Energy & Environmental Law Blog : Energy & Environmental Lawyer & Attorney : Vorys, Sater, Seymour and Pease Law Firm : Oil, Gas & Green Technology

Today the U.S. EPA reversed itself and granted California’s Greenhouse Gas (“GHG”) waiver request, allowing the State of California to enforce its own GHG emission standards for new motor vehicles – starting this model year. President Obama recently announced a new national policy to increase motor vehicle fuel efficiency and reduce GHG pollution; new national motor fuel standards would start with model year 2012 vehicles. Once the national program goes into effect, California has stated that it will find automakers in compliance with its state standards, so long as automakers are in compliance with national standards. It will be interesting to see how the two standards will dovetail together at that time. For a history of California’s waiver request, see here.

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Environmental Protection Agency has proposed stronger National Ambient Air Quality Standards for nitrogen dioxide. The proposed rule establishes, for the first time, a one-hour NO2 standard at a level between 80 – 100 parts per billion (ppb) and adds additional monitoring requirements for areas within 50 meters of major roads in cities with at least 350,000 residents.

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We reported previously on U.S. EPA's proposed finding that greenhouse gas (GHG) emissions are pollutants that endanger the public's health and welfare (a first step to potential regulation under the Clean Air Act).  Comments were due yesterday, and can be found here (search Docket No. EPA-HQ-OAR-2009-0171).  Just a quick look at the docket suggests that hundreds of comments were filed.

[Update:  There is a controversy brewing over whether EPA suppressed internal documents challenging its decision to move forward with the endangerment finding.  See here for a good roundup of the issue (CBS News Political Hot Sheet).  Also, you can find what may be the source of the controversy here (including the internal EPA emails and study) at the Competitive Enterprise Institute.  Interesting.  (Moved up.)]

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The LA Times is reporting that the Administration has set aside 1,000 sq. miles of public lands in the West for two years of solar energy study and environmental review.

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The American Petroleum Institute (API) has released the results of a new survey finding that Americans continue to underestimate the amount of oil and natural gas that government experts predict will be needed to meet demand while overestimating the role that renewable energy sources will play in meeting future demand.  For more - including a copy of the survey results - see here.

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REX-East began to flow gas to the Lebanon Hub today, according to this article in the Dayton Daily News.

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On June 22, 2009, the U.S. Supreme Court, in its last environmental ruling of the term, discussed the permitting authority distinction between a Clean Water Act Section 402 (NPDES discharge) permit, a Section 306 (pollutants from certain categories of new sources) permit and a Section 404 (fill/dredge) permit.  In Coeur Alaska, Inc. v. Southeastern alaska Conservation Counsel, the issue was whether gold mining slurry that was to be discharged into a lake was properly regulated under the Army Corps' CWA Section 404 permit program or whether U.S. EPA had the obligation to regulate the slurry under its CWA Section 402 and/or 306 authority.   In finding that the Section 404 permit was proper, the Court reversed the Ninth Circuit ruling which had vacated the Army Corps Section 404 permit and found that a Section 306 permit was required.  The case has a nice discussion of the allocation of authority in the Section 404 permitting process.

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Valero Energy Corp. is using a windfarm to produce electricity for its oil refinery, according to this article in the WSJ.  Ready to operate at capacity in August, Valero believes that the investment will pay for itself in 10 years.  (Note:  Subscription required).

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The Times-Picayune has an interesting article on the use of interstate pipelines to transport carbon dioxide from underground deposits or manufacturing processes in one state (e.g., Mississippi and Texas) to be used for oil production in another.

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That's how this article in the WSJ characterizes three Exxon Mobil liquefied natural gas (LNG) projects scheduled to start in Qatar this year.  Resulting increase in supply - 3 Bcf per day.  (Note:  Subscription required.)

