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

The court in Natural Resources Defense Council, Inc. v. U.S. State Department, et al., recently dismissed claims against the U.S. State Department that it violated the National Environmental Policy Act (NEPA) by issuing a presidential permit to TransCanada Keystone Pipeline, LP, for a cross-border pipeline between the U.S. and Canada without a sufficient assessment of the environmental impacts.  The court found that the State Department, acting solely on behalf of the President in issuing the permit under Executive Order 13,337, was exercising a purely presidential prerogative that was not subject to judicial review under the Administrative Procedure Act.

A copy of the decision can be found here (Case No. 08-1363).

[Disclosure:  Before joining the bench, Judge Leon practiced law with the Vorys firm.]

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A managing director for research at Tudor, Pickering, Holt & Co., is forecasting that natural gas prices will rebound to $7.50 in 2010, according to this article in the Star-Telegram.  The commodities research unit of Barclays Capital, on the other hand, is significantly less bullish, lowering its 2010 gas-price forecast to an annual average of only $5.05.

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Dominion Transmission has announced that it has begun the FERC pre-filing review process for its Appalachian Gateway Project, which is designed to move gas from West Virginia and southwest Pennsylvania to storage fields and other pipelines in Pennsylvania for ultimate use by consumers in the Northeast and Mid-Atlantic regions.  Construction is set to begin in 2011, with service to start in 2012.

Copies of the docketed information can be found here (Docket No. PF09-15-000).

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The Houston Chronicle is reporting on cleanup efforts regarding a spill of 10,500 gallons of fuel oil in the Houston Ship Channel after a ship collided with a barge.  The Coast Guard has reported that the ship's owner is taking responsibility for the cleanup, and that it doesn't look like a major problem at the moment.

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The LAT has a good article on what may be the largest oil discovery in California in the last 35 years, by Occidental Petroleum Corp.  Very interesting, and very secretive.

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XTO Energy has hedged about 55% of its estimated 2010 production (oil and gas) at cumulative prices equivalent to $9.62 per Mcf, according to this article in the Star-Telegram.  Not bad at all, particularly where prices are today.

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The Star-Tribune has a good article on the benefits of pairing wind energy and natural gas for power production.

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The NYT is reporting on a group of nine senators urging Senator Boxer to include in her climate legislation proposal a suite of measures that would boost natural gas production and use.  In addition to promoting use for electric power and transportation, these lawmakers advocate maintaining current tax treatment for the industry, including the percentage depletion credit and deductions for intangible drilling costs.

[Update:  For a related article on the industry's lobbying efforts, see this article in the NYT.  Makes you wonder whether the authors are reading the paper as a whole, though.]

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The NYT has a nice overview of worldwide oil discoveries this year.  Pretty impressive.

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The Buffalo News is reporting that National Fuel Gas Co.'s first wholly owned horizontal natural gas well in the Marcellus Shale region in northwestern Pennsylvania is showing some success, producing an average of nearly 6 MMcf per day.  Nice job!

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National Public Radio (NPR) is running a three-part series on the natural gas industry.  Not a bad job at all.  The opening from the first part:

In recent years, natural gas producers in the United States have struggled, mostly in vain, to be taken more seriously in the energy world. Big oil companies like Exxon had concluded that natural gas reserves in the United States were not sufficiently abundant to warrant big investments in exploration and drilling. When small independent gas producers argued otherwise, they were often ridiculed.

But then it goes on to take a brief look at shale gas and horizontal drilling, noting the recent revival for natural gas.  The second part profiles small independents and can be found here.  And the third part looks at the industry's late start in playing the climate legislation game (found here).

The charts and graphics are pretty good as well.

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US EPA announced today that beginning January 1, 2010, large sources of greenhouse gas (GHG) emissions will be required to collect and report GHG emission data. These first reports, covering calendar year 2010, are to be submitted to US EPA in 2011. GHG reporting will be phased in for vehicle and engine manufactures (outside of the light-duty sector) beginning with model year 2011.

US EPA issued a proposed GHG Reporting Rule in April 2009. The public comment period for this rule expired on June 9, 2009. US EPA has indicated that GHG reporting requirements for some sources identified in the proposed are still under review.

 A copy of US EPA’s announcement can be viewed here.

