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Thursday, April 21, 2011
Well fluids spill at natural gas site • The Oklahoma Citybased firm blames equipment. BY MICHAEL RUBINKAM
The outside of a natural gas drill site owned by Chesapeake Energy in Leroy Township, Pa., is shown on Wednesday. A blowout at a natural gas well contaminated a stream and forced the evacuation of seven families.
Associated Press
A blowout at a natural gas well in rural northern Pennsylvania spilled thousands of gallons of chemicallaced water Wednesday, contaminating a stream and leading officials to ask seven families who live nearby to evacuate as crews struggled to stop the gusher. Oklahoma City-based Chesapeake Energy Corp. lost control of the well site near Canton, in Bradford County, around 11:45 p.m. Tuesday, officials said. Tainted water flowed from the site all day Wednesday, though by the mid-afternoon, workers had managed to divert the extremely salty water away from the stream. No injuries were reported, and there was no explosion or fire. “As a precautionary measure, seven families who live near the location have been temporarily relocated until all agencies involved are confident the situation has been contained. There have been no injuries or natural gas emissions to the atmosphere,” Chesapeake spokesman Brian Grove said in a statement. Chesapeake said a piece of equipment failed late Tuesday while the well was being hydraulically fractured, or fracked. In the fracking process, millions of
C.J. MARSHALL/ The Daily Review/AP
gallons of water, along with chemical additives and sand, are injected at high pressure down the well bore to break up the shale and release the gas. State environmental regulators took water samples from the unnamed tributary of Towanda Creek on Wednesday but did not report a fish kill. Towanda Creek, which is stocked with trout, empties into the Susquehanna River. Officials said they do not know how large is the size of the spill. Neighbor Ted Tomlinson, who was among those asked to evacuate, said
ENERGY:
and the international specter of terrorism, respectively. The member of the Kennedy’s New England politiPickens counts cal dynasty wore his liberal President Obama as stripes on his sleeve, from supporting cap-and-trade one of his Pickens ideals to tax carbon emissions. Yet the environmental Plan supporters. lawyer and author said he is FROM E1 a “free-market capitalist” at heart, convinced that creating arguing that the concept a clean economy will generate of “cheap energy” was a lie safer and higher paying jobs because of the unseen costs for generations to come. of coal and oil, which include “The mantra by polluters air and water pollution, is that we have to choose behealth issues such as asthma tween prosperity and the en-
AMR: Its plan prioritizes replacing MD-80s for fuel-efficient Boeing 737-800s. FROM E1
“While we clearly must achieve better results as we continue to strengthen our business, we have made some meaningful progress.” AMR’s fuel-conservation efforts allowed the company to reduce fuel consumption to 597 million gallons, down 0.3 percent from the same quarter last year. But fuel prices that averaged $2.75 in the quarter, a 23.6 percent increase compared with the 2010 firstquarter average of $2.22 per gallon, sent AMR’s fuel bill soaring to $1.84 billion, a 24.8 percent increase over 2010’s first-quarter fuel expenses of $1.47 billion. “We anticipate we will spend $2.1 billion more for fuel in 2011 than we did in 2010,” Arpey said in a conference call with analysts
GAS: The cost of oil has gone up 20 percent since the beginning of the year. FROM E1
settled above $111 per barrel as the dollar weakened and the government reported an unexpected drop in U.S. crude supplies. Benchmark West Texas Intermediate oil for June delivery gained $3.17 to settle at $111.45 per barrel on the New York Mercantile Exchange. Oil has increased 20 percent since the beginning of the year as investors anticipated rising global demand and unrest in North Africa and the Middle East threatened oil fields and shipping lanes vital to world supply. Kyle Arnold 918-581-8380 kyle.arnold@tulsaworld.com
The Associated Press contributed to this story.
AMR Corp.’s first quarter (compared with 2010’s first quarter)
Net loss: $436 million (vs.
loss of $505 million). Net loss per share: $1.31 (vs. loss of $1.52). Revenue: $5.53 billion (vs. $5.068 billion). Source: AMR Corp.
and the media. “In this environment, it’s important that we continue replacing our fleet.” In 2011, American is retiring 25 of its 20-year-old MD80 aircraft in a fleet renewal plan that calls for replacing them with fuel-efficient Boeing 737-800s. Along with its purchase of Boeing 777-300 aircraft for international routes, the 737-800 aircraft purchases are part of $1.7 billion in 2011 capital expenditures, said AMR President Tom Horton. “These are very long fleet decisions we are making,” Horton said. “The 777-300 has 7 percent to 8 percent better unit costs than the 747400. These are long-term in-
he worried that fracking fluids will ruin his drinking water well, several hundred yards from the blown-out well. His well and several other private ones around the Chesapeake gas well were also being tested for contamination. “The biggest thing is the footprint on the environment,” he told WNEPTV. “Well, obviously this is a big footprint.” Katy Gresh, a spokeswoman for the state Department of Environmental Protection, said reports from the scene indicate that fracking wa-
ter was gushing from the wellhead, pooling on the pad, then escaping containment. “Discharge of fluids to the unnamed tributary appears to be stopped,” she said. Officials advised the farmer on whose land the well was drilled that his cattle could no longer drink from the stream. Francis “Skip” Roupp, deputy director of the Bradford County Emergency Management Agency, said a cracked well casing is suspected as the cause of the blowout.
