>> now, bear in mind carter was president in the 1970s but this has been going on for a

long time. so i would suggest, cynthia to you and others, a government scientist who might be called the father of fracking is al joost of the national energy technology laboratory. he was responsible for the appalachian basin by changes in government funding. they are several industry folks who might also deserve this title, the father of fracking. these would include keynote the epidemic overdesigned the early massive hydraulic fracturing experiment in colorado in the 1970s. and, of course there's george mitchell whose company was the first to make fracking afghans shale coal sugar this is done in the 1990s. then range resources, the first to put a massive hydroelectric fracture on the marcellus that all these people are deserving the academic types include physicists and engineers.

while it is not fair to include me on the list of potential candidates for the title you did ask me to explain myself, is that right? okay. i was blessed with funds from uncle sam and some of the early pioneering work on gas shells back to the 1970s. this is the same time george mitchell was experimenting with the gas shale in ohio then using government funds. from the eastern correctional project. then later egsp funding came to me to try to understand the state of stressing gas shells in the appalachian basin. that was in the 1980s. i was a small part of shells avenger which was on the first attempts at producing gas from a standard gas shale as we know it

today. at penn state i had an amazing group of graduate students. this is very important. it was not the faculty members but the students that are associated with faculty members. all of these students contribute significantly to our present understanding of gas and oil shale. we came to understand which natural fractures regard my high pressure gas. we came to understand the rate of fracture grows the timing of fracture growth impetus tradition of fracture growth. all of these are important elements that make commercial gas production possible. and, finally and most importantly, none of these are the discoveries of one person. >> thank you. i stand corrected on that. i understand there's also a woman involved, a geologist as well back in the olden days? >> no. as a matter of fact there were two or three names

interestingly enough, when the new york state survey, before it was called the survey, decided to understand and mineral industries of new york state this would've been 1843 a geologist with responsible for that and it just gotten married. i suppose his wife was looking for a honeymoon to go to europe, but rather they said you're coming to me to map in western new york. now, she was a good artist, and on her honeymoon she drew pictures of these fractures and gas shells that still remain seminal. that was later matt by a cornell graduate student in 1912 and that still remains some of the seminal work in understanding fractures and gas shells. that allows you got to do whatever you do.

>> thanks. i understand that you met doctor englander early on after the calculation. how did you get involved in fracking? >> i guess my background is we're just trying to find securities in growth industries. as we were talking at lunch we coincide with local shale was dying and that's what i got in industry is when the gulf of mexico shelf was where the hot ipos came from. that ended, and one of the first companies i found thereafter was mutual energy, as referenced by terry. so we kind of got tired of the gambler's ruin in the shelf, and without some companies do very well, get bought out, some companies actually disappeared. when i saw mitchell energy it was an onshore company going

sustainably every year on vertical crack at that time, had not gone horizontal. i was very excited about that but it's also a curse in another way because after seeing george and his company at i guess right beforebefore the take-up at a very early stage of horizontal application of fracking, they sort of implied to me this would not work outside other acreage. i was too young to realize every company says that. silent for quite some time going, while not okay guys this stuff outside here is just not going to work. that cost a couple of very, very good companies and ideas along the way. but i came around finally pick in 2005, was interesting about the fayetteville show from the barnabas with have unique characteristics that could not be replicated. as it so happened in the fayetteville they drove to wells, stock went up and those could not be replicated or what

was exciting and got me involved with terry, population as a landmass was multitudes bigger than the fayetteville or the barnett and today for very different reasons it has a very unique place in the u.s. as an exporter of gas come as an exporter product as a net exporter. i think from a stockpicking perspective and very exciting place to be. so anyway, i went to the father of fracking, you know -- >> who needs a new title. >> to understand this basic, but it was chesapeake energy the body company and had to take a position there but it was tectonically to forget everything about it was a different man the other place. that's where i found terry enter introduced me to a lot of work that is to attend pronounce and concepts i didn't understand but it's been, what was amazing about the whole shield extremes was there was no book you could read.

the education even now is a much real-time. along the way clients asked why don't you write a primer. the primaries of historical. there's so little i know. every passing day or so little until yet i feel i have known a lot since we had our chat. outside military and he helped us. terry i think phrase the pennsylvania experience very well, and since then pennsylvania, and ohio. increasingly able to west virginia and iraq is getting more powerful, far more productive. the techniques that are using to exploit the rock art by the way of wells are capable of doing these astronaut greats that in the gulf of mexico where things that could happen are now being experienced in a single well per well in places like ohio west virginia and pennsylvania. >> is at the primer had not been written? a great introduction for mr. gold and his book "the

boom." i understand that this may be a love it personal for you as well and i have just a personal for me it's great to be on the end of asking you questions rather than answering them. sabrosa, why don't you tell us a you got into? >> i will definitely get into the personal in a minute of my story is a classic example of how it's better to be lucky than smart. when i was starting off at "the wall street journal" looking around for the become a joint the energy team. not for any particularly good reason. other than the fact i was in texas and a whether to stay there. they assign to this most companies mostly doing u.s. domestic oil. very few investors were really interested in because of renewed it wasn't much oil and gas left in the training. we were depleted and we were importing. there wasn't that much money to be made. let's give it to the new guy.

as a new guy i go off and start meeting with companies and one of the companies wants to talk to me about the new drilling that doing in around fort worth. i went to my first frac job in 2003. we didn't even call it fraud job acting. we didn't have the technology. it was unconventional gas. really i got in on it very early on just listening to companies talk about how they found a way to drill lots of wells and get lots of gas. for several years that's what i did. i covered and what about the companies i wrote about what i saw something very specific in the united states. one day about those of the late i got a call from my parents, my mother specifically, and they on 100 acres up in north-central pennsylvania. a place to get away on the weekend. she said which is got a strange call from a company called chesapeake. want to inquire about leasing our land.