We will continue to monitor US EPA’s activities and provide updates on the GHG Reporting rule as they become available.

[Update: Under the final rule, covered entities can cease reporting through reductions in GHG emissions. Additionally, US EPA reduced the number of source and supply categories initially subject to the mandatory reporting requirement - deferring final action on oil and gas systems, for example.

More information on the Final Rule may be found here.]

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The U.S. Court of Appeals for the Second Circuit has issued its decision in State of Connecticut, et al. v. American Electric Power Company Inc., et al. (Case Nos. 05-5104-CV and 05-5119-CV), finding that plaintiffs (several states and land trusts) may sue power companies for the public nuisance of global warming due to emissions of carbon dioxide.  From the court's decision, and setting the stage:

In 2004, two groups of Plaintiffs, one consisting of eight States and New York City, and the other consisting of three land trusts (collectively “Plaintiffs”), separately sued the same six electric power corporations that own and operate fossil-fuel-fired power plants in twenty states (collectively “Defendants”), seeking abatement of Defendants’ ongoing contributions to the public nuisance of global warming. Plaintiffs claim that global warming, to which Defendants contribute as the “five largest emitters of carbon dioxide in the United States and . . . among the largest in the world,” Connecticut v. Am. Elec. Power Co., 406 F. Supp. 2d 265, 268 (S.D.N.Y. 2005), by emitting 650 million tons per year of carbon dioxide, is causing and will continue to cause serious harms affecting human health and natural resources.

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American Electric Power (AEP) is poised to begin a carbon capture and storage project at its West Virginia Mountaineer Power Plant to test the viability of the technology, according to this article in the NYT.  Its plan - to inject about 100,000 tons of carbon dioxide, converted to a fluid, annually for two to five years, or roughly 1.5% of Mountaineer’s yearly CO2 emissions.  Very interesting.

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The LAT is reporting on the challenges faced by proponents of offshore drilling in the Arctic.  The public comment period closed yesterday on the Department of Interior's pending decision to issue future leases for the Outer Continental Shelf.

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The WSJ is reporting that Petrohawk is selling its Permian Basin assets - currently producing about 30 MMcf per day - to an unidentified purchaser for $376 million.  (Note:  Subscription required.)

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The Washington Examiner has posted some "cool" energy facts, including:

The United States is the world's largest producer of nuclear power, but it derives a smaller percentage of its electricity from nuclear technology than many other industrial countries.

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The Houston Chronicle is reporting that Russia's largest oil producer believes that Russia will be unable to sustain the increase in oil exports that saw it become the world's largest oil exporter in the post-Soviet era.  The reasons:  Domestic demand increases and a loss of tax incentives for exports.

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A professor emeritus of petroleum and natural gas engineering at Penn State University - and co-author of a recent economic impact study regarding Marcellus Shale development - believes that Pennsylvania could be a net exporter of natural gas in the future, and potentially generate more than 175,000 jobs for the state, according to this article in the Observer-Reporter.  We reported previously on the study he co-authored here.

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We previously posted on the criticisms leveled at the natural gas industry for being late to the climate legislation game in Washington (see, e.g., here).  Recent efforts by America's Natural Gas Alliance should come as no surprise, therefore, and are being noticed by the media.  See, for example, this article in the Houston Chronicle:  "Executives from some of the nation's largest energy producers are lobbying Congress for changes to a House-passed climate change measure that they say overlooks the benefits of natural gas and gives an unfair advantage to coal."

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Yesterday, we posted on a recent economic impact study released by America's Natural Gas Alliance.  They have also released the results of a recent poll finding that Americans have a very favorable opinion of natural gas as an energy source:

The American public not only expects to rely more on natural gas, but also has very favorable views about it. Opinions of natural gas rank right alongside solar power, hydro power, wind power, and domestically produced oil in favorable perceptions. In a “thermometer” ranking from cold/very unfavorable (0) to warm/very favorable (100), natural gas rated a mean score of 71, with other top tier energy sources ranging from 73-81. Second tier energy sources were ethanol and biofuels, nuclear power, coal and oil imported from foreign countries. Second tier thermometer ratings ranged from 26-54.

That's encouraging.

