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

The Pennsylvania Department of Environmental Protection (DEP) is proposing new well construction regulations, including updated casing and cementing requirements.  For a copy of the published notice, see here; for the proposed regulations see here.  Comments are due March 2, 2010.

[Update:  The DEP is going to be hiring 68 more inspectors this year, according to this article in the Philadelphia Inquirer.  "With the new hires, the DEP will have 193 people dedicated to oil and gas."  (Moved up.)]

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The Energy Information Administration is reporting an 86 Bcf withdrawal.  "Stocks were 120 Bcf higher than last year at this time and 87 Bcf above the 5-year average of 2,434 Bcf."  Graphically:

For more, see here.

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The Federal Energy Regulatory Commission (FERC) has issued several proposed rulemakings related to the wholesale electric energy market, including a rulemaking designed to address the risk and cost of default shared among market participants (credit reform) (see here); and one proposing to grant blanket authorization to acquire securities under Federal Power Act Section 203 and amend the definitions of “affiliate” in Subpart H and Subpart I of Part 35 of the Commission’s regulations (see here).  For a list, see here.

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On January 27, 2010, the Securities and Exchange Commission voted to provide public companies with interpretive guidance on disclosure requirements related to business or legal developments on climate change. According to the SEC’s press release, the interpretive guidance is intended to assist companies with disclosures of climate change impacts under the SEC's existing disclosure regulations.

The interpretive guidance highlights four areas as examples of when climate change disclosures may be triggered:

• Impact of Legislation and Regulation
• Impact of International Accords
• Indirect Consequences of Regulation or Business Trends
• Physical Limitations of Climate Change

The SEC expects to post a copy of the interpretive guidance on its website when is it available. 
 

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Earlier this week, the Ohio Supreme Court issued a decision affirming the PUCO's (i.e., Public Utilities Commission of Ohio's) approval of modified straight-fixed-variable (“SFV”) rate designs in both the Duke Energy Ohio, Inc., and East Ohio Gas Company proceedings.  A copy of the court's decision can be found here (Case No. 2010-Ohio-134).

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Legislative hearings have started on proposed wastewater regulations related to natural gas drilling in the Marcellus Shale in Pennsylvania.  For a brief account, see this article in the Scranton Times-Tribune.  For a copy of the proposed rulemaking, see here.  Comments are due February 12, 2010.

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The Texas Commission on Environmental Quality (TCEQ) released a study of air emissions in the Barnett Shale last Wednesday finding:

All chemicals monitored at the majority of monitoring sites were either not detected or were detected below levels of immediate health concern.  At two monitoring sites in one geographic area, benzene was measured above the TCEQ short-term, health-based comparison value of 180 parts per billion (ppb) and the Toxicology Division (TD) recommends a reduction in volatile organic compounds (VOC) emissions in this area.  While not an immediate health concern, benzene was measured at short-term levels that could cause concern about long-term cumulative exposure levels at an additional 19 monitoring sites in 11 geographic areas.

For a sample of the differing ways the study's results are being reported, see here (Houston Chronicle) and here (ABC News).

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The Houston Chronicle is reporting that industry executives are optimistic about 2010.  "Vincent[, Chairman of IPAA,] cautioned that the industry outlook depends on what Washington decides to do on energy policy — particularly as to taxes and regulation of hydraulic fracturing."

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We reported previously on the Exxon Mobil - XTO purchase.  The NYT is reporting that a House Energy and Commerce panel will be looking at the financial ramifications of the deal.  But that isn't all:  "In addition to discussing the financial ramifications of the deal and the environmental impact of hydraulic fracturing, lawmakers could also question the executives about other oil and gas issues, such as increased offshore and public lands drilling or executive compensation, [one analyst] said."

[Update:  For more, see this NYT article (e.g., "Tillerson and XTO Energy CEO Bob Simpson told the congressional panel they could support a federal requirement that producers disclose those chemicals. But they said additional U.S. EPA regulation -- or an outright ban on the process to protect drinking water -- would bring a quick and certain end to unconventional gas development in the United States.").  (Moved up.)]

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This past weekend there was an oil spill offshore Texas caused by an 800-foot tanker heading for an Exxon Mobil Corp. refinery colliding into another vessel pushing two barges.  For more details see here (NYT) and here (Houston Chronicle).

