Give Me Some Space! Trucks Need More Room

In July of 2013, the Houston Chronicle reported that 12 people had died in Eagle Ford Shale area traffic accidents, an increase of 12 times the number of fatalities reported to the Texas Department of Transportation. This past spring, the San Antonio Express reported that Texas Department of Transportation data showed a 40 percent increase in fatal traffic accidents in the Eagle Ford Shale region last year. There’s no question that the shale play roads are busy and congested. This makes it more important than ever for drivers to know how to share the road. While the biggest jump in fatal traffic accidents has involved commercial vehicles, recent data shows that the majority of fatalities from collisions involving large commercial trucks are not the result of the truck driver’s actions but of the other driver’s actions. Sharing the road with large commercial vehicles means all drivers must always be aware of their surroundings.

The National Safety Council has a definition for a Preventable Accident. The NSC states further the expectations of professional drivers, that “every accident in which a driver is involved shall be considered preventable unless there was no action, which the driver could have reasonably taken to avoid the accident and that, his actions in no way contributed to the occurrence of the accident. The driver must drive in such a way that he commits no errors himself and so controls his vehicle to make due allowance for the condition of the road, the weather or the traffic, and so that mistakes of other drivers do not involve him in any accident.”

Road-Sharing Tips

[ic-r]Share the road and be safe by giving yourself plenty of room to maneuver. You need plenty of time, too, so maintain a safe speed. Here are some common sources of trouble and how to avoid them whether you’re behind the wheel of a large or small vehicle, courtesy of Del Mar College Transportation Training and Shell:

Blind Spots - Avoid tailgating a large vehicle. Remember, if you can’t see the driver’s face in the side view mirror, the driver can’t see you.

Cut-offs - Don’t try to sneak into a small gap in traffic ahead of a truck. Trucks take as much as three times the distance to stop as the average car.

Rolling back - Leave plenty of room if you are stopped behind a large vehicle. When the driver releases the brakes after being stopped, the vehicle may roll back.

Buckle your belts - Always buckle your seat belt. If you get into an accident with a large vehicle such as a truck, seat belts are your best protection. Trucks require a greater stopping distance and can seriously hurt you if your car is struck from behind.

Aggressive drivers - Aggressive drivers can be dangerous drivers. Pulling in front of trucks too quickly when passing and making frequent lane changes, especially in the blind spots of trucks can create dangerous and potentially fatal situations.

Wide turns - If a large vehicle in front of you is making a right turn, do not move up into the space that opens up in the right lane. You are putting yourself into a very dangerous position.

Turbulence - Due to various factors such as air pressure and airflow, a large vehicle can create heavy air turbulence. This may affect your ability to control your vehicle when passing a large vehicle.

Avoid distractions - Keep your cell phone and other electronic devices out of reach and silence them while driving.

Keep your eyes moving - You should be checking your mirrors, gauges and surroundings every 3 to 5 seconds.

Look Ahead - Be sure to look 5 to 10 seconds ahead of you to anticipate potential hazards.

Staying safe while driving in the Eagle Ford Shale play calls for planning, patience and attention. Aim to give yourself plenty of time to get to your destination so you’re not tempted to speed or chance risky maneuvers. Look out for other drivers, and yourself.

Texas Ghost Towns & Implications for Eagle Ford Shale Counties

Graveyard

It might surprise most of us to learn that there are over 250 ghost towns in Texas. In fact, many communities in South Texas that are now being impacted by the Eagle Ford Shale probably had some concerns about becoming the next ghost town. That is, until unconventional oil and gas exploration techniques changed the landscape entirely. However, as residents of Texas know probably better than anyone else, booms will sooner or later lead to slowdowns, if not outright busts.

