The move is part of the federal agency’s preparations for a long-term scientific study of the effects of the practice, known as hydraulic fracturing or “fracking,” on drinking water and public health.

“Natural gas is an important part of our nation’s energy future, and it’s critical that the extraction of this valuable natural resource does not come at the expense of safe water and healthy communities,” the E.P.A. administrator, Lisa P. Jackson, said in a statement.

The agency asked the companies to respond to its request within seven days and to voluntarily provide the information within 30 days, according to a copy of the letter provided by the agency.

“To the extent that E.P.A. does not receive sufficient data in response to this letter,” the agency warned, “E.P.A. will be exploring legal alternatives to compel submission of the needed information.”

Hydraulic fracturing has been used for decades, and the industry maintains that it is safe. But in recent years, environmental groups and community activists, pointing to inconclusive but sometimes compelling anecdotes of possible water contamination, have complained that the drilling practice is far too loosely regulated. Those complaints increased after the BP oil spill in the Gulf of Mexico.

New York Times: E.P.A to Study Chemicals Used to Tap Natural Gas

And as summer comes to an end and temperatures moderate demand will for gas- fired electricity to run air conditioners will moderate as well.  A Bloomberg News survey reports that “7  out of 18 analysts, or 39 percent, forecast gas futures will decline on the New York Mercantile Exchange through Sept. 17. Five, or 28 percent, predicted prices will rise and six said there would be little change. Last week, 41 percent of participants said gas would fall.”

Natural gas prices have come off nearly 24% since the end of July as higher amounts of natural gas in storage were suffecient to meed demand from gas-fired power plants.  About 23% of U.S. electricity is generated using natural gas, according to the US Energy Department.

Bloomberg: Natural Gas Futures Seen Falling Next Week as Cooler Weather Cuts Fuel Use

Mr. Bill Bennett, Minister of Energy, Mines and Petroleum Resources stated:

“Today we are leveraging strong investor confidence in our natural gas and petroleum sector to develop new infrastructure for the benefit of all British Columbians. This program is directly responsible for bringing new investment, new jobs, and additional revenues to help fund education and health care.”

The 21 new road and pipeline projects will support natural gas and petroleum exploration and development activity, and improve access to underdeveloped areas in northeast British Columbia.

The BC government has made substantial investments into the development of the Horn River, and Montney shale gas basins by improving infrastructure.

Press Release: Royalty Program Supports 21 New Roads and Pipelines

The other weather wild card is the hurricane season.  Hurricane activity is highest in late summer when the difference between temperatures aloft and sea surface are the greatest. As tropical storms move across the Gulf of Mexico they grow in strength fed by the warm waters of the Gulf and often reach hurricane strength. Hurricanes often will not lose strength until they have come ashore and moved inland where the cooler temperatures of the land remove the fueling effects of the warm Gulf waters. As we know the impact of hurricanes on coastal communities are devastating. Amoung the loss of human life, homes, infrastructure, power, etc. is the potential disruption of natural gas supplies from the Gulf of Mexico – home to ~11% of US domestic natural gas production.

Case in point was in 2007 when Hurricane Katrina and Hurricance Rita. The combination of these two hurricanes had an extraordinary impact on the offshore oil and gas industry in the Gulf of Mexico. The Minerals Management Service (“MMS”) estimated that 3050 of the 4000 platforms in the Gulf and 22,000 of the 33,000 miles of pipelines were in the direct path of either
Hurricane Katrina or Hurricane Rita. Fortunately, there were no oil spills or loss of life but the impact was the shut in of 100% of oil production during both storms and ~95% of natural gas production shut in during Katrina.

Such a major forced shut in of natural gas production from the Gulf during a time of higher demand was a major contributor of sending natural gas $14.50. It is also where many energy speculators like natural gas advocate T. Boone Pickens made a fortune by betting on higher natural gas prices due to an active and disruptive hurricane season reports (predictions). Today, this is not a bet that T. Boone Pickens or any other gas trader would likely make as the hurricane season has been a non-event. (Thankfully. The Gulf has had enough disasters and could use all the breaks they can get).

Those on the buy side of natural gas are buyers simply because they believe natural gas is under-valued or perhaps they have been caught in a short squeeze and are covering (not many but a few).

There is of course always the possibility that a  hurricane does form. Today, the National Hurricane Center announced that Tropical Storm Fiona had formed east of the Leeward Islands. Initial projections show Fiona heading toward the East Coast.  However, even if Fiona did materialize it is uncertain if this hurricane would have the strength of Katrina, or if it did would a short term disruption of 95% of the natural gas production have the same impact on prices given the comparative lower industrial demand, and the increased production from shale gas basins across North America. Demand and production were much different in 2007.