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The Houston Chronicle is reporting on Texas Petro Index report showing drops in employment, drilling rig counts, and oil and natural gas production in Texas in 2009.  "The index, though regionally focused, has bigger implications for the U.S. oil and gas industry, since roughly half of the nation's drilling rigs are working in Texas at any given time, [said the economist who prepared the report]."

For a copy of the report, see here.

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Schlumberger, the world's largest oil services company, has reported better-than-expected earnings in the fourth quarter, according to this article in the Houston Chronicle.  While net income was down 42% for the entire year, Schlumberger's CEO is cautiously optimistic for 2010.

For a related article regarding Halliburton, see here.

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We reported previously on a Pennsylvania lawsuit challenging a settlement reached between the U.S. Forest Service and the Sierra Club that requires the Forest Service to analyze future drilling proposals on split estates in the Allegheny National Forest (ANF) under the National Environmental Policy Act (NEPA) prior to issuing a Notice to Proceed.

The court recently granted a preliminary injunction enjoining the Forest Service from implementing the terms of that settlement.  It found, among other things, that the Service does not have the regulatory authority claimed over the processing of drilling requests, and that "[c]onsequently, its involvement in the approval process does not constitute a major federal action requiring NEPA compliance."  It further found that industry members "have suffered significant financial losses as a result of the Forest Service's decision to halt drilling while an EIS is performed," with the potential that some may be forced out of business if the drilling ban continues.  This was sufficient to find irreparable harm to the mineral owners.

More on the court's decision, including a copy of the opinion, can be found here.

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We meant to mention:  The West Virginia Department of Environmental Protection released on January 8, 2010, an industry guidance document for oil and gas producers looking at possible Marcellus Shale production.  Its purpose:

[T]o assist well operators in planning for the drilling and operation of these wells and the associated need to either dispose of or reuse large water volume fracture treatment wastes. It is intended to facilitate compliance with applicable statutory and regulatory requirements and to generally minimize negative environmental impacts associated with these activities, by promoting the use of necessary best management practices.

A copy can be found here.

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The Washington Post is reporting that 36 Senators introduced legislation yesterday to block USEPA from regulating greenhouse gas emissions under the Clean Air Act.  Essentially, the Senators don't think the Clean Air Act was drafted to address greenhouse gases and that Congress should act - not the USEPA under ineffective laws.  You can read the Washington Post article here.

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The WSJ has a good article discussing the history (briefly) and issues surrounding the use of hydraulic fracturing.  A sample:  "Hydraulic fracturing and some other technology improvements have created a way to tap a domestic fuel source that has proved abundant. U.S. natural-gas production has risen about 20% since 2005 in large part because of these developments, making gas a much bigger player in energy-policy planning."  And:  "What most worries environmentalists isn't the water in the fracturing process—it's the chemicals mixed in the water to reduce friction, kill bacteria and prevent mineral buildup. The chemicals make up less than 1% of the overall solution, but some are hazardous in low concentrations."

(Note:  Subscription required.)

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The WSJ has a brief article on the revival of two major oil-sands projects as a result of falling costs, making the projects profitable at $80 per barrel.

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Five companies bid over $128 million for the right to produce natural gas on Pennsylvania state forest land, according to this article in the Houston Chronicle.  Average per acre bid - $4,100.  For more, see this article as well, from the Philadelphia Inquirer.

[Update:  Complaints that PA didn't get paid enough?  (Moved up.)]

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The California Coastal Commission has denied a request by a Santa Cruz County couple to install a wind turbine above their ocean-view home, according to this article in the San Jose Mercury News.  The reason (at least in part):  The "visual jolt" that it would cause in the neighborhood.

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The WSJ is reporting that Williams Cos. is planning on merging two of its natural gas pipeline and processing affiliates to create one of the largest natural gas partnerships in the country.  "The move will merge Williams Partners and Williams Pipeline Partners, which are entities called master limited partnerships. MLPs are tax-advantaged vehicles commonly used in the energy industry to own stable, fee-producing infrastructure assets such as pipelines and energy-processing plants."  Interesting.

(Note:  Subscription required.)

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The NYT is reporting that proposed ozone standards may pose a problem for oil and gas producers in Colorado, Wyoming, New Mexico and Utah.  "While the effects of a tougher health standard would be most immediately felt in smog-choked urban areas, where motor vehicles contribute billions of tons of ozone-forming pollutants annually, the odorless gas is a growing problem in many more rural states, especially where oil and gas producers have sunk thousands of wells into the ground, resulting in releases of ozone-forming pollutants."

