"New" Skeptics on Global Warming?

The NYT has an interesting article on the apparent schism between many "meteorologists" and "climate scientists" on global warming issues.  The take away:  Increasing public skepticism regarding anthropogenic global warming is due in part to the public's interaction with meteorologists, "who predict short-term weather patterns," who "dominate communications channels to the public," and who are often less educated than their climate scientist colleagues.  It couldn't be the substance, of course.

New Offshore Drilling

It is being reported that President Obama today will announce plans to allow drilling for oil and natural gas off much of the U.S.'s Atlantic coast, but will continue to restrict drilling off the California, Washington, and Oregon coasts, as well as in Alaska's Bristol Bay.  See here, for example (LA Times); and here (NY Times).

PA Governor Pushes E&P Industry

Pennsylvania Governor Rendell has taken a more strident tone regarding taxation of natural gas production in the state, according to this article at philly.com.  "In a talk before an energy conference in Dallas, Rendell said the natural-gas business was following 'some bad advice' in resisting a Pennsylvania tax on production, and it could face a future backlash resulting in a far more severe tax 'that will bleed the industry.'"  Interesting article overall.


CAA Permits for GHGs Delayed

U.S. EPA has announced that stationary sources will not be required to get permits under the Clean Air Act (CAA) for greenhouse gases (GHGs) until at least January 2011.  "Today’s action determines that Clean Air Act construction and operating permit requirements for the largest emitting facilities will begin when the first national rule controlling GHGs takes effect. If finalized as proposed, the rule limiting GHG emissions for cars and light trucks would trigger these requirements in January 2011 – the earliest model year 2012 vehicles meeting the standards can be sold in the United States. The agency expects to issue final vehicle GHG standards shortly."

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Association Merger

The Philadelphia Inquirer is reporting that the Pennsylvania Oil and Gas Association is merging with the Independent Oil and Gas Association of Pennsylvania.  For a copy of the new association's press release [Pennsylvania Independent Oil and Gas Association (PIOGA)], see here.  Congratulations!


New Marathon Refinery

The Houston Chronicle is also reporting on Marathon's recent expansion of its Garyville facility, in effect the first new refinery built in the U.S. in the last 30 years.  "The new ultra-efficient behemoth is now processing its full nominal capacity 436,000 barrels of oil per day, producing 19.5 million gallons of fuel."  Nice.


Oil Companies Looking to the Shales

The Houston Chronicle is reporting on several large oil companies taking positions in natural gas shale basins.  Regarding Shell, for example:  "He [i.e., Marvin Odum, president of Houston-based Shell Oil Co.] now considers the holdings [in the Eagle Ford shale] a key piece of a North American gas portfolio the company has spent the last two years building, and that now encompasses 2.4 million acres of land and a resource holding of 21 trillion cubic feet of natural gas — 8 trillion cubic feet of which was added in 2009 alone."  Interesting.


Wyoming Frac Rules

Wyoming is considering changes to its oil and gas regulations that may impact how hydraulic fracturing is done in the state, according to this article in the Billings Gazette.  "The commission is considering several detailed rules for fracking, including requiring companies to disclose 'proprietary chemical component detail' of fracking fluids."


Enbridge Liquids Pipeline

Enbridge, Inc., has announced plans to develop a natural gas liquids (NGL) pipeline from the Marcellus Shale in southern Pennsylvania and northern West Virginia to Midwestern markets in the Chicago area.


Limits Proposed for Federal Frac Regulation

The Houston Chronicle is reporting that BP, ConocoPhillips and Shell Oil Co., have proposed language for climate change legislation that would prohibit federal regulation of hydraulic fracturing, which is currently regulated by the states.  Among other things, "[t]he document recommends that states adopt standards for disclosing the contents of hydraulic fracturing chemicals 'to health professionals or state agencies' in order to protect health or environmental safety but maintain 'the confidentiality of trade secret information' in the fluids."