which caught me by surprise. i should have known about this but at the time there was a little drilling going on in the pittsburgh area but this was hundreds of miles away, clearly, clear across pennsylvania. so really i do go back and start learning about why chesapeake was leasing all the way so far across pennsylvania. and i did add a rula ghani onto the second stage of the of fracking and what was going on. it really brought me into these questions of should we be doing this? asked the question my mother asked, should we sign a lease? and how can you get the benefits of all this oil and gas in the country come into united states, and minimize the risk and inconvenience and the downside to it? those are very important questions, and i will posit that it don't think those questions have been answered into united states it. i think we are still grappling with them.

i'm based in texas and texas was about to pass a law which is look at that very issue, who should regulate it state or the city's? we are still negotiating. i think it's important because one of the questions i know we'll get to it is why hassan shale taken off outside the united states? it's transformative inside the united states and canada but outside the united states it barely has started. i think one of the answers is because as much as the united states have struggled with these questions, we had one thing going for us. we had incentive. americans into united states, we own our own mineral rights. so chesapeake wants to come and go on 100 acres of land they are going to make an offer and they're going to they could offer that's sweet enough hopefully to overcome the inconvenience of having trucks driving all across your property for the next few months. outside the united states that's not the case because much as we're struggling in the united states with how to balance these

questions and i think outside the united states it's even more difficult because that incentive question hasn't been fully addressed because by and large it's the government or the states on the mineral rights. when you go into the community can say we want to drill you are not also bringing large checks as they do in the united states. these are topics as i wrote in my book "the boom," i wrote all about this. i wrote about ally yost. i wrote about terry come all the different people who greater this technology and also the questions we're struggling with today. i see this as one of the most important question for dressing in the united states clearly in energy. and all these questions which we talk about and are talked about in washington exports, we allow exports, oil exports, keystone xl, all basically question data been set in motion by fracking and this enormous new production of oil and gas that comes from essentially an oilfield technique that's been around for

several decades and then one day in the late 90s someone modified it slightly and completely changed his countries energy landscape. >> let me put it to direct the. the title of the panel is can fracking survive cliques i think in the last week we saw the price of oil about $59.50. the price of gas a little over $2.50 per btu. i can july prices were a lot different last year. they have been even lower recently. under the circumstances, we've already seen rig counts going down. weetzie notices of job losses. can fracking survive? if so what can companies would be the ones to establish themselves out of the and. i broke out into the last part first. i personally think an enormous change is happening right now as

we speak but i think the productivity of shale oil because that's what the global market is what is hugely underestimated. musical i remember clients asking the same thing happened to gas them which has fallen precipitously for me six to 10-dollar range to what is never top $4 sustainably, it's not about to happen in worth of oil? we have no way to tell. we understand that the oil molecule is a lot bigger. terry can quantify exactly, a lot bigger than a gas molecule. it's a different beast and far more problematic. the world now understand that the u.s. can grow at a rate of 1 million to 1.5 million barrels are very close to it can grow in excess of that. they have made room for the. the irony of this is that if we were to express it this way is that okay so the u.s. oil from every last barrel is profitable for matter what the cost was and was so that 90 100 each of

marginal barrel made a profit, which is fantastic. demand must have been great. you look at the numbers. demand wasn't good at all. so what happened was that the global forces allowed u.s. oil to have a place in the world at a rate of growth that they then decided ultimate looking at what was going on saying, wow, we are done at 32% market share. this is not just a little bubble that pops. to what was decided last november, we will not about. we will defend our market share so that is a sea change because what we have is an industry that initially was asked to gas but they trained for those dollars into oil thinking it can grow

forever. when you have a business where every item you so marginally is profitable, what do you? you leverage that this is a. you hire lots of people. leverage is great. ut deleverage into that business. we may have built in your environment where million, 1.5 million barrels will not be allowed to speak is too much excess capacity. that excess capacity exists in terms of land a lot of land would basically be returned back to the leaseholder not to be drilled again. you have way too much in capital. you don't love our business where, where your revenues are as, you know as influx as ours our. where the rest are what they are pixel leverage will come out of the business. talent and services. so the service aside you've already seen. you've seen the halliburton,

schlumberger's at all these people. what to do what it is this hard-won talent within his organization would hugely capable people. they want to retain that because you can't get it back. that's probably your next stage. what we are about to enter is a phase where all that excess capacity is resized to the new place for u.s. oil and that new place or use one of if not 1.5 million or 2 million barrels to mib a fraction of that. we are still trying to grapple with it. my point is kind of backwards, it depends on the oil price. oil price is a nerve signal, said all these forces come to bear. they can face its content to the oil price, through the produce and the producer says really frankly $65 we are done. but we'll start back at something closer to 70 which 70 75 or 90 or 100 anytime soon. if we were if new synagogue where every barrel is profitable

which with and sustained growth about 1 million barrels a day. with an analyst your with a washington research group at guggenheim in d.c. she covers a lot of the iran topic and so on. of course, iran is a hot topic. who's going to make space for those barrels next year? audits of a deal operated. so we are going to resize this entire sector. i did want to answer the first question, last question first. but what it means to me is that what we are already seen as it's like an earthquake centered you have the core and the fringes, the french companies already under huge stress if not on the verge of bankruptcy, et cetera. the core issuing a. who's in the court is the best rock and i think it plays two things, the price of oil can thank out and then it will be the differential. it's going to be the cost of getting that barrel to the

end-user that also conveys their places like the balkans which a been a huge success story is suffering a horrible differential. it's basically distance and thing that marginal barrel. -- bakken. yesterday 15% off the top of the cost of getting it to a sale of 70. you're not getting 70. i think we want to get close to the end user market, closer to refining center, eagle for and it's going to be a new play in oklahoma. the company like new field exploration and acquisition fiscal wake-up one company wanting eagle for buying another company for that reason. >> russell. isn't the boom now a bust? >> i don't think so. we have coaching as you put it and never come huge number of