Air issues are becoming more prevalent.

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The Energy Information Administration (EIA) reported on Thursday that we had a 266 Bcf withdrawal from storage the previous week, close to a record.  Graphically:

Puts us within the 5-year average!  You can find more here if you are interested.

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The NYT has a good article on the natural gas industry's continuing efforts to improve federal climate legislation (see here).  For example:  "If there is a renewable portfolio standard, natural gas argues, it should not force utilities to pick only fuel sources with no carbon emissions such as wind or solar. Instead, utilities should be allowed to pick fuel sources that reduce their greenhouse gas emissions. That would allow natural gas as an option."

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T. Boone Pickens has shelved his Pampa Wind Farm project, reducing his order of wind turbines by half and slating them for Canada or Minnesota instead, according to this article in the WSJ.  The cause - Cheap natural gas and lack of transmission infrastructure.  For a related article, see here (NYT).

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The California Building Standards Commission recently approved “CAL Green,” a new, environmentally friendly building code.  According to the San Francisco Chronicle, the new standards, which go into effect in January of next year, are the most stringent building codes in the nation and apply to new construction.  Builders will be required to install plumbing that reduces indoor water use, recycle 50% of construction waste, use low-pollutant paint, carpet and flooring, and install separate water meters for different uses in non-residential buildings.  In addition, CAL Green requires local officials to inspect heaters, air conditioners and other mechanical equipment in non-residential buildings to ensure efficient operation.  Local jurisdictions are also authorized to retain or adopt more stringent requirements.

More information on CAL Green can be found here.

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The Mobile-Sierra doctrine requires FERC to "presume that the rate set out in a freely negotiated wholesale-energy contract meets the 'just and reasonable' requirement imposed by law.  The presumption may be overcome only if FERC concludes that the contract seriously harms the public interest."  Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County (Case Nos. 06-1457 and 06-1462) (June 26, 2008).

Yesterday, the U.S. Supreme Court held that this standard of review applies to contract rate challenges even when they are brought by non-contracting parties.  See NRG Power Marketing, LLC v. Maine Public Utilities Commission (Case No. 08-674).

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The Houston Chronicle is reporting that the Texas Commission on Environmental Quality will be taking a closer look at air quality issues in the Barnett Shale.  Among other things, it will implement a rapid response plan for complaints regarding air quality and issue a report on extensive air monitoring later in January.  The issue now is benzene.

[Update:  TCEQ:  No dangerous ambient air pollution found.  Monitoring will continue, however.  (Moved up.)]

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This would be good:  The Houston Chronicle is reporting that McMoRan Exploration Co. has possibly found one of the largest oil and natural gas discoveries in shallow waters offshore Louisiana in decades (Davy Jones prospect, 28,263 feet, estimated 2 Tcf).

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An introductory program on the Marcellus Shale was recently held for landowners in Mineral County, West Virginia, according to this article in the Mineral Daily News Tribune.  Included were tips for landowners to consider when possibly leasing property for development.  Looks like it was informative.

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The Energy Information Administration has issued its Short-Term Energy Outlook for January, 2010.  Among other highlights, it concludes:

EIA expects the annual average natural gas Henry Hub spot price for 2010 to be $5.36 per thousand cubic feet (Mcf), a $1.30-per-Mcf increase over the 2009 average of $4.06 per Mcf.  The price will continue to increase in 2011, averaging $6.12 per Mcf for the year.

More:

EIA estimates that total marketed natural gas production increased by 3.7 percent in 2009, despite a 59-percent decline in the working natural gas rig count from September 2008 to July 2009.  Working natural gas rigs have since turned around from the mid-July 2009 low of 665, increasing to 759 as of December 31, 2009.

You can read the whole report here.

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New legislation in Ohio considers the possibility of brine produced from the Marcellus Shale in Pennsylvania coming to Ohio for disposal, according to this article in the Columbus Dispatch.

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The WSJ is reporting that the number of rigs looking for oil and gas in the U.S. rose to 1,220 last week, according to data from Baker-Hughes, Inc.  The greater increase came from rigs looking for natural gas.  (Note:  Subscription required.)