vironment,” he said. “That’s a false choice. It loads the cost of our national prosperity on the backs of our children.” Pickens, who made his initial billions as an oilman with Mesa Petroleum, may not go that far. However, he has invested millions in wind energy and the campaign to eliminate as much as 2.5 million barrels of imported oil per day by converting 18-wheelers to CNG. His Pickens Plan, backed by 1.7 million online supporters and a precursor to the natural gas incentive
bill recently introduced into Congress, now has close to 200 bipartisan Capitol Hill co-sponsors, he noted. However, the NatGas Act has bogged down in Congress before, which Pickens conceded but would not allow to dampen his enthusiasm. He predicted that the latest bill will pass the House within 30 days, clear the Senate by late summer and be signed into law by the end of the year. Pickens counted President Barack Obama as one of his supporters, although Obama had
vestments.” American has five 777300ERs that are scheduled for delivery in 2012 and 2013, company executives said. However, the company is keeping a close watch on capacity, announcing its plans to reduce its fourth quarter capacity by 1 percent. AMR, which includes American Eagle Airlines, American’s regional airline affiliate, operates more than 700 aircraft. A series of natural and man-made calamities in the first quarter cost AMR significantly, said Chief Financial Officer Bella Goren. Winter storms in February, the Japan tsunami and a fuel farm fire at American’s hub at Miami International Airport had a $100 million revenue impact on the company, Goren said. Asked by an analyst why investors should have confidence in AMR going forward after it has lost more than $10 billion in the past decade, Arpey said a convergence of costs and revenue will improve the company’s position in the industry in the years ahead. Because American is the
only major U.S. carrier that has not filed for bankruptcy protection, its labor costs are higher than its peers, Arpey said. American is in the midst of contract negotiations with its unionized mechanics, pilots and flight attendants. “Nineteen of 30 major (union) contracts industrywide are amendable,” Arpey said. “Almost the entire industry is in negotiations as we speak or they will be very soon. In terms of results, if the U.S. taxpayers are funding your pension benefits (at bankrupt airlines), your results are going to appear better.” In the past four months, AMR has spent $170 million on retiree pension benefits, Goren said. “We intend to work constructively with our unions to close the (wage and benefit) gap,” Arpey said, “and we do think there will be a convergence of costs and that our results will improve.” AMR shares closed Wednesday at $5.64, down 6 cents. D.R. Stewart 918-581-8451 don.stewart@tulsaworld.com
AES’ $3.5B deal for DPL continues utility tie-ups BY JONATHAN FAHEY Associated Press
NEW YORK — AES Corp. will buy the regional power company DPL Inc. for about $3.5 billion in cash, continuing the steady consolidation of the utility industry. Utilities have been trying to get bigger to help them spread the costs of making their power plants cleaner in response to tightening environmental regulations on emissions. Also, low power prices and weak demand have cut into utility revenue and profits. Companies such as AES that sell wholesale power at market prices have been especially vulnerable. They’re attempting to increase the number of customers in regulated markets, where power prices are less volatile. AES, which operates in 29 countries, said Wednesday it will pay $30 a share for DPL,
an 8.7 percent premium to its closing stock price of $27.59 Tuesday. DPL owns Dayton Power and Light, a regulated electric utility that serves more than 500,000 retail customers in West Central Ohio. “We are concentrating our growth efforts in a few key markets, including the U.S. utility sector,” AES President and CEO Paul Hanrahan said. Combinations like AES and DPL can lead to lower power prices for customers by lowering borrowing costs and allowing the combined utilities to more efficiently run plants and buy fuel and equipment, analysts say. They generally result in job losses, however. And consumer advocates worry that bigger companies have more sway with regulators to keep prices high. In unregulated markets these mergers can reduce competition and lead to high-
er rates, advocates say. Analysts say the deal allows AES to make better use of cash on its balance sheet that has been earning a scant return. DPL, which generates almost all of its power with coal, has already invested in equipment to control emissions from its plants in anticipation of coming pollution regulations. With the equipment paid for, DPL should have strong cash flow in the coming months. That cash flow may allow AES to begin paying a dividend, like most other utilities. But there is some concern that DPL’s cash flow may dwindle. Under its rate deal with Ohio regulators, DPL can charge customers rates that are now 20 percent to 30 percent above the market price for power. That deal expires at the end of 2012, and analysts expect DPL earnings to drop sharply in the following year.