drilling rigs lay down and the commission. a lot of people laid off but we've also seen production remaining fairly steady. witnessing a huge drop off in production. we are not political issue. will probably shrink a little but we ran up to 9 million barrels a day and we will sort of we are sticky coming can pick one of the reasons is this is a really immature industry in the sense that is just learning how to do this. it's on how to make bigger wells for less money. to get more oil and gas out for less money to drill more wells, longer wells with fewer rigs. a lot of the shouting going on his company she is getting smarter. the era of rapid relentless growth i think clearly is over. they're so question in my mind about that. but also don't see any signals that production is going to drop off. in that sense, no we are not

going through a bust. however, the are a number of companies. wall street is very generous funding these companies and there's a lot of management teams that went out and bought a lot of, well, i will be generous, suboptimal rock. they just did not spend the money very well. and that those companies will be bust. they will not be able to survive. so we are going to see a lot of the. i'm actually surprised we haven't seen more already, but the expectation is the second half of this year you will start seeing companies headed towards firesale. however, the era of the u.s. as a major oil and gas producer which in my mind is what the boom is all about, that's not going away anytime soon. >> terry, i know you have a strong opinion about opec and "the wall street journal" is reporting today that they are saying the price will not get back up to $100 for a long, long time. have they squashed the shale

revolution, in your view? >> absolutely not. the point that russell just made, the most important point is that there is oil available at every incremental increase in the price of a barrel that is there and waiting for small incremental changes. i think the other point that russell made which is about the u.s. right now has a fleet of oil and gas wells, while they may have very rapid early declines, the later history of these oil wells is a long period of production. this is particularly to of gas wells also. so innocents in the capital that was spent poorly on is betting on these long tails, at the long tails of these wells will sustain this level of production from american wells. and these are unlike

conventional wells where once the convention will declines it really goes off the books in terms of production. they have tight gas untied oil wells won't show that, that particular characteristic at least not as rapidly. we got some experience in the appalachian basin where some of these wells were drilled for as much as 40 years and the big slick water fracking experience we have of course is not only 10 to 15 years old in the united states and would look at the barnett to see of these wells are doing and right now a lot of these wells are being restructured and that particularly appears to turn on more gas to extend the life of these wells. so the last a long time. at a very low rate relative to the initial production called that in detail in my that is

detailed will do very well. >> what is your view on whether fracking will take off anyplace else outside the united states given the price and the current environment? >> they are trying. i think that view that there was only one barnett was true. and that there was only one barnett, there was only one fayetteville only one marcel. all these rocks have very distinct characteristics that i would agree we've barely begun to understand the i think as an aside, and two things, one is just on the prior question what i think of how our industry has changed is that we spent 130% of cash flows and has been fully funded by wall street if you just want to call it that, but by investors. i think we're going to a cash flow neutral world. this is the first time since

they shall revolution has occurred in the u.s. where we're going to enforce cash flow neutral growth. if that's not a sign of maturity i don't know what this. in that respect i do think the shale sector in the us has changed substantially. in terms of what these companies are going to do think applies to these other countries. they will put a lot more effort in understanding iraq that they have. one of the problems is there's big data sets hasn't existed up until the very, very recently. there so many little parameters on the rock-bottom were visible at a microscopic level but you have to collect that data and they make sure that the science is good that you have the same variables into well that they do not very one bit and didn't understand why they vary in performance. we've seen wells that are within one square mile of each other in a very same rock come in terms of points, 100% apart. so industry will spend a lot

more time with the place they have to understand why those races exist. so before we take off internationally i think we've taken the view that brute force works. for instance, if we put x. thousand gallons of water in let's put more. if we put x. thousand pounds of sand or a staging let's put more same. if it can stages, why not give 40? it's all been about brute force. wanting for status for data gathering and what we find is that our intervals to work a lot better that explains the various into well bore's almost completely. so before we make the same mistake, i should say a state it's all part of the process but before we go internationally and start with the brute force aspect of the because, frankly i don't think they have the equipment. you don't have equipment to put in his many gallons of water at this -- et cetera, et cetera i think we need to refine the site

and understand. so internationally there's a lot of things, russell was talking about, incentives there exists. i think before really takes off those incentives have to exist elsewhere. a lot of guilt i think companies are getting to figure it out are just not very good. you know and will take to much time. so i don't think i said anything remotely paralleling what we have here anytime soon. i believe in the report russia, what comes to shale oil russia was bigger than we were before the only country -- close to us was venezuela. i'm sorry, argentina. venezuela was slightly below that and was algeria there? anyway, so these were a view of the hotspots.

i have not seen one project really take off. >> terry, talking all of it about geology outside the united states. you've been traveling around the world talking about marcellus and the geology. have you studied any of these shale plays outside the united states and the way things could actually develop quickly? >> yes i have. and the answer is no i don't know anyplace they could develop quickly. let me explain a couple things quickly by following up on subash. subash mentioned to wells can be drilled, with one another offset by 1000 feet and behave differently, 100% of the. we also know and this is where the real science is going to come in to the for each well as you understand it is fractured in stages. what that means is if you have a lateral that is 5000 feet, each individual stages only a couple hundred to 300 feet. the industry knows that if the

our 15 stages in one welcome only two or three or four of the stages are money stages. the real scientific breakthrough i think that will happen on a lot of this is drilling a well and an understanding where you put your money, but three or four stages are really critical and that's more or less gets back to the question of where are the fractures? fractures can vary a great deal from one location to the next. even in a length of 500-foot 5000-foot wells. to answer your question, cynthia, the are a lot of parameters that really matter and make a big difference. for example, china early on was believed to have a fairly decent resource in gas shales but the chinese gas shales are different, but say the marcellus for two reasons, one of which is the marcellus was marine, a sickly deposit on the bottom of an inland sea, salt water.