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The NYT is reporting that the House passed the Waxman-Markey climate bill with a vote of 219-212.  The take away:  "The legislation, which passed despite deep divisions among Democrats, could lead to profound changes in many sectors of the economy, including electric power generation, agriculture, manufacturing and construction."  Now we wait to see what the Senate will do.

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We've noted previously the challenges faced by Canadian oil sands projects (see here, e.g.).  This NYT article reports that 18 environmental groups - led by the Sierra Club - launched a campaign this week aimed at discouraging imports of crude oil derived from Canadian tar sands into the U.S.

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EQT is planning on expanding their regional headquarters in Pikeville, KY, according to this report from WYMT TV.  Expected to be completed in 2010, the project involves the construction of a new 45,000 square-foot complex located at a future energy park located at Scott Fork.

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A recent producer survey found that Colorado was the least attractive state in the U.S. for oil and gas development, according to this article in the Grand Junction Daily Sentinel.

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The York Daily Record is reporting that the state House Environmental Resources and Energy Committee has voted to approve a 5% severance tax on Pennsylvania production, with 60% of the revenue generated from that tax to go to the state and the remainder to local governments.

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A West Virginia court has ruled that the state's Department of Environmental Protection erred when it refused to issue permits to Cabot Oil & Gas Corp. to drill 5 wells in Chief Logan State Park,  Logan County, WV, according to this article in The State Journal.

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As Congress considers the nation's first cap-and-trade legislation, California regulators are thinking about imposing the nation's first fee on carbon dioxide emitters as a means of funding the state's greenhouse gas emissions law, according to this article in the Mercury News.  If adopted, it would raise approximately $50 million annually to fund the regulatory program.

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This article in the NYT discusses the risks of a geothermal project in California that intends to use a method to drill into the subsurface that was shut down in Basel, Switzerland, in 2006, due to earthquake concerns.  The take-away:  "[While s]eismologists have long known that human activities can trigger quakes, [] they say the science is not developed enough to say for certain what will or will not set off a major temblor."

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The Hill is reporting that the Waxman-Markey climate bill may make it to the House floor by the end of this week.  It is still unclear whether the legislation has enough votes to pass, however.

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Bankruptcy and energy are topics frequently in the news these days, reminding us of the following case:

Earlier this year, the United States Court of Appeals for the Fourth Circuit reversed and remanded for further proceedings a lower court decision holding that certain NAESB natural gas supply contracts entered into by National Gas and a few of its customers were not "swap agreements" protected from avoidance proceedings under the Bankruptcy Code.  See In re National Gas Distributors, LLC (Case No. 07-2105) (a copy can be found here).

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The U.S. Supreme Court has upheld a permit issued under the Clean Water Act by the Army Corps of Engineers that allows mining waste to be dumped into Lower Slate Lake, north of Juneau, Alaska, according to this article in the NYT.  Environmental groups opposed the permit because it might turn the lake "into a lifeless waste dump."

A copy of the decision can be found here (Coeur Alaska, Inc. v. Southeast Alaska Conservation Council).

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The Herald-Standard reports on an interview with Lou D'Amico, Executive Director of the Independent Oil and Gas Association of Pennsylvania, discussing the benefits to Pennsylvania from Marcellus Shale development.

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SolarReserve is hoping to construct one of the largest solar plants in the world in Nevada, using heat-transfer technology developed for space rockets, according to this article in the Washington Post. The plant would consist of a field of mirrors focusing sunlight on a receiver what would heat molten salt to 1,050 degrees Fahrenheit, which would then be flowed to a storage tank and used to generate steam and power conventional steam turbines.

But there are issues raised by the Air Force.

Very interesting article.

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This article from the Houston Chronicle is reporting that the U.S. rig count rose by 23 last week to 899, only the second time this year that we've seen an increase.  If you are interested, you can find more information at the Baker Hughes website, here.

