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

The Intelligencer has an interesting article on drilling activity in the Marcellus Shale in West Virginia (with a side note regarding Ohio).  "The Marcellus Shale rush is hitting on the west side of the Ohio River as well. Information provided by the Ohio Department of Natural Resources shows there are currently 12 completed Marcellus wells in Belmont County, with eight in Jefferson County and seven in Monroe County. Permits to drill even more Marcellus wells also have been issued for these counties."

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Natural gas is expected to double its share of the energy market, according to a study done by the Massachusetts Institute of Technology and reported on here by the NYT.  The article:  "The increase, the report concluded, will come largely at the expense of coal and will be driven both by abundant supplies of natural gas — made more available by shale drilling — and by measures to restrict the carbon dioxide emissions that are linked to climate change."

For more on the report, including links to a copy of the full report and related press release, see here (MIT).

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Directed to study whether natural gas retail market competition would benefit the state's small-volume consumers, the Kentucky Public Service Commission (PSC) is seeking public comment from everyone that might be impacted by the change.  See here (public notice).  For related testimony and other information, see here (Case No. 2010-00146).

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The United States Court of Appeals for the Tenth Circuit recently upheld a Bureau of Land Management (BLM) decision allowing natural gas development in Wyoming's Powder River Basin.  See Biodiversity Conservation Alliance v. Bureau of Land Management, Case No. 09-8011 (Jun. 18, 2010) (here; search using case number).  Environmental groups challenged the decision, arguing that it violated the National Environmental Policy Act by failing to study in detail a decades-long phased-development plan proposed by the environmentalists.

The court:  "The Bureau reasonably refused to give detailed study to a plan that would not meet the project's purposes."  Interesting.

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The Federal Energy Regulatory Commission (FERC) issued Order No. 704-C recently to clarify certain aspects of Form 552, "under which natural gas market participants must annually report information regarding physical natural gas transactions that use an index or that contribute to or may contribute to the formation of a gas index."  Among other things, Order No. 704-C exempts from reporting any unexercised options to take gas under take-or-release contracts; addresses the exemption for unprocessed natural gas transactions (not all are exempt); and exempts cash-out and imbalance transactions.

For more, see here.

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The Federal Energy Regulatory Commission (FERC) has issued a Notice of Proposed Rulemaking (NOPR) soliciting comments on a proposal to revise certain financial reporting requirements for natural gas companies in Form Nos. 2, 2-A, and 3-Q.  Among other things, the revisions would require information on the amount of fuel waived, discounted or reduced as part of a negotiated rate agreement.

For more, see here (Docket No. RM07-9-003).

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The U.S. District Court for the Eastern District of Louisiana issued a preliminary injunction today prohibiting the Interior Department from enforcing a six-month moratorium on all drilling in the Gulf of Mexico's Outer Continental Shelf in water at depths greater than 500 feet.  See Hornbeck Offshore Services, LLC v. Kenneth Lee "Ken" Salazar, Case No. 10-1663 (you can find copies of the court's decision and order here).  The court found, among other things, that the plaintiffs had established a likelihood of successfully showing that the Department acted arbitrarily and capriciously in issuing the moratorium:

After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no time line for implementation, though many of the proposed changes are represented to be implemented immediately. The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium.

For more, see this article from the NYT.

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Today the USEPA published its revised primary ambient air quality rule (75 FR 35520) for sulfur dioxide.  A new 1-hour standard was set at a level of 75 parts per billion, based on the 3-year average of the 99th percentile of 1-hour daily maximum concentrations.  The previously existing 24-hour and annual primary standards were revoked. 

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Today the USEPA proposed two alternative options (75 FR 35128) for regulating coal combustion residuals ("CCR").  Under the first proposal, CCR would be listed as a special waste subject to RCRA subtitle C regulation when destined for disposal.  The second proposal would continue to regulate CCR under RCRA subtitle D by issuing national minimum criteria. 

This proposed regulation also would establish dam safety requirements to address structural integrity of surface impoundments to prevent catastrophic releases of CCR.  Lastly, EPA hopes to refine its regulations regarding the beneficial use of CCR.

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Dominion Transmission, Inc., has filed an application with the Federal Energy Regulatory Commission (FERC) for approval of its Appalachian Gateway Project.  See here (Docket No. CP10-448).  Among other things, it requests authorization to construct approximately 107 miles of varying diameter pipeline, several new compressor stations, and approval of related incremental transportation rates.  Estimated cost:  Just under $634 million.

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The Bristol Herald Courier is reporting that two class action lawsuits were filed last week claiming that EQT Corp. and Consol Energy, Inc., failed to pay Southwest Virginia landowners for producing coalbed methane from their properties.  This follows a 2004 Virginia Supreme Court ruling that methane constitutes a distinct mineral estate from coal for purposes of ownership.