PA Royalty Decision

The Pennsylvania Supreme Court recently upheld the lower court's decision in Kilmer v. Elexco Land Services, Inc., Docket No. 63-MAP-2009, which found that the net-back method for calculating natural gas royalties did not violate the state's Guaranteed Minimum Royalty Act (GMRA) (which requires that leases guarantee a landowner-lessor at least a 1/8th royalty).  See here (go to Supreme Court Opinions).  After going through the parties' arguments in detail, the Court reasoned, in part, that the term royalty must be construed according to its industry meaning, and that:

The term royalty has been defined in the oil and gas industry as “[t]he landowner's share of production, free of expenses of production.” *** In the industry, as referenced above, the “expenses of production” relate to the costs of drilling the well and getting the product to the surface, but do not encompass the costs of getting the product from the wellhead to the point of sale, as those costs are termed “post-production costs.” “Although the royalty is not subject to costs of production, usually it is subject to costs incurred after production, e.g., production or gathering taxes, costs of treatment of the product to render it marketable, costs of transportation to market.” Id.; see also George A. Bikikos and Jeffrey C. King, A Primer on Oil and Gas Law in the Marcellus Shale States, 4 TEX. J. OIL, GAS, & ENERGY L. 155, 168-69 (2008-2009) (explaining post-production costs and noting that a majority of jurisdictions authorize the deduction of post-production costs in the calculation of royalties).

This, bolstered by the fact that the GMRA was intended to apply to both natural gas and oil royalties, and that oil royalties can be taken in-kind, persuaded the court to agree with the lower court that the GMRA should be read to permit the calculation of royalties at the wellhead, consistent with the net-back method in the lease at issue.

Ohio Wind Farm Applications Approved

The Ohio Power Siting Board (OPSB) approved several large-scale wind farm projects yesterday, according to these press releases (Buckeye Wind Project, JW Great Lakes Wind, and Hardin Wind Energy Project).  Copies of the decisions in these cases can be found here.

Congratulations to all!

[Disclosure:  Vorys represented Buckeye Wind LLC.]

FERC Form 552

We mentioned previously that the Federal Energy Regulatory Commission (FERC) would be holding a technical conference to address certain issues identified by the FERC Staff regarding Form 552 (Transparency Provisions of Section 23 of the Natural Gas Act).  The Staff recently posted an agenda (including industry panelists), noting that the issues to be addressed include:  "Inconsistencies in reporting upstream transactions in the natural gas supply chain on Form No. 552, and whether these transactions contribute to wholesale price formation; (2) whether transactions involving balancing, cash-out, operational, and in-kind transactions should be reported on Form No. 552; and (3) whether the units of measurement (TBtu) currently used for reporting volumes in the form are appropriate."

For more, see here.

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US Rig Count

Baker Hughes is reporting that the U.S. rig count increased by 20 last week to 1,427.  Horizontal rigs have increased to 711, more than the previous peak:


FERC Penalty Guidelines

The Federal Energy Regulatory Commission (FERC) has announced a new policy statement on civil penalty guidelines to enhance its enforcement program.  From the news release:  "This approach promotes consistency by basing the penalty calculations on a set of uniform factors that are weighted similarly for similar types of violations and similar types of violators. The Penalty Guidelines also provide specific credit to companies for self-reporting violations and for implementing robust compliance programs, thus further encouraging compliance by the industry. Based on the specific facts and circumstances of a violation, the Commission retains the discretion to impose a penalty that is not based on an application of the Penalty Guidelines."

A copy of the Policy Statement can be found here.


EPA Hydraulic Frac Study

U.S. EPA has announced that it intends to conduct a comprehensive study of hydraulic fracturing and its potential adverse impacts on the environment.  From the news release:  "The agency is proposing the process begin with (1) defining research questions and identifying data gaps; (2) conducting a robust process for stakeholder input and research prioritization; (3) with this input, developing a detailed study design that will undergo external peer-review, leading to (4) implementing the planned research studies."

An EPA Science Advisory Board (SAB) meeting has been scheduled for April 7th and 8th to evaluate and comment on the proposed approach.

PA Commission Considering Gathering Regulation

The Pennsylvania Public Utility Commission is considering natural gas gathering regulation, according to this article in the Scranton Times-Tribune.  It has scheduled a hearing for April 22 to take comments from interested parties, including industry.