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U.S. EPA has set November 10, 2010, as the date by which facilities must prepare or amend, and implement changes to, their SPCC Plans to comply with substantive amendments finalized on December 5, 2008 (and earlier, where applicable).  Contrary to previous agency proposals, this date applies to all facilities, including those that meet the "qualified facilities" criteria - meaning that small production facilities are required to meet this deadline as well.

Moreover, EPA emphasized:

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This article in the Houston Chronicle reports that an Ernst & Young study released yesterday concludes that U.S. oil and gas finding costs increased 35 percent last year.  In 2008, the cost per barrel of oil equivalent was nearly $52, excluding acquisitions of proved reserves.

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The NYT is reporting that a study due out today by the Potential Gas Committee finds that the country's natural gas reserves have grown by 35 percent, the largest increase in committee's 44-year reporting history.  The number:  2,074 Tcf (2008).  The prime mover:  Shale gas.  Very interesting.

[Update:  According to this article (also in the NYT), the increased reserves play a part in the climate debate going on now in Washington.  For more on the report, see here (including how to get a copy).]

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On a 15-8 vote, the Senate Energy and Natural Resources Committee approved energy legislation that would allow oil and gas development in large tracts of the Gulf of Mexico and provide incentives for carbon capture and storage programs, according to this article in the NYT.

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Rising crude oil prices are causing some in Washington to revive calls for greater oversight of futures-contract purchases by those not involved in the physical production or consumption of commodities, according to this CNNMoney report.

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The WSJ is reporting that several of the lawmakers involved in drafting climate legislation have a financial stake in companies that will be affected.  (Note:  Subscription required).

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A California legislative panel has approved a proposal calling for a new 9.9% levy on oil produced in the state as part of a plan to meet the state's budget gap, according to this article in the LA Times.  Does that increase or decrease the incentive to develop energy resources for California producers?

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The California Energy Commission (CEC) website has several interesting reports on issues related to the energy sector.  Under the heading Joint Committee Workshop on Natural Gas Issues for June 16, 2009, for example, there is a report on natural gas volatility that asks the question:  "Do accurate [natural gas] price predictions actually exist?"

Answer:  "A comparison of natural gas price forecasts vis-a-vis actual prices does not yield encouraging results for the accuracy of long-range forecasts."  (Emphasis is ours.)

You can find this and other studies here (along with Staff presentations).

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Exxon Mobil must pay an additional $480 million in interest on delayed punitive damages awards to those injured by the 1989 Exxon Valdez oil spill, more than doubling the company's costs to settle the lawsuits according to this article in the LA  Times.

The same article also reports that the U.S. Supreme Court has struck down as unconstitutional a tax imposed by the city of Valdez on oil tankers docking at the city's port.

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According to this article in the NYT, the Senate Energy and Natural Resources Committee has approved an amendment to energy legislation that would give the Federal Energy Regulatory Commission (FERC) authority to address suspected market manipulation through the issuance of cease and desist orders without a prior hearing on the matter.

[Update:  For more on upcoming hearings, see this article in the NYT.  (Moved up).]

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This article from the NYT reports on a study commissioned by the American Petroleum Institute (API) finding that the U.S. oil and gas industry invested $58.4 billion over the past 8 years in greenhouse gas-mitigating technologies, while the federal government invested only $19.2 billion over the same period.  Not bad.

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This article in the Houston Chronicle takes a look at efforts by natural gas producers to address falling prices, noting, for example, that rig use has dropped by 56% since it peaked last September at 1,600.  Producers appear to be drilling their best wells first, with vertical rig use dropping more rapidly than horizontal rig use.  The article goes on to note that the Energy Information Administration expects gas in storage to reach 3.659 trillion cubic feet by October — total storage capacity in the U.S. is about 3.8 trillion cubic feet.

Interesting.

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The Senate Energy and Natural Resources Committee is considering an amendment to energy legislation that would bring oil and gas leasing in the Gulf of Mexico closer to Florida's coast, according to this article in the NYT.  This could mean greater access to 3.88 billion barrels of oil and 21.51 trillion cubic feet of natural gas.