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We posted earlier on the hydraulic fracturing study that U.S. EPA plans to do (see here, e.g.).  EPA has announced that it will be holding four public meetings around the country to gather further input (including one on July 22 from 6 p.m. at the Hilton Garden Inn in Canonsburg, Pa.).

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The Ohio General Assembly recently enacted Sub. S.B. 232, which (among other things) exempts certain qualified energy projects from real and personal property taxation for upcoming tax years; expands the solar panel revolving loan program to include other alternative energy technologies; and requires the Public Utilities Commission to study reactive power in the state.

[Note:  Vorys has published two client alerts looking at this bill in greater detail.  The first looks at new low-interest options for financing alternative energy projects.  The second looks at the advanced energy property tax exemptions.]

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With all of the talk of a moratorium on drilling in the Gulf, one group of workers gets little national attention:  Rig workers.  The NYT has an article looking at the impact a drilling ban would have on these skilled employees.  A sample:  "The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work."

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Building on the royalty-interest owners' success in Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC (West Virginia), plaintiffs filed a nearly-identical suit in Ohio asserting class-action claims for the deliberate and fraudulent underpayment of natural gas royalties by CNR and its successors.  See Lutz v. Chesapeake Appalachia, LLC, Case No. 4:09CV2256 (United States District Court, Northern District of Ohio).  Today, the District Court issued its decision dismissing those claims - based largely on Ohio's new 4-year statute of limitations.

Effective April 6, 2007, Ohio changed its statute of limitations for breaches of oil and gas leases from 15 years (i.e., the limitations period ordinarily applicable to breach of contract claims) to 4 years (i.e., the period applicable to UCC sales of goods).  See Rev. Code Section 2305.041.  Notably under the new statute, the "cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach."  See Rev. Code Section 1302.98.  To overcome the fact that they had alleged royalty claims beginning in 1993 and 2000, plaintiffs argued the new statute of limitations should not be applied because it would retroactively extinguish an accrued substantive right.  The court disagreed.

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On June 14, USEPA gave notice of a July 9, 2010 "listening session" related to its external review draft document entitled "EPA's Reanalysis of Key Issues Related to Dioxin Toxicity and Response to NAS Comments."  The draft document includes new analyses on potential human effects from exposure to 2, 3, 7, 8 tetrachlorodibenzo-p-dioxin (TCDD).  The draft document was also provided to EPA's Science Advisory Board for peer review.

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The WSJ is reporting that a proposal made by Senator Sanders (I-Vt.) to repeal the expensing of intangible drilling and development costs and percentage depletion has been defeated (at least for the moment), despite being part of a budget request made by the President this year.

(Note:  Subscription required.)

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The NYT is reporting that the U.S. Conference of Mayors is supporting a mandatory "green" construction code designed to reduce the impact of commercial buildings on the environment.  The article goes on to note:  "A handful of states and cities already require new public buildings to meet sustainable design benchmarks, such as the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design). Meeting such environmental benchmarks is voluntary for the vast majority of private buildings, however."

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The Delaware River Basin Commission has announced that its ban on new drilling permits in the Delaware River Basin has been expanded to include exploratory wells too, according to this article in the Philadelphia Inquirer.  "The commission said the action was a recognition of 'the risks to water resources . . . that the land disturbance and drilling activities inherent in any shale gas well pose.'"

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Dominion has announced that its transmission and storage subsidiary, Dominion Transmission, has entered into a 15-year firm transportation agreement with CONSOL Energy, Inc., for CONSOL's Marcellus production.

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Take the oil spill forecasts you hear with a grain of salt.  This article from the Houston Chronicle reports on the related uncertainties and warns:  "Predicting the long-term trajectories, it seems, is therefore a riskier business than even long-range hurricane forecasting."  Sounds like good advice.

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The Philadelphia Inquirer is reporting on the loss of state solar tax credits despite homeowner reliance when installing the related equipment.  "Turns out that the money for those tax credits - about $50 million over eight years from the state's general fund - was eliminated as part of the 101-day budget duel last fall."

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The federal government is meeting with Hollywood celebrities to discuss options for addressing the Deepwater Horizon spill in the Gulf of Mexico.  The Houston Chronicle reports here on congressional testimony given by Kevin Costner on separators that he has been developing over the last several years (motivated by the Exxon-Valdez spill); and here on a meeting between U.S. EPA and Avatar director James Cameron, "considered an expert on underwater filming and remote vehicle technologies."