and the chinese gas shales, some of them are deposited on the land surface and river channels that are not yet below sea level. both produce a show both produce organic matter in the shale and yet they seem to make a big difference. the marine marcellus has proven to be far better than some of the fluvial gas shales of china. we know there are other parameters in the rock. in fact, subash mentioned on the microscopic scale that are as many as half a dozen different parameters, all of them almost have to be perfectly aligned for gas shales to work. if you have one for example, the polls -- polish gas shales of you to much water to allow the kind of gas production they really like. so that's been a bit of a disappointment. we have a suspicion that maybe

the shale under the paris basin which is different in age, different and depositional setting in the shales in poland for ukraine and the french have elected to take a pass on the paris basin. then we have the midland basin in england were i think the british government under cameron has realized if the local people are going to participate in this, they are going to have to be rewarded in some way for their nuisance. that basin consists of a lot of cold aged rock. coal in the united states was deposits them in order to hundred 50 million years ago. younger than the marcellus older than let's say the paris basin. than just a completely different set of parameters. and all of these things need to be sorted out. it is true however that the biggest gas shales really seem to work in the united states are these large basin marine gas

shales, if this includes barnett, of fayetteville, the marcellus for example, a little bit younger in age is the eagle ford in the hands of each one of those are marine shells and they seem to have the best set of characteristics. a marine jail comes to close to mimicking some of the properties that really work in the united states. >> russell we started talking not just about geology but some of environmental and other issues. can you expound on that? >> absolute. i want to follow up on something that terry said about the paris basin. we don't really know because we haven't drilled that many wells into these places. one of the things when i first learned really struck me is just the number of wells that have been drilled in the united states is an order of magnitude different than wells drilled elsewhere.

when we start talking at shales in poland and france, the only way you can determine whether the shales will produce oil and gas is to drill wells and drill a number of wells. duchess has been done outside the united states and it will take time to drill those wells to take core samples to collect data. once again getting back to the environmental question, china was said to have as large gas shale deposit. the problem was that one of the deposits was in a very arid region to the north to the other one was in a part of the country which had a population density similar to new jersey. need a place really, did make a lot of sense to drill. on the one hand, you trying to drill in places that is dried and you need lots of water and lots of liquid to crack the wells under slot of competing demands for that water. then you go to a place to where

has population density and user difficult to drill their big we didn't get all the details you would in the united states but there were a number of protests over, as trucks came income as rigs and things were set up, there were a lot of local protests saying what is going on? what's the impact going to be and how will we be compensated for this? that essentially slowed the chinese growth of the shale, even though arguably china would be an extraordinary beneficiary of more domestic with produced gas. they are importing out in enormous numbers and it's a secret they have large environmental and pollution problems and would love to have more desperate these are issues which is simply haven't resolved. the shale that seems to be moving the quickest

international limited a couple times the block in and argentina argentina. that just happened this to be lucky in that it's in a very remote area where there has been a history of mining and there's sufficient water there. so once again you happen to found a place with the right conditions, beneficial conditions for going forward. those just are few and far between. i'm going to come back to this issue, what really made shale takeoff in the united states was the fact that you companies and landed in going across pennsylvania and texas and in a large checks $10,000 20000, $25,000 an acre to lease the land and by the way, you're going to get an eighth of the royalties on any oil and gas that comes afterwards. nobody said it because individuals owned the mineral rights. and are just i don't believe there are any other countries or if there are it's escaping me, that private ownership of

mineral rights. so what does the state do? there hasn't been a good answer for that yet. >> your book does a great job of talk about the positives and negatives of fracking. assuming that another country decides to move forward with fracking, beyond argentina, what are some the lessons learned that you can pass on to them based on the experience in the united states? >> i think there have been several. first of all one of the problems we've had is we will start drilling for oil and gas in an area and then all of a sudden there will be disputes about how has this impacted the quality of water the quality of there? one of the lessons learned and are doing this in pennsylvania, is measure the quality of water before you start drilling, measure the quality of there. that we know exactly what impact has been. as a bonus you develop a fairly large environmental database about the course of water and air in the countryside which is not a bad thing to do.

better data, better understanding is first and foremost. another thing that i think was certainly a lesson the federal government learned out of the deepwater horizon is that it is very difficult of one government agency that's both promoting the development of resource at attempting to regulate it as well. one of the things the federal government did offshore after the deepwater horizon was a split that into two groups. we haven't seen the states do that very well but certainly if sheldon bell takes place elsewhere that will be something i would look for, have one government body charged with leasing and getting interest in getting exxon and other countries to come in and another one in charge of protecting the quality of water. the final point i would make is well construction. sounds very boring, well integrity, it's critically important to nature if you are drilling wells 5000 feet if you're building the wells well

and that they're going to survive for 20, 30 40 50 years and be sure that right up front. that's how you know we talk about fracking and the problems associate with fracking. most are associated with well integrity. if you can build a well right, get a cementing into steel right, you're not going to have those problems. >> terry, i know that you are very recently something about the missteps in pennsylvania, in response to some international bans on fracking in romania, france and other places. what are those missteps following up on with -- >> russell is mentioned a couple of them. in order of importance i think i'm one of those great failures in pennsylvania was to understand, and industry understood how important was to measure the quality of water in individual wells. they misunderstood that that

baseline chemistry had to be established in every well. if they did it in one well intend, that proved not to be good enough because in pennsylvania, for example, there are no standards for water wells and it is well known that 40% of all private water wells in pennsylvania would not pass epa standards. it's very easy for the public to identify a well that they have problems with and immediately blame it on industry regardless of whether that actually happened. as russell mentioned water will standards. the second of course in imports was well construction. just to amplify a little bit further, the early wells that were drilled in pennsylvania by more than one company were wells in which a production stream was passed down through several thousand feet of upper devonian rock without being cemented. at the time the industry first came to pennsylvania to industry

did not realize the extent to which this three to 4000-foot interval of upper devonian section was gas of charged in itself, not gas from the marcellus necessary but at the gas from other layers. and it into the open well bore, went up several thousand feet and bite into groundwater. so those are the two most important. other issues, one of which was industry made i think a fundamental error and a law that was passed on as the halliburton loophole in which the additives that were put into frac fluid were held in secret and, of course, anytime you keep a secret, why, that creates a public distrust. that was remedied very rapidly by a website called for a focus. and it was the disposal of water and what to do it -- frac focus.