More Marcellus Gathering

Penn Virginia Resources Partners, L.P., has announced that it has entered into an agreement with a Marcellus producer to construct gathering and compression facilities in Wyoming County, PA.  "PVR Midstream will construct a 12-inch gathering pipeline and compression facilities with 25 million cubic feet (MMcf) per day of throughput capacity. This system is expected to become operational during the second quarter of 2010, with the potential for additional system extensions."


Dominion Selling Appalachian Assets

The Richmond Times-Dispatch is reporting that Dominion Resources, Inc., is selling its Appalachian oil and gas E&P operations to Consol Energy, Inc., for just under $3.5 billion.  It includes more than 9,000 wells, 1.46 million acres, and 1 Tcf of proven natural gas reserves.  For a copy of the Dominion news release, see here.


Marcellus Drilling

The Philadelphia Inquirer has an interesting article on drilling in the Marcellus Shale.  It ranks, for example, the players in the region by number of wells drilled in the shale since 2008.  The results ... well, take a look for yourselves.



The Dallas Morning News has an interesting article on the views of Exxon Mobil Corp.'s CEO regarding natural gas vehicles.  In sum - He has doubts about the wide-spread adoption of natural gas vehicles.  He sees, however, significant potential for natural gas for power generation.


Storage Report

The Energy Information Administration (EIA) is reporting a draw of 111 Bcf from storage last week, leaving 1,626 Bcf as of Friday, March 5, 2010.  This is well within the 5-year range:

For more, see here.



This has been CERAWeek in Houston, one of the largest industry conferences of the year.  The NYT has a good article on how much of the conference seemed to focus on the opportunities presented by shale gas for the country.  For other articles, see here at the Houston Chronicle.


Short-Term Energy Outlook

The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for March, 2010.  Regarding natural gas prices:

EIA expects this year’s annual average natural gas Henry Hub spot price to be $5.17 per million Btu (MMBtu), a $1.22-per-MMBtu increase over the 2009 average. EIA projects price increases to continue in 2011, averaging $5.65 per MMBtu for the year. Projected working gas inventories end the first quarter of 2010 at about 1,550 billion cubic feet (Bcf) compared with 1,644 Bcf in the previous Outlook because of colder-than-normal weather in February. Natural-gas-weighted heating degree-days were nearly 11 percent above the 30-year norm last month.

It makes that prediction based in part on an expectation that total marketed natural gas production will decline by 2.7 percent to 58.7 Bcf/d.  For more, see here.


FERC Technical Conferences

The Federal Energy Regulatory Commission (FERC) has issued several notices regarding upcoming technical conferences:  for Electronic Tariff Filings, see here; for Guidance on the Preparation of Market-Based Rate filings, see here (with webcast available); and for FERC Form 552 potential changes, see here.

[Update:  If you are interested in the technical conference on FERC Form 552, it will now be webcast.  See here for the details.  (Moved up.)]

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A new study released by the University of Texas and Southern Methodist University finds a correlation between a series of minor earthquakes in north Texas and the operations of a disposal well on Dallas-Fort Worth International Airport property, according to this article in the Houston Chronicle.  The take away at the end of the article:  "But he [i.e., an SMU geophysicist who worked on the study] said the study raises more questions, since no quakes have been reported around the 200 other disposal wells in seven north Texas counties."

Just remember:  Correlation does not imply causation.



The WSJ is reporting that EQT intends to sell at least 12.5 million shares to fund production operations at its Marcellus Shale and Huron-Berea properties.  It also plans to raise its capital expenditures for the year by 41%, to $1.2 billion.

(Note:  Subscription required.)


Solar to Increase Utility Costs in CA?

The NYT is reporting on a plan by the Los Angeles Department of Water and Power to increase electric utility rates to cover a $6 million a week budgetary shortfall and subsidize renewable energy sources, including the use of solar panels by Los Angeles' residents to contribute to the power grid.  While noting that solar energy should be a thriving local industry, the article further observes "that has never been the case, and experts cite cost as the main reason."

WV Reporting Legislation Moves Forward

The Charleston Daily Mail is reporting that legislation to require reporting on source water and disposal plans related to hydraulic fracturing, as well as the additives used in the frac fluids, has cleared the Senate Natural Resources Committee.  Next stop:  the Senate Energy, Industry and Mining Committee.