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The downward demand for oil may be moderating, according to this article in the Washington Post.  OPEC is reportedly "cautiously optimistic" about the future, believing that demand seems to have moderated after months of downward revisions.  The article further reports that earlier this week both the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA) raised their global oil demand estimates for the year.

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This article from The Hill reports that more and more Democrats are poised to vote against the Waxman-Markey climate legislation now being pushed by Speaker Pelosi.  A possible alternative being discussed - the Senate bill being put together by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.).

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This is interesting.  The Australian Federal Police Association is concerned that federal agents are going to be required to prosecute a new range of climate crimes - at the expense of protecting against traditional crimes - under the Australian Government's plan to combat rising greenhouse gas emissions, according to this article in the Herald Sun.  Possible crimes - the underreporting of carbon emissions and false carbon offset schemes.

The article goes on to note that Interpol believes that criminal gangs will find the new carbon market "irresistible."

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In Northup Properties, Inc. v. Chesapeake Appalachia, LLC (Case No. 08-5718), the United States Court of Appeals for the Sixth Circuit recently held that delay rental payments maintained an oil and gas lease despite the fact that the lease property went undeveloped for nearly forty years (applying Kentucky law).  Notably, the court found that the lease was unusual in that it did not contain the typical habendum clause (e.g., it did not use the "as long as" or "so long as" language commonly found in lease term provisions).

[Note that the court did not address the impact of the producer's failure to timely pay the delay rental at one point, however.]

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The Administration's proposed tax changes could have significant adverse consequences for the oil and gas industry says Alex Mills, president of Texas Alliance of Energy Producers, according to this article in the Times Record News.

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Expanded oil and gas leasing in the Gulf of Mexico has been approved by the Senate Energy and Natural Resources Committee, according to this article in the NYT.  The measure would allow drilling as close as 45-miles offshore Florida, and is part of a markup of broader energy legislation.

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Companion bills were introduced yesterday in both the U.S. House and Senate to repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act and to require the disclosure of chemical constituents used in frac fluids (the "FRAC ACT" - Fracturing Responsibility and Awareness of Chemicals Act).  More information can be found here.  Copies of the legislation can be found here (Senate - S. 1215) and here (House - H.R. 2766).

[Update:  For more, see here (article from WSJ, subscription required); and here (from the Wayne Independent).]

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Water may be the largest challenge for western oil shale production, according to this report in the NYT.  It appears that environmental groups are concerned about the acquisition of significant water rights at numerous locations in the Colorado River basin.

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One expert has speculated that recent earthquakes in Cleburne, Texas, may be due to nearby oil and gas drilling activity, according to this report in the Dallas Morning News.  Other scientists disagree, stating that there is no known link between drilling and earthquakes - reminding us of the adage, "Correlation does not imply causation."

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Columbia Gas of Virginia has proposed several conservation programs estimated to save customers $22 million over time, according to this article in The Virginian-Pilot.  Columbia plans on recouping revenues lost from implementing the conservation measures with a new customer charge.  Unclear, ultimately, how the incentives will play out.

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Some alternative energy sources are having better success at encouraging investment than others, according to this article from the NYT.  Not surprisingly, there is growing competition between alternative-energy technologies.

[Update:  A related article on local community opportunities can be found here, from the Akron Beacon Journal.]

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This article from the Houston Chronicle provides some interesting statistics on natural gas prices.  For example, according to the report the number of natural gas rigs dropped last week to 700, the lowest it's been since 2002.

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This article in the Fort Worth Business Press points out one of the major issues presented by recent efforts to more-strictly regulate the use of hydraulic fracturing in oil and gas development - who should have jurisdiction, the federal government or state oil and gas commissions?  Not a bad article.

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The Tennessee Valley Authority has approved a new 880-megawatt gas-fired power plant in northeast Tennessee, according to this press release.  Estimated cost - $820 million.