very early on the pennsylvania a lot of water was dumped down wells, and we have known as a geologist for the better part of a half a century that you put a certain amount of water down a well that will cause local earthquakes. that was discovered in the rocky mountain arsenal in 1960 and yet it is an error that's been repeated again to academic is going on in oklahoma right now and that is not a consequence of fracking. that's really the production of oil with a very very large water cut with water has to be disposed of entity being disposed of in massive amounts and we know that's going to cause earthquakes. another issue, when industry a ride industry arrived from places like west texas where there were very few people living educating have to do such things as build holding tanks very well for blowback flutes.

pennsylvania had demanded these fluids well. the first holding tanks were nothing more than open pits in the ground lined with plastic which tentatively. now industry is going to completely self-contained systems to prevent this from going on. another industry habit that created a lot of problems early on is the industry would air drill or by air drilling the initial thousand feet air drilling through the water table, that they are under high pressure these decide to push cutting back up the portal where they can be recovered but that air pressure pushing against open holes in which the air pressure was leaking into the surrounding rock that had groundwater, and that pushed a front of methane in front of it towards people's water wells, pushed backward toward towards people's water wells and this greater in number of issues. if you're the owner of a private well that's been recently claimed for years and suddenly

it becomes dirty and bob litt may think of you going to raise cain. that's a list of six mistakes industry made, all of which i think have been mitigated through reasonable extent right now. but those with a six that, of course caused a national uproar and it's going to take industry a long time to download that spin they the want to add any lessons learned for industry and investors out there in other countries? >> i thought it was very comprehensive because of the problems that terry said were highlighted in the various media forms was before these learnings. whether the countries have a huge benefit right now of is a very fine degree of best practice. and as a well construction water disposal, water procurement, communicating the traffic if and when possible and how to dispose of water wells and avoid earthquakes by doing seismic program at a time they can make sure you're not

near any local false and things like that. there's so much. we have learned so much where some the problems are being highlighted. right now probably more into transportation and is probably in the physical production because we've come a long way. i think he of the country will be a huge beneficiary of those learnings. >> before it opened it up to the floor, because this is the atlantic council we will talk geopolitical for one second. there was a lot of talk when the ukrainian crisis happened about potentially taking gas from the block them, liquefying it and sending it to lng exported throughout the state. there were lots of bills very recently about crude and lindsay exports. -- lng exports. isn't really feasible or not what do you think? >> there's no reason technically you couldn't do that. there's a large, was called liquid natural gas we take it

and go down to what 160 degrees below zero fahrenheit put it on a ship and take it elsewhere that happens all the time. the issue that came up around the ukrainian crisis was one of time it becomes a crisis that need a short-term solution. and lng and exporting gas is long-term but exporting gas is long-term but it's going to take years to put the infrastructure in place. but if that's the direction you those wants to go there is no reason why the u.s. couldn't be a large exporter of gas. the other hiccup i suppose with that thinking is that the use energy system isn't government control. the federal government may have had every reason in the world to want to bring gas to ukraine at the point but there's not a history of telling exxon and bp and shell and chevron other work well to direct their gastric we let the market do that. there's a couple of the changes

that would be required to get to that point. >> does anybody else want to speed as i was going to add when i think about some of the girls that oil has now cable oil prices are, one of the hurdles is were not the low-cost producer. and shale gas we kind of are. we have definite low end of the spectrum. in oil we can export and and shale gas we can. so my pendulum has swung back. and the third thing is that gas companies have adjusted their capacity to this lower gas price world. the oil producers are about to undergo a very traumatic probably figures in adjusting to the i can feel pretty good about the u.s. gas producers. the other thing, and longer-term view, where i think the elegy game is going to change also -- lng game. a complete historical shift is a link to the oil price.

as the are more ships on think was a delinking from crude into will be a far more, it will be a far more i do know competitive situation i think when you don't have an oil price link. even if oil price were to go back. we don't have an oil price provide an umbrella for this project and it will be a test project with. i know if i'm an end-user, one of a half-dozen countries companies can't do this but countries can. they can collude they can definitely say we are not going to take that price. and then we'll see which of the best projects when i think the u.s. is very well situated for the lng. >> yet i am reminded that gas coming out of the middle east, a lot of that gas is associated gas which means it is produced as a byproduct of producing oil which means it is produced at no cost.

and, of course the american gas the show producers still have a cost and and principle didn't even if we were to liquefy this natural gas we might be competing against the market where people can continually undercut whatever is that we tend to want to sell overseas. this is true of the canadians who are also trying to liquefy natural gas. they will have to be competing against gas coming out of the middle east that can veritably undercut canadian gas. >> throw it open to the floor for questions. thank you. please introduce yourself. good afternoon. i'm bill holland reporter with s&l energy. actually edited two of the three up there. -- interviewed.

i always showed us to i was at the first appellation show conference in pittsburgh in 2008 when dr. engelder got up and said they change the estimates of the size and we've gone from 15 to 500 tcf. the 500 sl that but i want all these people leak out of the room when they heard that number and get on their telephones. so that brings me to my first question dr. engelder. we have three place in appellation that us.com they have a number for how the total of all three of them come with a potential gas is? >> well, you know, i like it better with the jackpot once and the smart better the jackpot once will not try again. having said that let me remind you, welcome to kill appellation base most amazing place and will because from bottom to top we have the utica, the marcellus the geneseo orion street and

then, of course the original gas place in the appalachian basin can the appalachian basin big sandy cooper collected into the abyss being a stack of six. you can let your imagination run wild in terms of what this will do. there've been some very good wells. i think you're counting that as a third level but at the same time i know the rhine street has been tested in the western part of the state anderson people unhappy with the outcome. but that remind you that when they first called me up we were looking at the five original range wells and the ip coming out of those five wells with anywhere from i think 1.4 billion cubic feet per day the highway was 4.7 or something like that. at that point in time for billion cubic feet per day was judged as a great well. of course, right now 4 million is a failure.

