STEVEN PORUBAN
Managing Editor-News
It's time once again for some pre-autumn cleaning, when any good oil and gas editor worth his salt dives into some tucked-away e-mail folders to scrounge for any overlooked news tidbits that didn't make these pages for one reason or another.
What follows are a few items that this news editor found interesting enough to report.
Fracing and your mortgage
Recent research conducted by a Clemson University finance professor showed that hydraulic fracturing actually had a positive impact on mortgage defaults in areas where the fracing occurred.
The research, which was conducted by Lily Shen, assistant professor of finance at the university's College of Business, examined data from 2004-11 and found that mortgages originated in shale-gas fracing regions of Pennsylvania had a 58% lower default rate compared with the state's average rate.
The study, which the researcher claims is the first to link fracing with mortgage performance, "seems to debunk a widely held belief" that fracing has devastating impacts on the mortgage market.
Shen said, "When there's discovery of a mineral resource, a property becomes more than a place to live. The mineral rights are tied to property ownership. If a person defaults on the mortgage and loses the property, they lose the mineral rights and the potential revenue they could have generated from those rights."
The findings show that borrowers stopped defaulting on mortgages after the nationwide fracing boom-late in 2007-when extracting natural gas became "technically feasible and profitable."
Natural gas extraction creates income for property owners in the form of signing bonuses and royalty payments from leases they sign with oil and gas companies, which typically pay 15-25% of gas production profits.
"So, one can see why it behooves a property owner in these areas to stay current on their mortgage payments," Shen said.
Fracing has raised environmental concerns due to the excessive water it requires and the resulting contaminated wastewater. As fracing wells spread across the US, financial regulators, banks, and real-estate investors also expressed great concern about the possible negative effect of fracing on mortgage performance.
The research examined 372,000 residential mortgages originated in shale-gas fracing areas of Pennsylvania. It is estimated there are 300,000 fracing wells in the US today. Almost 90% of new US onshore oil and gas wells are fraced and account for more than half of the US oil output. In the last decade, fracing process has led to an eightfold increase in US gas production.
Japan's 'decarbonization'
Meanwhile, Japan is being urged by the International Energy Agency to balance and diversify its energy mix through the combination of renewable and nuclear energy and thermal power generation.
In its latest review of Japan's energy policies, IEA stressed that this rebalancing would help the country build a more secure, affordable, safe-and "decarbonized"-energy system.
In recent years, Japan's energy policy has been dominated by efforts to overcome the impact from the 2011 Great East Japan earthquake and the subsequent Fukushima nuclear accident, which resulted in the gradual shutdown of all of Japan's nuclear power plants.
This, in turn, led to a marked rise in fossil-fuel use, increased fuel imports, and rising carbon dioxide emissions. Subsequently, it also brought electricity prices to unsustainable levels.
IEA Deputy Executive Director Paul Simons, speaking at the recent launch of IEA's report in Tokyo, acknowledged that since the Fukushima accident, Japan's energy system has shown "great resilience."
He said, "The traditional focus on security of supply has worked. The future challenge, however, is more about climate change. Japan should take concrete steps to meet its 2030 climate target and to cut emissions significantly more by 2050."
IEA's report encourages Japan to increase low-carbon power supply sources.
"Renewable energy supply should become more cost-effective over time. It should also have a broader technological and geographical focus. Nuclear power should gradually be restored but only once the highest safety standards are met and public trust is regained," it said.