But though increased onshore gas production from shale formations around North America have contributed to lower prices for most of 2010, the US Energy Information Administration recently reported that production from the 48 states decreased by 1.2% between May and June to ~64.3 billion cubic feet per day. This has been reflected in the lower then average weekly injections into the US natural gas supply in storage.

In the meantime, we remain in a period of higher supply and lower demand. And the opportunity, to take advantage of increased natural gas reserves as a lower carbon energy source making up for a larger part of the overall energy mix is still there.

Energy, Mines and Petroleum Resources Minister Bill Bennett stated:

“This sale, like others this year, is larger than predicted and is more evidence of the confidence the international investment community has in British Columbia’s natural gas and petroleum resources.  This confidence, matched with our rich resources, is powering our economic recovery, creating good jobs for families and revenues for government.”

The  August 25 sale was for  81 parcels totalling 34,349 hectares in northeast BC of which 68 parcels totalling 31,052 hectares were sold at an average price of $3,160. The next sale is on September 22, offering 71 parcels covering 35,197 hectares.

For complete information on all land lease sales go to: http://bit.ly/cnB0E1

Press Release: $98 Million for Natural Gas and Petroleum Sale

Under the agreement, Mitsubishi will commit $850-million to the joint venture which consists of $250 million in cash to acquire a half stake in the assets and $600 million for capital and development funding in Penn West’s shale gas assets in the Cordova Embayment area and conventional producing gas properties in the Wildboy area.

More specifically, according to Penn West’s press release:

Under the terms of the Agreement, Penn West will sell MC 50% of its working interest in its Wildboy conventional gas assets including current production of approximately 30 million cubic feet per day of natural gas, 550,000 gross acres of land including approximately 120,000 acres targeting shale gas in the Cordova Embayment, the Wildboy gas processing facility, a sales gas pipeline connecting the area to the TransCanada gathering system in Alberta, and associated infrastructure.

According to a Penn West statement:

“It is Penn West’s view that the joint venture will accelerate the exploration and development of this significant unconventional gas asset. The joint venture supports our corporate strategy, which recognizes the importance of maintaining a balanced exploration and development portfolio as we assess and develop the full potential of our diverse resource plays. This agreement is the foundation for a long-term relationship with [Misubishi], who has world-wide experience in major project development.”

This is the latest in a number of Asian companies that are investing hundreds of millions into BC’s shale gas industry as part of a long term strategy to export natural gas to the Asian market via a Liquid Natural Gas (“LNG”) facility to be built in Kitimat.

Press Release: Penn West Trust Announces Strategic Joint Venture with Misubishi Corporation

BP Capital added shares of several onshore natural gas drilling companies to its portfolio that it didn’t have in its first quarter holdings including:

190,454 shares of Devon Energy Corp;
599,788 shares of Quicksilver Resources Inc;
189,507 shares each in Encana Corp; and,
189,507 shares Southwestern Energy Co.

Does T. Boone know something that the rest of us dont? No. Prices cycle, and though natural gas prices remain low due to US natural gas in storage increasing on a weekly basis, milder weather, and a non-event hurricane season, at some point one has to understand that the time to buy an investment is when it is low. Its that simple.

Reuters: T. Boone Pickens loads up on onshore gas stocks

Three most notable transactions include; Chief Oil & Gas, a Dallas-based company active  in the Marcellus Shale. Estimated value of the transaction is $3.0 billion.; Talon Oil & Gas LLC, with operations in three Texas regions and could sell for between $1.0 and $1.5 billion; and, Anschutz Exploration Corp, which focuses on the Bakken shale which could sell for $1.0 billion.

Demand is on the increase, but long term the acquisition of shale assets will prove to be profitable as shale gas plays a leading role in the North American (and international) energy mix. Analysts and bankers agree… according to the WSJ article:

Bankers and analysts expect the trend to continue, although assets in older shale regions have become less attractive because of low gas prices. Tracts in the Marcellus are still fairly inexpensive, so a purchase there could still be a good investment for a company on the lookout for natural-gas assets.

In BC, interest lies in the value shale gas assets represent not only to North American energy needs, but also to Asia due to proximity. The Asian market is growing in importance as the US turns more towards domestic natural gas resources.

Wall Street Journal: Three Shale-Gas Drillers Up for Sale

According to Badar Khan, president of Direct Energy Upstream and Trading:

“Ultimately, if we’re able to become a more stable business, it should allow for more stability in pricing, longer term, but I don’t think one should expect to see an immediate drop in our pricing. When you own an upstream business and couple it with a downstream business, you ultimately can provide more innovative, more flexible pricing programs for your customers.”

Calgary Herald: Direct Energy raises stage in natural gas deal with $375 M Suncor deal