New Air Regulations for E&P Operations?

U.S. EPA is continuing its review of how it regulates emissions from oil and natural gas facilities.  The latest step, public meetings "to establish a dialog among government, the affected industry, and other interested members of the public."  More:

EPA will be conducting public meetings to provide an opportunity for public involvement during EPA's review of air regulations affecting the oil and natural gas industry. The review in progress covers oil and natural gas exploration and production, as well as natural gas processing, transmission, storage, and distribution. The primary purpose of these meetings is to establish a dialog among government, the affected industry, and other interested members of the public early in the rule development process, as well as to receive information that may be useful to EPA in its review. At these meetings, EPA will explain the regulatory process, provide a brief overview of its regulatory review, solicit information that may be useful to EPA in the review of these rules, and provide an opportunity for participants to ask questions and submit comments.

Note that the meetings will occur in TX and CO on August 2nd and 3rd.  The related docket is EPA-HQ-OAR-2010-0505.

EPA Denies Claims of Flawed Climate Science

U.S. EPA has denied multiple petitions challenging its finding that climate change is based on sound science, according to this press release.  "After months of serious consideration of the petitions and of the state of climate change science, EPA finds no evidence to support [the petitioners'] claims. In contrast, EPA’s review shows that climate science is credible, compelling, and growing stronger."

Did you expect a different result?  For more from U.S. EPA, see here.

EPA Environmental Justice Initiative

U.S. EPA has released an interim guidance document on how to incorporate environmental justice issues into its rulemaking process.  From the related press release:  "The document, Interim Guidance on Considering Environmental Justice During the Development of an Action, seeks to advance environmental justice for low-income, minority and indigenous communities and tribal governments who have been historically underrepresented in the regulatory decision-making process. The guidance also outlines the multiple steps that every EPA program office can take to incorporate the needs of overburdened neighborhoods into the agency’s decision-making, scientific analysis, and rule development. EPA staff is encouraged to become familiar with environmental justice concepts and the many ways they should inform agency decision-making."

For more, see here.

Gulf Spill Impact on Onshore Operations

We've mentioned before that the oil spill in the Gulf of Mexico is likely to have an impact on onshore E&P operations.  Some environmental groups certainly hope so - here is a copy of a joint letter recently sent to Speaker Pelosi (D-CA) and Majority Leader Reid (D-NV) by Earthjustice, the Natural Resources Defense Council, and the Sierra Club (among others) urging Congress to further restrict oil and gas development in the nation.  Their hook:  "While national attention has been understandably focused on offshore production as the disaster in the Gulf of Mexico unfolds, the risks to our environment, our food, our water, our air, our health, our wildlife, and our natural resources, do not begin or end at our shorelines."


PA Preemption Decision

The Commonwealth Court of Pennsylvania in Penneco Oil Company, Inc. v. The County of Fayette, Pennsylvania, recently affirmed a lower court decision holding that a local zoning ordinance was not preempted by the state's Oil and Gas Act (58 P.S. §§601.101-601.605).  The court observed that the ordinance provided that an oil or gas well would be a permitted special exemption - in instances where it would otherwise be prohibited - under certain conditions (e.g., that it was not located within the flight path of an airport's runway facility; and that fencing and shrubbery were located around the pump head and support frame).  Relying on prior state Supreme Court cases, the court concluded:

[T]hat while there may be some overlap between the goals of Fayette County’s Zoning Ordinance and the purposes set forth in the Act, the most salient objectives underlying restrictions on oil and gas drilling in certain zoning districts appears in Fayette County to be those pertaining to preserving the character of residential neighborhoods, as well as each zoning district, and encouraging beneficial and compatible land uses. As such, the limited provisions of the Zoning Ordinance governing oil and gas wells in Fayette County do not accomplish the same purposes as set forth in Section 102 of the Act, 58 P.S. §601.102. ***.

Accordingly, we conclude that the provisions of the Zoning Ordinance do not reflect an attempt by Fayette County to enact a comprehensive regulatory scheme relative to the oil and gas development within the county but instead reflect traditional zoning regulations that identify which uses are permitted in different areas of the locality. The Zoning Ordinance, on its face, is clearly a zoning ordinance of general applicability like the ordinance in Huntley. Therefore, the Zoning Ordinance is not preempted by the Act.

For a copy of the decision, see here (Docket No. 18 C.D. 2010) (filed July 22, 2010).