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America's Natural Gas Alliance released today a study done by IHS Global Insight finding that the natural gas industry alone supported more than 2.8 million jobs in the United States in 2008.  Moreover, its economic impact on the nation's economy for the year was $385 billion.

Interesting.  A copy of the study can be found here.

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The Natural Gas Supply Association (NGSA) recently released a study of price transparency in the U.S. natural gas market, finding that it is "arguably the most price transparent commodity market in the world."

An examination of the interaction between the physical and financial U.S. natural gas markets shows that there is enough transparency.  In fact, the combination of transparency on both the physical and financial sides of the market makes the overall market close to being completely transparent.

A copy of the report, as well as the related NGSA press release, can be found here.

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The Energy Information Administration (EIA) has issued its overview of the U.S. - International natural gas trade for 2008.  It finds, for example, "In 2008 there was a 9 percent decrease in net imports from Canada. Despite this decrease Canadian pipeline imports continued to account for the vast majority of U.S. natural gas imports."  A sample chart:

For more, see here.

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The Government Accountability Office (GAO) has found that the Interior Department missed out on $21 million in natural gas drilling fees due to accounting errors in its royalty-in-kind program, according to this article in the Denver Post.

A copy of the GAO's report can be found here.

[Update:  The NYT is reporting that the Interior Department has decided to end the royalty-in-kind program.  Interestingly, this program has been a large source of revenue for the government (about $6.6 billion in energy resource deliveries in 2008).

Also, the GAO recently released a report concluding that energy companies may have underpaid royalties by more than $100 million in 2006 and 2007.  (Moved up).]

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U.S. EPA and the Department of Transportation’s National Highway Safety Administration (NHTSA) have proposed a National Program intended to reduce greenhouse gas emissions and improve fuel economy for new cars and trucks sold in the United States.  Applicable to model years 2012 through 2016, the new standards would require an estimated average emissions level of 250 grams of carbon dioxide per mile (equivalent to 35.5 miles per gallon) and, if successful, would reduce carbon dioxide emissions by an estimated 950 million metric tons over the lifetime of the vehicles sold.

More on the program can be found here.

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In a case recently published, though decided in April, the Ohio Second District Court of Appeals Ohio in Englewood v. Miami Valley Lighting, L.L.C.,  182 Ohio App. 3d 58 (2009), discussed what makes a particular entity a "public utility".  Generally speaking it is a mixed question of law and fact which requires an examination of the nature of the business.  The court provides a nice synopsis of Ohio law on the matter.

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The WSJ has two articles on the natural gas market today.  One looks at the price disconnect between oil and natural gas and the risk to investors.  The other looks at the possibility for a turnaround in gas prices.  (Note:  Subscription required.)

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The Sun Gazette has an interesting (and, for Pennsylvania, encouraging) article on the potential work force needed to develop the Marcellus Shale in Pennsylvania.  Its source - two studies done recently by Penn State University and the Marcellus Shale Education and Training Center.

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The Baltimore Sun has an article on the disappointment of Western Maryland landowners whose Marcellus Shale leases haven't been honored.  It appears as if several of the landowners are investors who bought the land simply to lease for development.

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The Energy Information Administration (EIA) has published its Short-Term Energy Outlook for September 2009.  Among other things, it states:

EIA projects the monthly Henry Hub natural gas spot price to average $2.32 per thousand cubic feet (Mcf) in October, the lowest monthly average spot price since September 2001. Natural gas inventories likely will set a new record high at the end of this year’s injection season (October 31) reaching more than 3.8 trillion cubic feet (Tcf). The projected Henry Hub annual average spot price increases from $3.65 per Mcf in 2009 to $4.78 in 2010. However, upward price pressure next year is limited by the sensitivity of natural gas use in the electric power sector to higher natural gas prices and continued expansion of U.S. natural gas production from shale formations.

For producers, the outlook is challenging.

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Senator Niehaus (R-14th Dist.) recently introduced S.B. 165 to amend and update Ohio's oil and gas conservation program.  If adopted, it would address significant issues facing Ohio oil and gas development today, including funding for the Division of Mineral Resources Management (DMRM), and well construction and completion practices designed to promote safety and environmental concerns.  It would also be one of the most substantial updates to Ohio oil and gas law since 1985.

A copy of the draft legislation and related information can be found here.