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This article from the LA Times takes a look at rising oil prices at a time when there is a surplus in the commodity and where domestic demand is down.  Interesting.

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At least some mineral owners are unhappy over Colorado's new drilling rules, according to this article in the The Grand Junction Daily Sentinel.  Take away quote from one mineral owner:  "I didn’t donate my land to become wildlife habitat."

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This article in the Houston Chronicle reports that some drilling costs are declining, while others - including personnel costs - remain relatively unchanged.

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The Eleventh Circuit Court of Appeals, in a case styled Friends of the Everglades v. So. Fla. Water Mgmt., is the first court to rule on the USEPA's water transfer rule (40 CFR 122.3(i)), which provides that the discharge of one meaninfully distinct water into another meaningfully distinct water does not require a NPDES permit.  The issue in this case was whether the pumping of dirty canal water into a lake required a NPDES permit.  The 11th Circuit, in finding the Clean Water Act language on this issue ambiguious, said the USEPA's rule was a reasonable interpretation of the Act and, therefore, no permit was required. 

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The Department of Interior has forwarded to Congress a report containing recommendations on a national program to reduce greenhouse gas emissions through a carbon capture and storage program on public lands.  More information, including a copy of the report, can be found here.

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The Ohio Supreme Court recently held that the state public utilities commission has exclusive authority over a landowner's claims regarding vegetation management (i.e., whether or not to remove a tree) within a utility easement.  A copy of the court's decision can be found here (2009-Ohio-2524).

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This article from the Houston Chronicle reports on industry opposition to increased federal oversight of hydraulic fracturing in the shales.  Turns out, there is a House Natural Resources subcommittee hearing today on U.S. shale gas production.  Interesting.

More information on the subcommittee's hearing can be found here.

[Update:  A number of reports have surfaced recently on the issue.  See, e.g., here (Dallas Morning News - noting the Ground Water Protection Council's recent report finding state regulation effective); here (WENY-TV News - reporting on Congressman Hinchey's reintroduction of legislation to repeal the exemption of hydraulic fracturing from the Safe Drinking Water Act); and here (WSJ - subscription required - discussing industry resistance to new regulations).]

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A new lawsuit has been filed challenging the settlement requiring the application of NEPA standards and evaluation on mineral development proposals in the Allegheny National Forest, according to this press release from the Pennsylvania Oil & Gas Association.  One of the plaintiffs - Warren County, PA.

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This article from the NYT looks at renewed interest in Canadian oil sands production, with projects becoming economic at the $40 to $60 per barrel range according to one analyst.  Politics is a great unknown, however.

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This article from the Toledo Blade looks at the opportunities for residential natural gas buyers to lower their bills and some of the factors pushing prices down.  Interesting.

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It looks like legislation will be introduced in the next couple of weeks to overhaul Ohio's oil and gas regulatory program, according to this article from the Columbus Dispatch.  Stay tuned.

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We've reported previously on the State Lands Commission's rejection of new drilling offshore California.  Governor Schwarzenegger has proposed a plan to overcome that rejection through legislative action, a move that the Commission also opposes according to this article in the LA Times.

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According to this article in the News-Gazette, Champaign, Illinois, is considering imposing a 2.75 percent natural gas use-tax on entities purchasing natural gas produced outside the state.  The possible benefit to Champaign residents - $1.4 million.  If adopted, expect a challenge.

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Chesapeake Appalachia, LLC, is considering the possible lease and development of natural gas underlying parks in Oglebay and Wheeling, WV, according to this article in The Intelligencer & Wheeling News-Register. Note the comments.

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U.S. Geological Survey is reporting that the Gulf of Mexico has a very thick and concentrated gas-hydrate-bearing reservoir with the potential to produce gas using current technology. More here.

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Baker Hughes is reporting that the number of active oil and gas rigs in the U.S. is down to 899, according to this article in the Houston Chronicle.  This is less than half the number of rigs from only a year ago.

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