New Marcellus Economic Study

The American Petroleum Institute (API) has just released a new study on the economic benefits of producing the Marcellus Shale for New York, Pennsylvania and West Virginia.  See here for a copy of the report, which finds that it "could create 280,000 new American jobs and add $6 billion in new tax revenues to local, state and federal governments over the next decade."

For more, see here (an article from the Christian Science Monitor).

EPA Frac Study Update

U.S. EPA's Science Advisory Board (SAB) Staff Office is seeking public recommendations of technical experts to assist in reviewing EPA's hydraulic fracturing study plan.  "Selection criteria to be used for Panel membership include: (a) Scientific and/or technical expertise, knowledge, and experience (primary factors); (b) availability and willingness to serve; (c) absence of financial conflicts of interest; (d) absence of an appearance of a lack of impartiality; and (e) skills working in committees, subcommittees and advisory panels; and, for the Panel as a whole, (f) diversity of expertise and viewpoints. EPA values and welcomes diversity. In an effort to increase diversity, we seek nominations of women and men of all racial and ethnic groups."

Nominations are due August 10, 2010.

Biofuel GHG Emissions

U.S. EPA has asked for comments on how to account for greenhouse gas emissions generated from bioenergy and other biogenic sources.  It stated:  "The fact that the Tailoring Rule did not take final action one way or another concerning such an exclusion does not mean that EPA has decided there is no basis for treating biomass CO2 emissions differently from fossil fuel CO2 emissions under the Clean Air Act’s PSD and Title V Programs."

Comments are due September 13, 2010.

A Solar Panel on Every Roof?

Yesterday, proposed legislation on grants for residential and commercial solar energy systems received support from the Senate Energy and Natural Resources Committee. The proposed legislation (S.3460), entitled the 10 Million Solar Roofs Act of 2010, would set a national goal for installation of solar electric or water heating systems over ten years, with $250 million in competitive grants to be authorized in 2012.

Barnett Shale Air Study

The Barnett Shale Energy Education Council recently released an air study showing no harmful levels of benzene or other compounds being emitted from natural gas sites in Fort Worth and Arlington, Texas.  For more, including a copy of the report, see here.

PA Gathering Update

We've reported previously on the Pennsylvania Public Utility Commission's (PA PUC) possible regulation of gathering (see here, e.g.), and the petition filed with the Federal Energy Regulatory Commission by Laser Marcellus Gathering Company, LLC, for a declaratory order that its pipeline facilities are functionally gathering and therefore exempt from Federal Energy Regulatory Commission jurisdiction under Section 1(b) of the Natural Gas Act (see here and here, e.g.).

Laser Marcellus has also filed a public utility application with the PA PUC that has generated controversy over its ability - if the application is granted - to exercise the power of eminent domain.  See here (the PUC docket) and here (letter from PA Rep. Mundy objecting to application), for example.  Public hearings were recently held at which an administrative law judge heard frequent objections to the application, based largely on eminent domain concerns.


More SPCC Regulation on the Horizon?

Federal spill prevention control and countermeasure (SPCC) regulation has been at the forefront of recent U.S. EPA regulatory initiatives (see here, e.g.).  The U.S. House Committee on Energy and Commerce is working on legislation that suggests we may see even more changes to the SPCC Rule in the near future.  See here (linking to H.R. 5626, known as the "Blowout Prevention Act of 2010" and - as drafted today - which would apply to certain non-marginal onshore production wells).

PA Marcellus Drilling Personnel

According to this news release, the Pennsylvania Department of Environmental Protection (DEP) has concluded that untrained personnel and the failure to use proper well control procedures were the main causes of a natural gas well blowout in Clearfield County in June, leading to fines of more than $400,000.  Moreover, the DEP has told Marcellus drillers:

• A snubbing unit, which prevents pipes from ejecting uncontrollably from a well, may be used to clean out the composite frac plugs and sand during post-fracturing (post-frac) if coil tubing is not an option.

• A minimum of two pressure barriers should be in place during all post-frac cleanout operations.

• Any blowout preventer equipment should be tested immediately after its installation and before its use. Records of these tests should be kept on file at the well site or with the well site supervisor.

• A sign with DEP’s 24-hour emergency telephone number and local emergency response numbers, including 911 and the county communications center, should be posted prominently at each well site.

• At least one well site supervisor who has a current well control certification from a recognized institution should be on location during post-frac cleanout operations. These certifications should be in possession at all times.

