs of:• Air pollution morbidity and mortality• Water pollution costs• Global warming damage. e.g. coastline loss,

agricultural and fish losses, human heat stress mortality, increases in severe weather and air pollution

• Worker health

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Energy Technology 2005-2012* 2020-2030*

Wind Onshore 4a -10.5b ≤4a

Wind Offshore 11.3c -16.5b 7b-10.9c

Wave >11.0a 4-11a

Geothermal 9.9-15.2b 5.5 -8.8g

Hydroelectric 4.0-6.0d 4a

CSP 14.1-22.6b 7 -8a

Solar PV (Utility) 11.1-15.9b 5.5g

Solar PV (Commercial Rooftop) 14.9-20.4b 7.1-7.4h

Solar PV (Residential Rooftop) 16.5-22.7e 7.9-8.2h

Tidal >11.0a 5-7a

New conventional (plus externalities )f 9.6-9.8 (+5.3) =14.9-15.1

12.1-15.0 (+5.7) =17.8-20.7

Approximate fully annualized generation and short-distance Approximate fully annualized generation and short-distance transmission costs for WWS and new conventional power transmission costs for WWS and new conventional power (2007 U.S. cents/kWh-delivered), including externality costs. (2007 U.S. cents/kWh-delivered), including externality costs.

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Not Much Respect for You Not Much Respect for You from EXXON Mobil CEOfrom EXXON Mobil CEO

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“Now, with these new technologies that evolve always come a lot ofquestions. Ours is an industry that is built on technology, it's built on science, it's built on engineering, and because we have a society that by and large is illiterate in these areas, science, math and engineering, what we do is a mystery to them and they find it scary. And because of that, it creates easy opportunities for opponents of development, activist organizations, to manufacture fear.”

Rex W. Tillerson, Chairman and CEO, Exxon Mobil CorporationJune 27, 2012Council on Foreign Relations

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Easy for Him to SayEasy for Him to Say

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“…And as long as we as an industry follow good engineering practices and standards, these risks are entirely manageable. And the consequences of a misstep by any member of our industry -- and I'm speaking again about the shale revolution -- the consequences of a misstep in a well, while large to the immediate people that live around that well, in the great scheme of things are pretty small….”

Rex W. Tillerson, Chairman and CEO, Exxon Mobil CorporationJune 27, 2012Council on Foreign Relations

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EXXON Mobil CEO on Global WarmingEXXON Mobil CEO on Global Warming

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“…And as human beings as a -- as a -- as a species, that's why we're all still here. We have spent our entire existence adapting, OK? So we will adapt to this. Changes to weather patterns that move crop production areas around -- we'll adapt to that. It's an engineering problem, and it has engineering solutions. And so I don't -- the fear factor that people want to throw out there to say we just have to stop this, I do not accept. I do believe we have to -- we have to be efficient and we have to manage it, but we also need to look at the other side of the engineering solution, which is how are we going to adapt to it. And there are solutions. It's not a problem that we can't solve.”

Rex W. Tillerson, Chairman and CEO, Exxon Mobil CorporationJune 27, 2012Council on Foreign Relations

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EXXON Mobil CEO on JournalistsEXXON Mobil CEO on Journalists

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“…But this is an ongoing dialogue I've been having with people in your profession now for some time; that for whatever reason, a large number ofpeople in the journalism profession simply are unwilling to do their work.They're unwilling to do the homework. And so they get something delivered to them from the manufacturers of fear; it makes a great story. I mean, it – I mean, it does. It makes a great story. People love that kind of stuff. Theconsuming public loves it, because it goes to what, you know, their fears are.”

Rex W. Tillerson, Chairman and CEO, Exxon Mobil CorporationJune 27, 2012Council on Foreign Relations

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Exxon Mobil CEO: Farmer Joe Is a LiarExxon Mobil CEO: Farmer Joe Is a Liar

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“…There are a lot of sources of science-based information. There are a lot of sources that can debunk claims that are made specific -- you know, specific examples. Farmer Joe lit his faucet on fire, and that's because there was gas drilling going on, you know, in his back porch. And we can go out there and we can prove with science that that is biogenic gas; it's been in the water table for millions of years; it finally made its way Farmer Jones' faucet, it had nothing to do with any oil and gas activities. And part of when you're dealing with the subsurface strata is you've got to -- you got to understand that Mother Nature has done a lot of things in the subsurface that have nothing to do with anything man has done. And it changes. It moves around all the time. So what once was will change.”

Rex W. Tillerson, Chairman and CEO, Exxon Mobil CorporationJune 27, 2012Council on Foreign Relations

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EXXON Mobil CEO Correct on EXXON Mobil CEO Correct on Shale Gas EconomicsShale Gas Economics

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“The higher volumes are not only the result of drilling in the higher Btu area, but are also the result of drilling longer laterals and completing them with more frac stages. We’ve also experimented with reduced cluster spacing, decreasing the frac interval from 300 feet to 150 to 200 feet, all of this looks very promising.” Once we extract ethane beginning late next year, this will further enhance the economics.”

“…And what I can tell you is the cost to supply is not $2.50. We are all losing our shirts today. You know, we're making no money. It's all in the red.”

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