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The Times-Tribune is reporting that the Commonwealth Foundation has issued a policy brief opposing the new severance tax proposed for Pennsylvania oil and gas producers.  You can find a copy of the brief here.

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The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for June 2010.  Among other things, it projects that natural gas consumption is going to grow by 3.8% (or 2.4 Bcf/d) in 2010.  Regarding prices:

Sustained low natural gas prices this summer are expected to contribute to a decline in natural gas drilling activity over the next several months. As a result, the current 2011 forecast of higher prices comes as production begins to decline later this year and next. The projected Henry Hub spot price averages $4.49 per MMBtu in 2010 and $5.06 per MMBtu in 2011.

For more, see here.

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On June 3, 2010, the USEPA issued its final Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (75 FR 31,514).  On the very same day, a legal foundation, House Republicans, businesses and business organizations sued the EPA saying EPA does not have the authority to issue the new rule.

The tailoring rule phases the applicability criteria to determine which stationary sources become subject to GHG emission permitting requirements under PSD and Title V Clean Air Act programs.

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The Dallas Morning News is reporting on an explosion caused by utility workers digging into a 36-inch high-pressure natural gas pipeline owned by Enterprise Products Partners.  As observed by the Pipeline and Hazardous Materials Safety Administration (PHMSA), this is one of the leading causes (i.e., dig-in) of injuries related to natural gas pipeline incidents.

[On a related note, one of our attorneys will be giving a presentation on the applicability of federal pipeline safety regulations to production and gathering operations at the PIOGA Summer Meeting at the Seven Springs Resort - Champion, PA, later this week.  For more, see here.]

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U.S. EPA has set a new health standard for sulfur dioxide (SO2).  Among other things, EPA is setting the one-hour SO2 health standard at 75 parts per billion (ppb) and changing related monitoring requirements.  For more, see here.

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The Columbus Dispatch has an interesting - and overall, fair - report on the Ohio E&P industry today.  A sample:  "At one time, Ohio was an oil epicenter. One of the first, if not the first, wells in North America was drilled in 1814 in Noble County in southeastern Ohio. The state’s first commercial-scale well was drilled around 1860, according to the Ohio Oil and Gas Association, a trade group. *** The industry entered a two-decade boom in the 1880s with the discovery of large oil and gas reserves in the Lima and Findlay areas. Ohio rose to become the leading oil-producing state for the last few years of the 19th century. This helped nurture corporate giants such as John D. Rockefeller’s Standard Oil in Cleveland."

Read it for yourself.

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On June 2, 2010, USEPA announced a 90-day public comment period for its "Toxicological Review of Formaldehyde Inhalation Assessment: In Support of Summary Information on the Integrated Risk Information System."  EPA's Integrated Risk Information System is a human health assessment program that evaluates quantitative and qualitative risk information on effects from chemical exposures.  EPA 's notice seeks pre-dissemination peer review.  A copy of the notice can be seen here.

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The Chicago Tribune is reporting that Sen. Debbie Stabenow (D-Mich) is urging U.S. officials to persuade Canada to halt natural gas drilling in Canadian waters of Lake Erie over concerns raised by the Deepwater Horizon oil spill in the Gulf of Mexico.  Really.

[Natural gas production is prohibited in the U.S. side of Lake Erie already.]

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This didn't take long.  The NYT is reporting that the Justice Department is opening a criminal probe of the Deepwater Horizon spill in the Gulf of Mexico.  The first paragraph hints at the reason:  "The Obama administration said Tuesday that it had begun civil and criminal investigations into the massive oil spill in the Gulf of Mexico, as the deepening crisis threatened to define President Obama’s second year in office."

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The Federal Energy Regulatory Commission (FERC) has granted a request to extend the filing deadline for 2009 Form 552 to September 1, 2010.  See here for more.

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The Ohio Chamber, along with other statewide associations, formally requested a motion for leave to intervene in the Natural Resources Defense Council’s (NRDC) 6th Circuit appeal challenging Ohio’s New Source Review (NSR) State Implementation Plan (SIP). The NRDC is arguing that the rule violates the “anti-backsliding" provisions contained in the Clean Air Act. Motions to intervene were also filed by the Ohio EPA, Utility Air Regulatory Group and Clean Air Implementation Project. 

In addition to the formal legal challenge, NRDC has also petitioned US EPA for a “reconsideration” of its approval of Ohio’s rule. NRDC also sought a reconsideration and stay of certain parts of Wisconsin’s NSR SIP. On January 20, US EPA formally denied NRDC’s request to reconsider Wisconsin’s rule. Might there be a similar determination for Ohio?  

The regulations being attacked were intended to assist business and industry maintain jobs and improve the environment.   

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