so i think that each one of those layers that i've named have come up to that 2008 standard but today we have the utica range i think holds the record right now utica at a flow rate of 59 million witches equivalent -- >> and 54 on the marcellus. >> yeah, it's a big number. and so let me just say that i'm content with 500 trillion cubic feet this is technically recoverable. this has nothing to do with today's prices. i might add that recently the university of texas has run a study and they basically have stated, we come up with about the same number for the marcellus, 500 trillion cubic feet. there's a bunch day. they. i don't think we have to worry about running out of the stuff in the next five or 10 years. as i said of the stone age the

stone age didn't come to an end because we ran out of stones. >> a follow-up question if i could for subash. two years ago to gas producers went to the own price crash and they spent a year recovering, neither producing more than ever. is there a chance the oil guys will end up doing the same thing or is that just too different complete different commodities because it's a different commodity, different physics. i think the oil, gas as gas producers that of dundas. barnett show production is pretty flat. impossible for an oil well. physically impossible, and they do it -- [inaudible] >> they didn't do things like pressure and pressure maintenance. devon is not sure that they can do reef rack. they do it vertically. they're not sure they can do it

horizontally. what i think about oil wells which you can't do pressure. you don't add pressure to a pipeline to allow oil into it. you got to do a lot of artificial lift to work. stuff is expensive. in the reef rack come into a place i don't it's going to work. i don't think it's going to work. so that other aspect of it is in terms of capital to gas producer basically took 1 dollar he said i'm going to spend 70 cents of in oil or 80 centsoutput and 20 cents back and gasp. under cycling to tell you. what we are looking at now is you don't have capital for the gas producer can you do that for the oil-producing. there's nowhere left to turn. and goes back to the original point, what is the shape of u.s. supply curve. right now second and third quarters will probably be costs for u.s. oil supply. and in the fourth quarter we will see. what we see in 2016 based

decline with mathematica does the console should take less money to maintain your volume is not growing slightly. the biggest change is my ability to outspend my cash flow. that's a much bigger shift. if i can't spend 130, 150% of my cash flow that i can't deliver the growth and. i think what we'll see as a single digit growth rate within cash flow in 2016. you can describe it how you will. is that a victory or not? adsorb a lot different than what we experienced last five years. >> a question right here. >> hi. naked snow with oil and gas journal. thanks for having this. i find it interesting that nobody has said much about transportation and he got a former director as your moderator. i have to know because somebody at the federal railway administration told me a couple summers ago that it's actually

sends a that's going to be responsible for writing and was responsible for writing -- simsa -- final regulation for rail. and i wonder if any of you would be willing to address the implications of transportation as they affect u.s. access to global markets, particularly for crude oil? >> thank you for pushing the that was on my list but we running out of time. >> i can take a crack at it. crude by real has been a subject near and dear to my heart. i've written quite a lot about over the last 12 months. you just made the point you're right, the new regulations have come out recently requiring a whole to set up tanker cars, phaseout of existing tanker cars over the next five seven years or so.

dennis introduction of new types of breaks. and she said they will find that. we don't know where it ends up. i'm not sure how that's going to impact right now exports levels primarily because really what crude by rail right now is drive is it's feeding east coast refiner. these are refineries that have existed on nigeria and angola crude for a long time. so i think from what i've seen and from what i expect to happen over the next few months i think it's about important open question. just a step back sago and for understandable are talking about, the blocking -- bakken shale in north dakota what from about 100000 barrels a day production in 2008 do right now is about 1.2 1.1 somewhere in there, tenfold increase. we didn't build pipelines to accommodate all that. we figured out you can put it on

train cars and nowhere but in an incredible amount of volume of crude we never had before in train cars. actually we did before but it was in the 19th century. this is sort of a modern equipment of that. we put them on hold or take cars, which clearly have shown to be got not up to snuff because we've had a number of train car derailments involving both the older train cars and even newer generation thing called at 30 miles an hour and what resulted, giant fireballs as this crude is very jazzy and is very flammable. the question is, okay we've had these accidents in places like castleton, north dakota. last week there was one in north dakota. thank goodness 27 people lived in the town. but they spent hours are also going through chicago and philadelphia and albany is a very large population centers. what the government, the question they're asking is how do we make this safer if we're

going to be moving crude? i think that's an open question right now. you have extraordinarily powerful entities involved. the rail industry is are enjoying loss of revenue. the oil industry needs this to keep going in order for the blocking to keep going for $50.710000 barrels a day production. keep an eye on this. this incredible predatory clash going on right now in washington. as a reporter it's incredibly fun to watch and report on. >> it's so nice to hear you answer that question and not me. >> i was talking to producers are they going to ship back the pipes. they're making that change on equitable type space. if the global model is correct that we are single-digit rate of growth overall the pipeline will be more than enough to

satisfy future production growth. i think some of the tier two rock outfit will not produce anymore anyway so you were were would not have that explosive blocking growth rate do had to put is used coast and west coast and what goes to west coast they will have to definite product via rail but everything else anything gulf coast that will be increasingly pipe. [inaudible] take the mic please. >> we will shut you down. august will come and shut you down. i'm not kidding you. there's an awful lot of mad people. neighborhoods both and do not have to. the other question, technical question, can you tell me what refrac means speak with yes. as you're aware when oil and gas are produced from gas shale, and gas shell itself is very

impermeable come and what makes production possible our hydraulic fractures in the gas shale. it's impossible to fill the entire reservoir volume with hydraulic fractures at one time. so refrac is basically a second stimulation of the reservoir with the hope that second stimulation will put fractures in new volumes of rock that were not acceptable with the first fractures. ..