Mexico's Oil Production

The future of oil production in Mexico looks bleak, according to this article in the NYT.  The U.S. link:  "'As you lose Mexican oil, you lose a critical supply,' said Jeremy M. Martin, director of the energy program at the Institute of the Americas at the University of California, San Diego. 'It’s not just about energy security but national security, because our neighbor’s economic and political well-being is largely linked to its capacity to produce and export oil.'”


Wind Power's Challenges

The NYT has an article on the challenges for expanding U.S. wind power generation, including a push for American jobs, rather than sending jobs to China; and low prices for competitive fuels such as natural gas.

Laser Marcellus

We reported previously on the petition filed by Laser Marcellus Gathering Company, LLC, for a declaratory order that pipeline facilities it intends to construct from Pennsylvania into New York are functionally gathering and therefore exempt from Federal Energy Regulatory Commission jurisdiction under Section 1(b) of the Natural Gas Act.  The Commission recently granted that petition, noting that the fact that the facilities crossed the Pennsylvania-New York border did not affect the exemption:

The history of Commission and court interpretation of Section 1(b), … makes clear that there is a distinction between gathering and transportation, such that the two functions are mutually exclusive. Consequently, otherwise non-jurisdictional production or gathering does not become jurisdictional on the basis that the facilities employed therefor cross a state line.

For a copy of the Commission's decision, see here (search Docket No. CP10-35).

Sage Grouse

The Department of the Interior has found that the greater sage-grouse warrants protection under the Endangered Species Act (ESA), but that its listing is precluded by the need to address higher priority species first.  See here.  As a consequence, it will be placed on a list of candidates for future action and not receive statutory protection under the ESA.

For commentary, see this NYT article.

EPA Effluent Guidelines

On December 28, 2009, U.S. EPA issued a Notice of Availability of Preliminary 2010 Effluent Guidelines Program Plan (74 Fed. Reg. 68599) (see here) and asked for comments on both its preliminary 2010 Plan and on its 2009 review of existing effluent guidelines and pretreatment standards, including comments on industrial categories not currently regulated by effluent guidelines and pretreatment standards.  See Docket No. EPA-821-R-09-006 at www.regulations.gov.

Comments were submitted by both industry and environmental groups on the appropriateness of effluent guidelines for the oil and gas industry.  Earthjustice, for example, submitted comments urging U.S. EPA to expand its study of CBM operations "to include all techniques that may result in contamination of surface water or groundwater, including hydraulic fracturing in all formations."  See here.  The American Petroleum Institute filed comments, on the other hand, noting that CBM operations should not be subject to national effluent limitations guidelines and objecting to an expansion of U.S. EPA's study of CBM extraction to oil and gas operations more generally.

Eagle Resources Targets Illinois Prospects

The Courier Press is reporting that Eagle Resources is targeting the New Albany Shale Group in southeastern Illinois.  Its current plans:  To drill three core sample wells around the first quarter of 2011, followed, hopefully, with drilling for production.  To success!


U.S. Supreme Court PMPA Decision

The U.S. Supreme Court recently held in Mac's Shell Service, Inc. v. Shell Oil Products Co., LLC, Docket No. 08-240 (Mar. 2, 2010), that a franchisee cannot recover for constructive termination under the Petroleum Marketing Practices Act (PMPA) if the franchisor's wrongful conduct failed to compel the franchisee to abandon the franchise.  See here.


Negotiated Rates (FERC)

The U.S. Court of Appeals for the District of Columbia Circuit recently rejected a shipper's attempt to require FERC approval for a pipeline's rate changes under a negotiated contract.  See Iberdrola Renewables, Inc. v. Federal Energy Regulatory Commission (Docket No. 08-1195) (Feb. 26, 2010) (see here - opinions).  The court found that:

The contract’s plain language settles this matter. Even if we were to consider this extrinsic evidence, it is of no help to Iberdrola. Both parties were aware that FERC had instructed Alliance to remove that language [i.e., language making rate changes subject to FERC review] from its tariff and to include it in the Transportation Agreement if the parties wanted FERC approval for any negotiated rate changes. They were, therefore, on notice that FERC would only review rate changes if the parties included such a provision in their contract. Their knowledge of how FERC would read the contract is the most probative piece of extrinsic evidence of the parties’ intent, and it cuts strongly against Iberdrola.