• A remote-controlled, independently powered blowout preventer unit, which allows workers to control what’s happening on the rig at a safe distance, must be located a minimum of 100 feet from the well and operational during all post-frac cleanout operations.

According to the Philadelphia Inquirer, commenting on the same incident:  "The DEP, after being criticized for accommodating the natural-gas industry as the Marcellus Shale frenzy took hold, has adopted a more stern tone this year as criticism has mounted about the industry's practices."

It's What You Think You Know!

Mark Twain wrote:  "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."  As an example, the NYT is reporting that most tar balls washing up on the Texas shore are not related to the Gulf spill, contrary to earlier opinion.

Oil Spill Panel Concerns

This should come as no surprise.  The WSJ is reporting that members of Congress of both political parties are questioning the competence and bias of a panel put together by the Obama administration to investigate the spill in the Gulf of Mexico.  "Republicans and some Democrats in Congress have questioned panel members' competence and ideological leanings. They note that none of the commissioners has any experience in petroleum engineering, and that several have spoken out strongly against offshore drilling."

(Note:  Subscription required.)


Shale Boom

The NYT has an article on the competing views on Marcellus drilling (a topic we've noted in the past).  An example:  "There [in Williamsport, PA], real estate and industrial space going for a premium blunt the impact of the worst American recession since the Great Depression."

[Update:  For another NYT article on the development going on in the Marcellus, see here:  "The industry expects to drill some 30,000 Marcellus wells by 2020. Placing a thumb on an accurate figure for how much gas can be recovered from the Marcellus remains a matter of geological guesswork. But if companies develop the shale to its full potential, according to some estimates, it rivals Russia's massive gas fields and the untapped reserves off the coast of Iran and in the Caspian Sea."]


GHG Confidentiality Rule

U.S. EPA has issued a proposed rule on the confidentiality determinations it believes are appropriate for the data and information submitted as part of a company's compliance with its Mandatory Greenhouse Gas Reporting Rule obligations.  Among other things, "EPA is soliciting comment on several key issues related to the confidentiality determinations and proposed amendments, such as whether the proposed data categories are appropriate and reasonable, whether there are unique circumstances that would warrant a limited process for a facility to seek reconsideration of a final determination of non-confidential status when it submits its information, whether alternative interpretations of emission data would be appropriate, and whether there are any approaches for delaying publication of data elements that would ease potential concerns by industry while enabling EPA to meet our obligations under FOIA and CAA."

Comments are due September 7, 2010.

Moratorium Decision Stands for Now

We reported previously on the issuance of a preliminary injunction by the U.S. District Court for the Eastern District of Louisiana prohibiting the Interior Department from enforcing a six-month moratorium on all drilling in the Gulf of Mexico's Outer Continental Shelf.  See here.  The NYT is reporting that the Administration's efforts to reinstate the moratorium have been rejected by the United States Court of Appeals for the Fifth Circuit shortly after hearing oral argument on the matter.  "The appeals court found that the Interior Department failed to show the federal government would suffer 'irreparable injury' if the moratorium is lifted while it appeals the trial court’s decision."

Will the Interior Department issue a new moratorium to get around this setback?


Short-Term Energy Outlook for July 2010

The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for July, 2010, projecting "lower-48 onshore production increases [of] 2 Bcf/d (3.8 percent) in 2010 and 0.2 Bcf/d (0.3 percent) in 2011. According to Baker-Hughes, natural gas rig counts have climbed from under 670 in July 2009 to about 950 in April this year and have remained relatively stable since then."

Regarding price, the Outlook states:

EIA expects the Henry Hub natural gas spot price to average $4.70 per million Btu (MMBtu) this year, a $0.75-per-MMBtu increase over the 2009 average and $0.22 per MMBtu higher than in last month’s Outlook. Most of the increase in the price forecast occurs in the third quarter of this year, due to projections of increased hurricane activity in the Gulf of Mexico this season, which pushed spot prices higher. EIA expects the Henry Hub spot price to average $5.17 per MMBtu in 2011, up $0.11 per MMBtu from last month's Outlook.

For more, see here.


Ohio EPA - Permit Processing After U.S. District Court <10 Ton/Year Exemption Decision

The Ohio EPA's Division of Air Pollution Control has revised its February 19, 2010 memo that describes DAPC's approach to determining BAT for sources that qualify for the <10 ton/yr BAT exemption. The revised memo was issued on July 2, 2010 and is effective immediately.