expressed some reservations about hydraulic fracturing methods one day earlier. “I have no concerns,” Pickens said about the president’s loyalties to the concept of natural gas fleets. “He’s doing fine. He’s going to be for our energy plan.” Kennedy doesn’t share Pickens’ optimism about federal natural gas incentives. He believes the better political track is state by state, citing CNG laws in Colorado as important first steps. “One thing I can’t be optimistic about is the political
Shutdown of wells in Arkansas extended ••Researchers•study• their•potential•link• to•earthquakes. LITTLE•ROCK•(AP)•—•The• Arkansas• Oil• and• Gas• Commission• says• two• natural• gas• companies• have• agreed• to• extend•the•shutdowns•of•two• injection•wells•as•researchers• study•whether•they•are•linked• to•an•increase•in•earthquakes• in•central•Arkansas. The• commission• announced•Wednesday•that•the• companies• owning• the• wells• asked• to• postpone• a• scheduled• April• 26• hearing• on• the• shutdowns• until• a• commission•meeting•May•24. One•well•is•owned•by•Clarita• Operating• LLC• and• the• other•by•BHP•Billiton,•which• recently• acquired• it• from• Oklahoma•City-based•Chesapeake•Energy•Corp. Both• companies• agreed• to• extend• the• shutdown• of• the• two•wells•in•Faulkner•County• until•the•May•hearing. State• seismologist• Scott• Ausbrooks• says• the• area• has• experienced• a• noticeable• decrease• in• seismic• activity• since•the•injection•wells•were• first•closed•March•4. system,” said the son of late U.S. Sen. Robert F. Kennedy and nephew of late President John F. Kennedy. The Sustainable Enterprise Conference, which included a daylong schedule of speakers and panel forums, was presented by OSU’s Spears School of Business. The event also included speakers from American Electric Power, Williams Cos. Inc., Dr Pepper Snapple and the Nature Conservancy. Rod Walton 918-581-8457 rod.walton@tulsaworld.com
FYI: BUSINESS ONEOK Partners ups payout by 1 cent Unitholders of ONEOK Partners LP will receive a first-quarter cash distribution of $1.15 per unit, the Tulsa-based natural gas processing and transportation partnership announced Wednesday. The distribution is payable May 13 to unitholders of record at the close of business April 29. The fourth-quarter 2010 payout was $1.14 per unit. In October, ONEOK Partners reported it would increase the distributions by 1 cent per quarter this year and between 5 percent to 10 percent annually in 2012 and 2013. CEO and Chairman John Gibson cited the $2 billion in capital investments completed in 2009 and up to $2.1 billion in growth projects planned
through 2014 as drivers for the increased cash payouts.
Bank of America to spin off unit Bank of America Corp. is planning to spin off its private equity business by the end of the second quarter. The Charlotte, N.C.-based bank inherited the private equity business, BAML Capital Partners, when it acquired the brokerage Merrill Lynch in 2008. BAML Capital Partners, which manages $5 billion in assets, will be spun off into a separate company that will be run by its existing management. Bank of America has been winding down business units that use the bank’s money to make investments. The move has been in response to new federal regulations. — FROM STAFF AND WIRE REPORTS
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DTAG: A merger would still help Avis compete with Hertz, one analyst points out. FROM E1
“It’s in the eyes of the beholder or suitor,” said Jake Dollarhide, CEO of Longbow Asset Management Co. in Tulsa. “Avis values Dollar Thrifty about the same as they did six or seven months ago. “It’s a matter of, ‘How do we make our brand stronger?’ It’s not so much about the price with Avis. What hasn’t changed is that they want to capture those (Dollar Thrifty) assets. They want the Dollar Thrifty brand to be part of Avis so they can compete with Hertz and Enterprise.” Enterprise is the largest U.S. rental car operator. Hertz is the second-largest rental car company, Avis Budget is third, and Dollar Thrifty is the fourth-largest
U.S. rental car operator. Fred Russell, CEO of Fredric E. Russell Investment Management Co. in Tulsa, said any suitor willing to pay $67 a share for Dollar Thrifty is making two assumptions. “First, Avis Budget is calculating that a Dollar Thrifty acquisition would cut out $150 million to $200 million in duplicate costs — fleet costs, software system costs and, especially, negotiating costs to buy fleet vehicles,” Russell said. “Second, you’re making an assumption that the economy will continue to strengthen, people will continue to travel and to operate rental cars. If you’re comfortable in those assumptions, you will feel good about buying a company whose stock only a few months ago was in the low-$40s.” Avis Budget shares closed Wednesday at $19.16, up 87 cents or 4.76 percent. Earlier in the day, Avis Budget’s shares hit a 52week high price of $19.21. D.R. Stewart 918-581-8451 don.stewart@tulsaworld.com