Denton Record-Chronicle (Denton, Tex.), Vol. 112, No. 206, Ed. 1 Wednesday, February 24, 2016 Page: 3 of 28
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STATE/NATIONAL
3A
Denton Record-Chronicle
Wednesday, February 24, 2016
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Pat Sullivan/AP
Saudi Arabia’s Minister of Petroleum and Mineral Resources AM Al-Naimi speaks at the annual
IHS CERAWeek global energy conference Tuesday in Houston.
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crude, used to price oil interna-
tionally, dropped $L36 to $33.31
a barrel in London.
Just a day earlier, oil prices
surged after the International
Energy Agency predicted that
oil supply and demand would
balance next year because of a
steep drop in new drilling,
namely in the U.S. The group’s
executive director, Fatih Birol,
predicted that crude would
more than double to $80 a bar-
rel by 2020.
Shale and other new sources
attracted by years of high oil
prices pushed the supply of oil
much higher than global de-
mand, leading to the sharp drop
in crude prices since mid-2014.
OPEC decided in late 2014
that it would not cut production
to prop up prices, and Naimi
echoed OPEC’s thinking. “Cut-
ting low-cost production to sub-
sidize higher-cost supplies only
delays an inevitable reckoning,”
he said.
Analysts expect more U.S.
shale operators will fail unless
prices rise. Mark Papa, now an
investment firm executive and
the former CEO of EOG Re-
sources, an early shale-gas pro-
ducer, said the shale boom creat-
ed many new companies. In the
next year or so there will be
“bodies all over the place — a lot
of bankruptcies,” and drillers
who survive will emerge weaker,
he said.
Others say that it might not
take much of a rally in oil prices
for shale drillers to thrive.
Vance Scott, an Ernst &
Young consultant to oil and gas
companies, said shale operators
are continuing to cut costs and
can squeeze subcontractors
more and improve efficiency
with technological advances in
drilling.
By David Koenig
AP Business Writer
HOUSTON - Saudi Ara-
bia’s oil minister said Tuesday
that production cuts to boost oil
prices won’t work, and that in-
stead the market should be al-
lowed to work even if that forces
some operators out of business.
Ali Al-Naimi said production
cuts by big, low-cost producers
like Saudi Arabia would amount
to subsidizing higher-cost ones
— an apparent reference to U.S.
shale oil drillers.
Booming U.S. production ef-
fectively ended oil trades at
more than $100 per barrel that
were taking place less than two
years ago. A barrel of U.S. crude
is now hovering around $30, a
price at which many shale oper-
ators are assumed to be losing
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30%
to
“They could make a go at
$40 and maybe even lower” de-
pending on the field, Scott said.
“They will innovate.”
While Naimi rejected pro-
duction cuts as politically un-
workable, he endorsed a freeze
on production at current levels if
major oil-producing countries
go along. The freeze idea, floated
last week by Saudi Arabia, Rus-
sia, Venezuela and Qatar, would
be a more gradual path to higher
oil prices, but it faces uncertain
prospects. Iran, just coming off
international sanctions, wants
to boost its production.
“If a freeze even gets done it
really does not accelerate the re-
balancing of the global market,
especially with Iran not partici-
pating,” said Dominick Chiri-
chella, an analyst with the Ener-
gy Management Institute.
Matching supply to demand
would still linger “well into 2017,”
he said.
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“The producers of these
high-cost barrels must find a
way to lower their costs, borrow
cash or liquidate,” Naimi said. “It
sounds harsh, and unfortunate-
ly it is, but it is the more efficient
way to rebalance markets.”
Naimi disputed a common
view in the industry: that Saudi
Arabia has kept pumping oil to
protect its market share and un-
dercut shale producers.
“We have not declared war
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The 81-year-old Naimi, who
joined Aramco, the old Arabian
American Oil Co., as an office
boy in 1947, said he had seen oil
prices swing from $2 to $147 a
barrel. The current price slump,
which has led to layoffs across
the U.S. oil industry, is just an-
other of oil’s inevitable boom-
and-bust cycles, he said.
“It is going to end,” Naimi
said. ‘When, I don’t know, but it
will end.”
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on shale or on production from
any given country or company,”
he said.
Naimi spoke at a gathering of
global energy leaders in Hous-
ton.
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The price of benchmark U.S.
crude fell Tuesday by nearly 5
percent to $31.81 a barrel. Brent
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Trial begins for driller
sued over Pa. gas wells
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SCRANTON, Pa. (AP) -
Two families who accuse one of
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the largest natural gas drillers in
Pennsylvania of polluting their
well water are trying to persuade
a federal jury to hold the compa-
ny accountable.
Opening statements were
made Tuesday in a bitter and
long-running federal lawsuit
that pits homeowners in the vil-
lage of Dimock against Hous-
ton-based Cabot Oil & Gas
Corp.
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Dimock was the scene of the
most highly publicized case of
methane contamination to
emerge from the early days of
Pennsylvania’s natural-gas dril-
ling boom. State regulators
blamed faulty gas wells drilled
by Cabot for leaking combusti-
ble methane into Dimock’s
groundwater. Cabot has consis-
tently denied responsibility.
The rural community be-
came a national battleground in
environmental activists’ fight
against fracking — the tech-
nique that allows drilling com-
panies to extract huge volumes
of oil and natural gas from rock
formations deep underground
— and its plight was featured in
the Emmy-winning 2010 docu-
mentary Gasland.
Dozens of plaintiffs settled
with Cabot in 2012, but two
homeowners opted to take their
claims to court.
“We haven’t had clean water
since my son was in kindergar-
ten. He’s now in seventh grade,”
one of the plaintiffs, Monica
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A natural gas well pad site on Sycamore Bend Road in Hickory
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Marta-Ely, said outside court
Monday, when jurors were se-
lected. “It’s not a normal way of
complaints continue.”
Residents first reported
problems with their wells in
2008. The water that came out
of their faucets turned cloudy,
foamy and discolored, and
smelled and tasted foul.
Homeowners, all of whom
had leased their land to Cabot,
said the water made them sick
with symptoms that included
vomiting, dizziness and skin
rashes.
After a water well exploded
on New Year’s Day 2009, a state
investigation found that Cabot
had allowed gas to escape into
the region’s groundwater sup-
plies, contaminating at least 18
residential water wells.
Cabot asserts the methane in
the residents’ wells is naturally
occurring.
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Leslie Lewis, the families’ at-
torney, said in opening state-
ments that her clients’ water was
clean and drinkable until Cabot
drilled two natural gas wells
near their homes in 2008. Ste-
phen Dillard, Cabot’s attorney,
told jurors the problems started
before Cabot began drilling —
and continue to this day, some
six years after Cabot plugged the
wells.
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“One would expect ... when
we filled the wells with cement
and shut them down, the prob-
lem should go away,” Dillard
said, according to the Times-
Tribune of Scranton. “Yet here
we are, six years later, and the
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Parks, Scott K. Denton Record-Chronicle (Denton, Tex.), Vol. 112, No. 206, Ed. 1 Wednesday, February 24, 2016, newspaper, February 24, 2016; Denton, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1127338/m1/3/: accessed June 24, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; .