we've had tremendous experience in the day to begin with. and where has about the same geology as the geology to the last. i think the first less the first lesson to learn here is that they didn't have the alaska pipeline is going to be incredibly important. the alaska pipeline is aging. british petroleum got into trouble because they didn't maintain the pipeline. that won't happen if the new area of theater tickets open. we have learned a lot about managing fluids produced with the oil and that would be how

does one dispose of them and incidentally that is a nontrivial problem in a place like alaska and i don't know what the answer is, but i can imagine if this area is ever opened up one of the first questions that regulators will have is how are you going to manage the waste waters. i don't have an answer for that. there are a number of other issues in clue dave for example, protect team the upper part of the wealth is with better casing and submit jobs. these are all coming out of gas shells. there are others do but i have not prepared to address those. >> thank you. >> i am at the cato institute. question one, is it possible to

the right the entire u.s. truck fleet and the railway system to using compressed natural gas? given how low the prices of gas are to keep producing more at these places, once he did that come the amici huge difference to demand for oil so is this a potential game changer? the second question i have if you want to problems or four. then you say the problem is how to disclose. there are two different kinds of problems. as i understand for the initial. the other the seawater is back. instead of initially injecting water, we can inject natural gas liquid.

there is no question. the large quantities of water disappear. is that reasonable? >> all right. you've asked to record questions. let me rent if there is an investor who is at a research geologist to begin with the telekom into the business of equities. he attempted something called the pickens plan and you may recall that the pickens plan was to build a lot of wind infrastructure and he put a lot of money into west texas wind farms. he was then hoping that natural gas could be used not for manufacturing electricity, but for compressed natural gas vehicles. it really is technically possible. in pennsylvania, one of the

early hopes is that there would be a series of compressed natural gas station built along ied for just this particular purpose. so yes, it is technically possible. let me address the second question which is why don't you use compressed natural gas to fracture wells? i can think of to reason that it's not practical. one is i would not beat around a trail raid when you run explosive materials at high pressure. that is incredibly dangerous. the beauty of using water as it doesn't low up under high pressure. the second reason for not doing that is to fracture stimulation itself is only as good as the transfer of energy from the surface to the rock itself and

using natural gas the fracture wells means you spend a lot of energy compressing a compressible fluid that will then expand on its own accord without transferring the energy into the rock itself so it has a much less efficient way of tricking the lock apart. in this business were ever fracture matters, the more it creates in the better off you are. water allows this to happen because water is very incompressible. all of the energy in the surface halliburton pump trucks is then transferred to breaking the rock apartheid that. >> i would add two things. one is on the use of gas. it happened in canada and it had some applications, but in the u.s., so far suggest not only is

it not working that there's no intermediate term view that it will work. it could be that nature of the rock and that we have a longer way to go to deliver the energy. i did study quite in depth on cng and lng on vehicles. what would change things is the consumer adoption of the vehicles. we have a lot of things like sanitation trucks that are incremental. there's a lot of commercial vehicles because when i am refilling, i need to know i'm coming back at the same time. i can't be stuck out there. when we look at that, one of the things needed to do instead existing gas stations. i forget that number. it doesn't sound like much, but i was going to come from the government. i don't think anything is coming

from the government for that sort of thing. really the main reason why is because the commotion mentioned, the same old thing getting better and better and you don't need tax credits, you don't need tax handouts. you don't pay extra for the same miles per gallon, et cetera. competitively and they're falling behind. maybe the real test will be a battery engine, but i don't see the natural gas vehicle being competitive. >> david kreutzer from the heritage foundation. this has been a very interesting panel. i'm wondering if you could go back to the cuban government, which wanted to mean fines was to go back for they shall gas and whether they can do it and whether this service companies look at this in his spare whatever it is is a big issue.

>> i can. i don't know whether the right kind of rock. i can tell you there's been significant anti-phrack backlash. the government has been busy us think about this and just got another five years. i would certainly keep an eye on night. but they are going to run into the same problem everywhere else which is in order to accommodate the sentiment, how do you incentivize local communities to open their doors today? i haven't seen any suggestion that really get you there. i think it's really a financial game at this point. >> the major problem the area

from birmingham and manchester east is the rock is heavily salted. it is much more complex than marsalis. one of the primary problems in china the density of default networks has made very clear because obviously they had a couple earthquakes that were set off. if you had to with them. it is not entirely clear to me that this can be made economical , profitable given the complexity in that area of england. >> right here. [inaudible] -- washington d.c. i would like to ask a question for the whole panel.

first of all from the very beginning a few years ago 10 room from poland and romania. from your days and it is a matter of profitability of various sources that are inside. it's a matter of conjunction of the market or could be in for some geopolitical issues in this regard. >> i will answer the first part and then i will pass this off to my colleagues. i spent some time in a number of those countries. the gas shell we are talking about in poland runs from: through ukraine and actually shows up in turkey. it is a solarium gas shell in a

graph for life. it probably is the utica gas shell. it turns out that the major issue is the quality of the rock and it doesn't really matter what the politics are or how the local people feel. if the quality of the rock is not there to make this work. the way that it has the rest of it doesn't matter. i'm sure there's some politics going on in other things as well to make it tough. but the rock quality itself is disappointing. >> i am not an expert on politics, but you are absolutely right. the political discussion comes secondary to the rock. if the rock is no good or if

there hasn't been a discovered a way, the is a moot point. >> this is one of the things that is amazing about the anti-tracking the evolution. russell made the point earlier. without testing that gas shell to know whether it is worthwhile or not it seems to me a little bit nearsighted for a government to say no we are not going to look at all. the french have a wonderful opportunity. the british ran into this situation and ballclub, which is south of london where a company was going to drill a well. it was a vertical well to test the route. they were just going to see what was there. that got shut down. so it is very difficult for the government to know what the path forward is without knowing what is fair.

that is the first step. >> i think we've come to the end of our session. i want to thank our esteemed panelists who've come from texas and pennsylvania and new york to talk to us today and for you folks asking questions. we hope to come back and talk some time about liquefied natural gas as well as discussing offshore some of the global offshore projects and how oil prices are affect in this in the future. thank you very much. [applause] [inaudible conversations]