This sort of begs the question: Why do communities become ghost towns in the first place? To gain some insight into the issue, UTSA’s Institute for Economic Development examined the cases of Texas communities over the past two centuries that have fallen victim to significant population declines. Interestingly, there is no single factor as to why communities end up as ghost towns. In some instances – clearly applicable to the Eagle Ford Shale – natural resource abundance is the culprit. Typically, the supply of oil, gas, coal or other mining product runs out. In other cases, the commodity being mined falls victim to a steep and extended price decline. The Permian Basin area in West Texas, for example, has seen ups and downs related to the price of crude oil for decades. In other communities, the transition of locomotives from steam to diesel resulted in a drop in demand for coal mined in Texas.

“But the effects of the resource curse are not uniform and clearly vary by country or community – many do in fact end up better off. ”

But a fall-off in natural resource mining/extraction is not the only reason that communities become ghost towns. The mechanization of agriculture during the 20th century resulted in a decrease in rural populations, which in turn caused many small towns to systematically wither away. New railroads or highways that bypassed existing cities often served as a death knell.  In other cases, relocation of the county seat served as a catalyst for population migration away from established city centers. Sometimes the need for military bases ceased to exist, and the local communities followed suit. Drought and flood have been factors from time to time.

In the academic economic development literature, there has been a fair amount of research performed on the Resource Curse or Dutch Disease, which has demonstrated that in many situations, communities with an abundance of natural resources actually end up worse off after the discovery. This might be because competing industries are “crowded out” by the emphasis on natural resource production. In other instances, the temporary windfalls are squandered by local governments and citizens.

But the effects of the resource curse are not uniform and clearly vary by country or community – many do in fact end up better off. A key differentiating factor between those that are successful and those that are not appears to be governance. Several programs at UTSA’s Institute for Economic Development such as the Rural Business Program and the Eagle Ford Shale Community Development Program – in coordination with the College of Public Policy, and the Center for Urban and Regional Planning – have been working to promote just that. Good governance is the key to the long term prosperity of the Eagle Ford Shale communities.

UTSA Is Working To Assist Communities In South Texas

[ic-l]Along those lines, UTSA, with a grant from Royal Dutch Shell has developed a municipal capacity building program aimed at assisting community leaders address the many issues they currently face. In addition, the Institute for Economic Development continues to stress the need for diversification in communities across South Texas. Houston in the late 1970s, for example, was nearly 90% dependent on the energy industry for economic activity, but has since made significant efforts to diversify into other areas such as medical, finance and technology so that it is less dependent on a single economic sector.

For the rural communities in South Texas, the options are more limited. The relatively short list of industries with potential for growth include olives and olive oil processing, spinach and other agricultural products, geothermal energy, tourism, hunting, outdoor recreation, water recycling/desalination, and wine/beer making. In addition, if a robust broadband infrastructure can be put in place, there are prospects for telemedicine, distance learning, and attracting knowledge workers who prefer the lifestyle associated with smaller communities.

Municipal Capacity Building Workshop - Carrizo Springs 2013 | Click to Enlarge

But these potential opportunities cannot be actively pursued yet – they can only be planned at this point. UTSA’s Eagle Ford Shale Community Development Program refers to this approach as “strategically sequenced” economic development. Clearly local mayors, city managers, economic development directors, county judges and commissioners, and other community leaders have their hands full with the pressing needs of infrastructure development right now. That list is long and includes roads, water, wastewater treatment, solid waste treatment, medical facilities, first responders (police, fire, medical emergency), electricity generation, K-12 education, and housing – as well as broadband, improved public amenities and aesthetics that will be needed to improve quality of life. And yet, if the infrastructure in South Texas is incrementally and steadily improved, it can serve as the foundation for attracting other types of industry in future years.

“It is important to stress that long term community sustainability is not guaranteed.”

The Eagle Ford Shale discovery represents a significant opportunity for South Texas. But it is important to stress that long term community sustainability is not guaranteed. The extensive roster of old Texas ghost towns is proof enough of that. So it will be important for community leaders to engage in longer term strategy planning, undertake regional approaches to economic development, establish a skilled local workforce, recruit or nurture strong institutional management, and exercise fiscal discipline. If we can put these pieces together, we will have gone a long way toward ensuring that economic development – which includes job growth, quality of life, and environmental stewardship – will be sustainable for communities across South Texas well into the 21st century and beyond.