[Update:  In related news, the Pittsburgh Tribune-Review has an article on drilling in Pennsylvania in 2009.  The upshot:  Not great news except for the Marcellus.]

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Stricter environmental standards are coming for oil and gas development of public lands in the west, according to this article in the NYT.  This doesn't bode well for the industry, or the people who use these resources:  "'In the prior administration the oil and gas industry were the kings of the world. Whatever they wanted to happen, happened,' Salazar said, adding that those days are over."

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It appears that Laser Marcellus Gathering Company, LLC, is preparing to construct a new gathering line in Pennsylvania and New York, according to this notice in the Federal Register.  If you are interested, you can find Laser's Petition for a Declaratory Order from the FERC that it is a non-jurisdictional line here (Docket No. CP10–35–000).

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We previously reported on Cincinnati's Environmental Justice Ordinance, believed to be the first of its kind for a City.  That ordinance was supposed to take effect in December 2009.  On January 5th, the City Council's Quality of Life Committee unanimously passed a motion to delay the effective date until February 2011 due to lack of funding in the City's budget for implementation.  Additional City Council action will be necessary to amend the existing ordinance.

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The WSJ is reporting that the U.K. is experiencing the coldest winter in Britain for decades, causing demand for natural gas for heating and power to surge by 30%.  Moreover, "The lack of stored reserves leaves Britain exposed to competing with other countries for gas imports during periods of strong demand across Europe, and having to pay higher prices to lure it there."  Watch LNG prices this winter!

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Noble Energy, Inc., has announced that it will be acquiring substantially all of the Rockies upstream assets of Suncor Energy (Natural Gas) America Inc., and Petro-Canada Resources (USA) Inc., for $494 million.  A copy of the press release can be found here.

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The WSJ is reporting that French oil company Total SA (TOT) has entered a joint venture with Chesapeake Energy Corp. involving Chesapeake Barnett Shale assets.  Consistent with reports about other European production companies looking to learn from the U.S. experience, Total's Chairman and Chief Executive Christophe de Margerie stated, "It will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide."  Very interesting.

(Note:  Subscription required.)

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The Tennessee Valley Authority (TVA) plans on using more natural gas produced from eastern shales to generate power, according to this article in the Tennessean.  Not everyone is happy about it, though:  "[E]nvironmentalists say the chemical-laced drilling process used to break up the shale deep underground and release the gas could present as many problems as it solves."

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US EPA announced today its commitment to "strengthen and reform chemical management."

According to the press release, "EPA intends to establish a 'Chemicals of Concern' list and is beginning a process that may lead to regulations requiring significant risk reduction measures to protect human health and the environment. The agency’s actions represent its determination to use its authority under the existing Toxic Substances Control Act (TSCA) to the fullest extent possible, recognizing EPA’s strong belief that the 1976 law is both outdated and in need of reform."

TSCA will undoubtedly be a hot topic in 2010!

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Congress' failure to renew federal tax credits for biofuels is leading to the closure of a large biodiesel fuel plant in Port Neches, Texas, according to this article in the Houston Chronicle.

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The Houston Chronicle has a noteworthy article on a conflict we are seeing more and more between environmental interests - the encouragement of alternative energy and the goals of conservation groups.  In this case, the construction of a solar energy project is viewed as jeopardizing 6 square miles of habitat for a threatened desert tortoise species.

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The WSJ has an interesting article on how small natural gas production companies are expanding their focus on oil exploration and development, contrary to a recent move made by Exxon Mobil.  "The contrasting moves highlight the conundrum facing natural-gas producers and investors: Gas appears likely to become a favored fuel over the long run, because it is seen as a cleaner and more environmentally friendly fuel, but its near-term prospects are limited by a glut of supply and weak demand."

(Note:  Subscription required.)

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The NYT is reporting on the link between air pollution and the use of heating oil in NYC buildings, and the possibility that it might be regulated out in favor of natural gas.  An interesting contrast to the recent complaints regarding natural gas drilling in NY.

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The WSJ has an interesting article on natural gas producers seeking long-term contracts for their production, suggesting, according to the authors, that low prices are here to stay.  "Gas executives, however, are finding that long-term deals are an unexpectedly tough sell. The same price stability that has made producers eager to sign contracts has made their customers reluctant, because they are less worried that prices will suddenly rise."

(Note:  Subscription required.)

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