>> good morning and welcome to the brookings institution. i am ken pollack on a senior fellow at the middle east policy here at the brookings institution are absolutely delighted to bring the program to you this morning. as all of you know in the last few months, washington has seen two extremely distinguished visitors from iraq. prime minister a body in march and recently we had press event said six of the krg. all of them in great tension.

some of them virtually at war with one another. as we all know at the heart of the differences late sunni community. we all know it began after the 2003 american invasion which drove iraq out of the political system and drove them into opposition and helped usher in iraq's civil war. we all know in 2008-2009 with help from the united states they were brought back into the folds, a new power-sharing arrangement was forced to back down. once again given their rightful place, political power and economic benefits commensurate with their demographic weight and that was a critical element resolving the civil war, pacify the country and putting it in a direction towards real progress.

we also are well aware after the painful events of last year that it was the unraveling of that agreement and the actions by the prior iraqi government they've alienated the community once again and opened the door for a phase or step dad to come back. today one of the critical questions facing iraq one of the critical question for the united states in every country in the world that sees iraq's future is tied to its own interest is that the future of iraq will be. what kind of iraq can bring all of its communities together again, help them to live in peace and tranquility is. when you speak to iraqis in that dad all the parts of the country, what you often hear almost invariably when you talk about the course of the fighting so far of what it will take to

defeat it will pull matter is that the future iraqi government looks like. for the community, that is a big tent ventures. many feel they were badly betrayed by the events of 2010 and 11 and 12 in 13 when they bought back into a political system only to find the system used again and by a prime minister who saw many of the most part numbers as his enemies. if iraq is going to be safe, secure peaceful unified, the real question is not how fast can we defeat and how fast can we drag them out of the country. the real question is whether there is a political solution to be had. political solution will allow the sunnis to feel they are full members of the political system.

once again they have the political strength and economic benefits commensurate with their demographic and they are not entities of this state. they are not objects of persecution but full part is that the government. when you talk to iraqis, you often hear a paraphrasing of something i heard from one person in particular. i will put a slight twist on it so it's not a direct quote. what you often hear is your asking you five or the future of iraq. tell you tell me what the future looks like i can't tell you whether i'm willing to fight for it. for that reason, i asked today to very important, very well known and highly regarded leaders to come to washington to understand the perspective of their community on these critical issues. for many people in this room,

both of these figures are well known, but also for some they are not particularly well acquainted. so let me give quick introductions. to my farthest right, your farthest left is dr. rafe al-issawi. rafe was born near falluja, trained and rose to become the head of the falluja hospital including most famously during the november 2004 battle for solution. he was elected in 2005. in 2006 he became minister for foreign affairs. in 2008 deputy prime minister of iraq in 2010 finance. 2012-13 rafe came under attack. his bodyguards were arrested. he was the target of the assassination and he was forced to resign from the government. he is the personification of the events that led to the

alienation of the community of 2012 and 2013. to my immediate right is governor tran 11. board of muslim he has degrees in engineering and lott also found out looking that good i/o that in 2009 governor atheel became the governor of the province and at that time it was a tremendously important events in iraq and i can do your early adventures of early adventures on we took over the governorship, which i think were critical in broaching were breaching the difference is between sunni and kurds. still the governor, his brother

osama al-nujaifa was a speaker from 2010 until 2014. again, many in this audience know, if there is one thing the previous government of iraq was successful at, it was fragmenting the community. there are many different voices in the community these days and there is no question that there are other people who will claim to be this or that or speak to this or that community. the reason we brought you is because these two men have long-standing histories of acting as eloquent voices for their community, has been committed to the peace and stability of a future of iraq and being committed to a u.s. iraqi partnership. for those reasons i think of no two better voices to help us understand the situation in iraq with the community said dr.

dr. rafe. he has a powerpoint presentation and then they will join me and we'll have some questions talk show style. i will ask questions and we will open things up to you in the audience to ask your questions. first, please join me in welcoming dr. rafe al-issawi and tran 11 -- atheel al-nujaifa. [applause] >> good morning, everybody. i would like first to thank my friend for the invitation and thank you all for your attendance. especially my colleague in bold red. when i was director --

[inaudible] the only comment is to make it easy for you on specific topics for the situation in iraq. i agree in order to talk about fighting to defeat extremism in iraq, building back the state in iraq we have to describe exact way what's going on on political security. so now as talk about building the state because we are talking about almost a fragile damage stayed in iraq for the favor of violence, both on the isis website and on the malicious site.

i put this up to give you the impression. in order not to repeat the mistake, we have to know the exact events that causes that led to the situation. i will let you focus on the video, which is about one minute . i divided the two sides. one is the flags of the militia. so many of the militias were working in the yard. this is one of the negotiators and outlines in neighboring countries that they are identical. on this side, this is a brutal

militia. on that site isis are dealing with the shiites. i would like to give you the impression this is an identical group who are now played in the face of europe. the same thing on the left side is isis are killing someone. it is very, very offensive. on this site, militia are killing and on the left side you see the daish are killing. in order to change, on the government side or american side how to end this tragedy. it is such an identical and on this side that is why we want

to focus on the short-term threat of isis as damaging to the country in the region. but in the long run we cannot do with a country filled with the militia, which is an illegal violence factor. arabs are part of iraq, very rapid. i'm afraid this rapid presentation may give you not exactly a good idea about the situation. is sunni and arab were divided into four groups. i colleague of mine participated since 2005. the vice president -- is

[inaudible] they are wanted and politicized. so now his third and instead of political participation are the people who participated in 2005. second, i am talking about how the other partner is dealt with the sunnis. the first is participation. second, it is difficult to achieve their goals. they want to declare region in order to get sub authority to decrease. is what happens in 2011, the

militia entered the office of the governor and the governor was there for six months. while this is a constitution, changing the region is coming they improved also. that is the awakening. this is back to 2006 in 2007. what is happened almost is the tribes will fight al qaeda and the government. after that they said let's go across the street for demonstration. and in volusia and brevard e. the former government killed people who don't trade legally.