Hours of Service “Merry Go Round”

Running Clock

On July 1, 2013, hours of service (HOS) regulations went into effect that had been published by the Federal Motor Carrier Safety Administration as a final rule in December of 2011. The implementation was despite a lawsuit that was submitted by American Trucking Associations, a lawsuit that’s still pending.

Read the first part of this two part series in the article Riding the Hours of Service "Merry Go Round"

To recap, as of July 1, 2013 commercial drivers are only allowed one 34-hour restart per seven days. Further, they must take an additional three-minute break when driving for eight consecutive hours. This must include two periods between 1 a.m. to 5 a.m. home terminal time and may only be used once per week.

We are midway through the month of living with the changed HOS regulations. The pros and cons of the changes are debated every day. Among the complaints are that the changes are costing the entire trucking industry millions of dollars to implement and further that they reduce drivers’ pay. Overdrive magazine reports that Dave Osiecki, of the American Trucking Associations, stated the rules for the break do not take into account the extra time it takes for drivers to find parking and get out of the truck. (Osiecki is ATA’s senior vice president for policy and regulatory affairs.)

Getting Some Official Guidance

On July 11, the FMCSA published revisions to guidance that had been first published in 1997. The revisions are intended to help drivers implement correctly the July 1 changes regarding taking mandatory breaks every eight hours on duty.

In short, the clarified guidance states conditions that must be met to log meal and other routine stops made during on-duty hours as off-duty break time:

1. “The driver is relieved of all duty and responsibility for the care and custody of the vehicle, its accessories, and any cargo or passengers it may be carrying.
2. During the stop, and for the duration of the stop, the driver must be at liberty to pursue activities of his/her own choosing.”

Living with the Law

[ic-r]Here are a few helpful tips to make sure you are operating within the guidelines of the new rule:

• Time management is the key to your success. Allow yourself plenty of time to get to your destination. Use your breaks wisely and efficiently to maximize your driving time.
• Trip planning is critical in maximizing your driving time. Schedule your stops for fueling, dining, showering and resting at convenient locations that will have the least distractions that might take more of your time than you would like.
• Vehicle inspections are very important. Do not overlook possible component failures while you’re in route to your delivery destinations. Take care of components showing signs of failure before leaving to avoid costly and timely repairs away from your home terminal.

The regulation are here to stay for now, well at least for now, so we have to do whatever we can to be efficient and safe on our roadways while operating within the rules.

ConocoPhillips Ramping Up for the Future (2011) - Eagle Ford Flashback

ConocoPhillips Eagle Ford Acreage Map

ConocoPhillips began ramping up in South Texas not long after acquiring Burlington Resources. The following was taken from an Eagle Ford fact sheet over two years ago:

The conception of Eagle Ford started as a play off of a deal between Burlington Resources and Texas Crude. When ConocoPhillips acquired Burlington, the company began seeing well results in the area that enticed it to acquire more acreage, hence the birth of the ConocoPhillips Eagle Ford asset.

"ConocoPhillips was fortunate to acquire a strong position with low acreage costs in the Eagle Ford, one of the best shale plays in the county, before industry attention in that area became so intense," said Don Hrap, president, ConocoPhillips Americas. "When early results pointed toward a good opportunity to capture resource, the decision to ramp up was obvious."

With encouragement from top management in November 2009, Eagle Ford development was a go, and there was no looking back.

Read the full release at conocophillips.com

Natural Gas Exports & Global Gas Prices

Japan and Asia LNG Supply

Shale exploration technologies have initiated a renaissance for domestic applications for natural gas that include power generation, manufacturing and vehicle fuel, but also the growing prospect for export. Yet the possibility of exporting natural gas remains controversial. For example, several chemical companies have formed an advocacy group known as America’s Energy Advantage that is attempting to exert political pressure to limit exports.