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The NYT is reporting on new legislation introduced by House Energy and Natural Resources Chairman Nick Rahall (D-W.Va.) that would create a new federal agency for onshore and offshore leasing of public lands - the Office of Federal Energy and Minerals Leasing.  Among other things, the draft legislation would create new "diligent development" rules for onshore and offshore leases and impose new fees on nonproducing leases.

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A new report from IHS-Cambridge Energy Research Associates concludes that global oil demand will increase next year and possibly overtake old records by 2012, according to this article in the Houston Chronicle.  The reason - Growing global demand in developing nations like China and India.

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The Texas Supreme Court recently held that Apache Corporation could not seek recovery for a large volume of "unaccounted-for" gas lost between the wellhead and sale to customers at the gas processing facility (Dynergy Midstream Services, et al., v. Apache Corporation, Case No. 07-0043).  It based its decision on the contract language, which focused on the volume of gas sold to the customer - and not the volume of gas delivered to the processing facility.

"When calculating the proceeds due to Apache under these 'percentage of proceeds' contracts, only one criterion matters:  sales.  Common throughout the natural-gas industry, these contracts unambiguously base payment on the amount of gas ultimately sold at the tailgate (not the amount initially delivered at the wellhead), and Apache admits that it was paid in full for 'every molecule of gas' sold at the tailgate of the processing plants."

If you are interested, the Supreme Court's website contains electronic versions of the briefs filed in the suit, as well as audio of the oral argument (that is, in addition to the decision itself).  Very nice.

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The NYT has an interesting blurb on potential new treatment methods for produced water.

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We reported earlier on a FERC Notice of Proposed Rulemaking on whether to revise the contract reporting requirements for certain intrastate and Hinshaw pipelines providing interstate services pursuant to statute and Commission regulation.  The Commission is soliciting comment on an additional standardized electronic information collection proposal, and has extended the comment period to November 2, 2009.

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The PA Department of Environmental Protection has announced that wind farms in two Pennsylvania counties will "receive funding under an American Recovery and Reinvestment Act program that provides cash assistance to energy production companies in place of earned tax credits."  The two grants total over $100 million.

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BP announced yesterday that it has discovered a giant oil field at a depth of more than 35,000 feet in the Gulf of Mexico (the Tiber well), according to this report in the NYT.  Estimates make it potentially greater than the three billion barrels of oil equivalent thought to exist in the nearby Kaskida field.

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The European Chemicals Agency has today proposed to harmonize the classification and labeling of three chemical substances: Tris[2-chloro-1-(chloromethyl)ethyl] phosphate (TDCP); Tetrahydrofuran; and Abamectin.  The proposal is open for comments for 45 days.

For a press release see here.

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The European Chemicals Agency (ECHA) has proposed 15 chemicals to be designated as Substances of Very High Concern (SVHC).  

These substances were proposed to ECHA by EU Member States and by the European Commission. The public has until October 15 to provide comments, in particular focusing on why these chemicals should or should not be deemed SVHC. 

After the public comment period closes, ECHA’s Member States Committee will decide whether these substances should be placed on the Candidate List.

Once a substance is placed on the Candidate List, a manufactured or importer of an article that contains that substance in an amount greater than 0.1% has an obligation to notify its customers by providing the name of the substance and sufficient available information to ensure safe use of the article.

Further, once a substance has been placed on the Candidate List, it may eventually be subjected to Authorization and/or banned.

To see the press release, click here.

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The Houston Chronicle is reporting that U.S. crude oil production is expected to increase for the first time in two decades due to new GOM offshore projects and a quiet hurricane season.  Could increase production to 5.22 million barrels per day in 2009.  Very interesting (and encouraging).

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The Energy Information Administration (EIA) is reporting a 2.6% increase in working gas storage capacity over last year, estimated to be 3.889 Tcf.  It finds that this is a "somewhat conservative[] measure of aggregate industry capability to store gas."

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The Pittsburgh Tribune-Review is reporting that drilling in the Marcellus Shale is continuing apace despite the recession, due in large part to access to northeast markets and lower drilling costs.  Interesting.

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Governor Rendell told reporters yesterday that his proposed "extraction" tax on PA natural gas production is off the table for the year, according to this article in the Pittsburgh Post-Gazette.

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