Because the negotiated contract did not include an express role for FERC, the court followed "the well-established rule that freely negotiated rates are presumed just and reasonable."

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Colorado Conversion

The Daily Sentinel has an article on potential Colorado environmental legislation that would convert several coal-fired power plants to natural gas (900 megawatts).  From the article, it looks like everyone wins.


Sen. Rockefeller Introduces GHG Legislation

Senator Rockefeller (D-WV) has introduced legislation to delay action by U.S. EPA on greenhouse gas regulation for stationary sources for a period of two years, according to this press release from the Senator's office.  "The legislation directs that for two years after enactment the EPA can take no regulatory action and that no stationary source shall be subject to any requirement to obtain a permit or meet a New Source Performance Standard under the Clean Air Act with respect to carbon dioxide or methane, except for the widely-supported motor vehicle emission standards."

The press release provides a link to the proposed legislation.

Energy Security

The NYT is reporting on steps being taken by the European Union (EU) to strengthen its access to reliable natural gas resources, including pledging nearly $300 million to fund the Nabucco project - a pipeline designed to bring gas in from the Caspian Sea region and bypass Russian supplies.


Mobile Methane Detectors

The Dallas Morning News is reporting on claims made by researchers that mobile methane detectors have found plumes near natural gas facilities located in Barnett Shale counties.  Looks like they may be centered around compressor stations.

EIA Storage Report

The Energy Information Administration (EIA) has reported a 116 Bcf decline in storage from the previous week.  Graphically:

That leaves working gas in storage at 1,737 Bcf, only 21 Bcf above the 5-year average and well within the 5-year range (as illustrated above).


Wave Power

Several utilities and states are looking at harnessing the hydrokinetic energy of ocean waves, according to this article in the NYT.  Marine renewables?  Very interesting.


Bush Tougher on Polluters than Obama?

We couldn't resist the title.  The WSJ is reporting that U.S. EPA under the Obama administration has forced polluters to pay in fiscal 2009 less than in the previous year:  "In fiscal 2009, the EPA's enforcement office required polluters to spend more than $5 billion on cleanup and emission controls—down from $11.8 billion the previous year, according to a report recently published by the agency."

That won't last, will it?

(Note:  Subscription required.)

Wind Power - Natural Gas Tension

The WSJ has an interesting article on the tension between wind power producers and the owners of natural gas power plants in Texas.  For one thing, while power producers generally are responsible for their own backup costs in the event that they fail to deliver as promised, it appears that wind power producers in Texas are not - creating an unfair advantage according to some.

(Note:  Subscription required.)

Tax Decision Stands

The U.S. Supreme Court has declined to hear an appeal by Missouri Gas Energy contesting a ruling by the Oklahoma Supreme Court that natural gas in storage is subject to ad valorem taxes, according to this article in the Oklahoman.

For more on the case, including a copy of the underlying decision, Petition for Certiorari, and related briefs, see here (SCOTUSblog).


House Committee Inquiry

The Chairman of the House Committee on Energy and Commerce, Rep. Henry Waxman (D-Ca), and the Chairman of the House Subcommittee on Energy and Environment, Rep. Edward Markey (D-Ma), have sent a letter to the American Public Power Association (APPA), demanding to know whether the APPA disputes the scientific validity of U.S. EPA's greenhouse gas endangerment finding, and if so, the basis for that dispute.  See here.  The Congressmen expressed a deep concern that "APPA appears to be actively misinforming its members about this issue."

CWA - Navigable Waters

We have reported previously on the narrowing definition of "navigable waters" under the Clean Water Act, particularly with respect to the federal SPCC Rule (see here, for example; but see here (Rapanos decision in Sixth Circuit)).  The significance of that trend - especially on enforcement - has finally been recognized by those outside of industry and the regulators.  From the NYT today:  "[M]idlevel E.P.A. officials said that internal studies indicated that as many as 45 percent of major polluters might be either outside regulatory reach or in areas where proving jurisdiction is overwhelmingly difficult."

Will this spur on a legislative fix?  We'll keep you posted.  (Yes, pun intended.)