Exporting Domestic Natural Gas Is Attractive At International Prices

It’s not hard to see why exporting natural gas is an attractive proposition. At present, global natural gas markets are not integrated. Prices vary from $0.75 per thousand cubic feet in Saudi Arabia, to $3-4 in the U.S. to around $12 in Europe, and as high as $16-17 in Japan. This situation is based on short-term shifts in supply and demand which have created export arbitrage opportunities,[1] which will be systematically exploited.

LNG Liquefaction Needed

In order to ship natural gas abroad from the U.S. efficiently, it must be supercooled to minus 260 degrees Fahrenheit near an export terminal at a deepwater port and transformed into LNG, which reduces its volume by more than 600 times. An LNG tanker then transports the product to its designated foreign market. When the LNG reaches its destination, it is revaporized (or regasified) back into a gas before being shipped to its final destination by pipeline. Each step in this process is significant in terms of operating costs.[2]

“Given the current worldwide price differentials, it is profitable to ship LNG to Japan from the U.S.”

 For example, given the current worldwide price differentials, it is profitable to ship LNG to Japan from the U.S. Assuming a U.S. market price of $4 per thousand cubic feet, there is the additional cost of approximately $6.40 to liquefy, transport and regasify at the delivery point in Japan – more than doubling the price. Even so, a healthy profit of $6.60 for every thousand cubic feet is still generated.[3] However, this lucrative opportunity will not go unnoticed by Australian, East African and even Canadian natural gas suppliers – all of whom have substantial natural gas reserves and are equally or better positioned logistically to ship to Japan than is the U.S.

Similarly, prices in Europe have remained artificially high because of Russia’s Gazprom monopoly on natural gas exports. With the threat of LNG imports from the U.S., the Ukraine and other countries[4], prices in Europe are unlikely to remain at current levels either. Further, Gazprom’s pipeline monopoly is already under siege from domestic producers in Russia, such as Novatek and Rosneft, and Statoil in Norway.[5]

In short, markets are dynamic. While there is an attractive export opportunity in the near term (3-5 years) for U.S. producers, over the longer term supply will catch up with demand and reduce global price differentials.[6]

A Global Market For Natural Gas Will Evolve

[ic-l]The eventual synchronization of supply and demand will serve to both moderate the demand for exports from the U.S., as well as put downward pressure on natural gas prices.[7] In the same way that crude oil has become a global market, so will natural gas. This will come about as a direct result of new, significant natural gas discoveries and eventual production in the U.S., Australia, East Africa and probably China – perhaps other countries as well. These countries will seek to export their surplus, or in the case of China, reduce their need to import. Taken as a whole, these new supply markets that extend well beyond U.S. borders will serve to keep a cap on natural gas prices at an estimated $4-7 per thousand cubic feet (and arguably in a tighter range between $5-6).[8] This kind of price stability would indeed represent a significant shift away from the frequent spikes that occurred during the era of conventional natural gas exploration and production, which is steadily giving way to unconventional methods of production.

[1] Energy Information Administration. “Effect of Increased Natural Gas Exports on Domestic Energy Markets.” U.S. Department of Energy. January 2012.

[2] Kawamoto, Lt. Hannah. “Natural Gas Regasification Technologies,” USCG Proceedings, Winter 2008-09.

[3] Henderson, James. “The Potential Impact of North American LNG Exports.” The Oxford Institute for Energy Studies.

[4] Peaple, Andrew. “A New Foreign Policy for Gazprom.” Heard on the Street,The Wall Street Journal. January 29, 2013.

[5] Marson, James. “Gazprom warns of a drop in profit, driving down stock” The Wall Street Journal. Feburary 11, 2013.

[6] Medlock III, Ph.D., Kenneth B., “U.S. LNG Exports: Truth and Consequence.” James A. Baker III Institute for Public Policy, Rice University. August 2012.

[7] Henderson, James. “The Potential Impact of North American LNG Exports.” The Oxford Institute for Energy Studies, from the Preface by Howard Rogers.

[8] Henderson, James. “The Potential Impact of North American LNG Exports.” The Oxford Institute for Energy Studies and UTSA Center for Community and Business Research estimates.