The memo re-do was required by the U.S. District Court's February 2, 2010 decision in Sierra Club v. Christopher Korleski, Director of Ohio EPA, which required the Director to implement and enforce Ohio Administrative Code 3745-31-45 as contained in the USEPA approved State Implementation Plan.

Proposed Consent Decree Filed on Residual Risk Standards

According to the provisions of a proposed consent decree filed July 6 (Sierra Club v. Jackson, N.D. Cal., No. 09-152), USEPA will issue residual risk emissions standards to address the risk posed by hazardous air pollutants emitted by 28 industrial source categories that have already had MACT standards issued.

Under the terms of the proposed settlement, the agency will issue the residual risk limitations for 27 source categories by Oct. 31, 2013, and for portland cement by June of 2018. The agency can also make a determination that no residual risk standards are needed for a specific category. The first set of six categories have a September 14, 2010 date set for proposal.

The suit was filed in January 2009, alleging that USEPA failed to meet the Clean Air Act’s (CAA) statutory duty to review national emissions standards for hazardous air pollutants (NESHAPs) for 28 categories of industrial facilities to determine if their emissions still posed a residual public health risk after MACT standards were imposed.

Sections 112(d)(6) and 112(f)(2) of the CAA require EPA to review emissions limits for various industrial source categories every eight years, taking into account newly available technology. Because MACT standards are technology-based and not risk-based, the drafters of the CAA were concerned that there might be a remaining risk even after the latest in technology was installed on HAP sources. In addition, they wanted to account for improvements in technology over time.

The following source categories are covered by the proposed agreement:

• aerospace manufacturing and rework facilities,
• chromium electroplating and anodizing,
• ferroalloy production,
• flexible polyurethane foam production,
• polycarbonate production,
• acrylic and modacrylic fibers production,
• marine vessel loading operations,
• mineral wool production,
• off-site waste recovery operations,
• pesticide active ingredient production,
• pharmaceuticals production,
• phosphoric acid,
• phosphate fertilizers,
• polyether polyols production,
• polymers and resins I,
• polymers and resins III,
• polymers and resins IV,
• portland cement manufacturing,
• primary aluminum,
• primary lead smelting,
• printing and publishing,
• pulp and paper production,
• secondary aluminum,
• secondary lead smelting,
• shipbuilding and ship repair,
• steel pickling process,
• wood furniture manufacturing, and
• wool fiberglass manufacturing.

Future Generations

This is good news.  For years, the oil and gas industry has been concerned about finding and training skilled workers for the future.  From the Pittsburgh Post-Gazette:  "With Penn State University researchers projecting that the Marcellus Shale natural gas industry will create or support about 88,000 jobs in Pennsylvania by the end of this year, it's no surprise a number of vocational schools, technical colleges and universities across the state are trying to get workers ready for at least some of those jobs."  More:  "In all, 400 students have been trained at Penn College for work in the industry through other noncertificate programs such as a commercial driver's license course, a welding program and a safety program for natural gas and oil."



Range War?

The Philadelphia Inquirer has an article highlighting the various interests at issue in the Marcellus Shale - from landowners looking to save the homestead in a challenging economy to environmentalists looking to shut down development.  "What is unfolding here is a mammoth clash between neighbors with starkly contrasting visions about the land. It is a virtual range war, waged at public meetings and on the Internet, expressed mostly in insults but occasionally through small acts of vandalism."


New Gathering Line Regulation?

The U.S. House of Representatives Committee on Transportation and Infrastructure held a hearing last week on "The Safety of Hazardous Liquid Pipelines:  Regulated vs. Unregulated Pipelines."  See here.  The focus - not surprisingly, given the Deepwater Horizon incident in the Gulf of Mexico - was on any perceived gaps in existing safety regulations, with much of the related memorandum discussing hazardous liquid pipeline incidents.  From one witness' testimony:  "To be clear, however, part of the regulatory oversight problem lies with the law, not with PHMSA. The pipeline safety statute is a relatively weak law from a regulatory standpoint. Changes should be made to the statute’s general provisions to enhance PHMSA’s ability and mandate to protect the public and the environment. In particular, the language in 49 USC 60102(b) ties PHMSA’s ability to regulate to an overly prescriptive, time-consuming, and industry-weighted risk assessment. The Trust recommends that: Congress eliminate or modify 49 USC 60102(b) greatly to permit more effective regulation."  (Emphasis in original).

Will Congress' focus remain on hazardous liquids, or move to natural gas as well?


GAO Report: LIHEAP Fraud Prevention Needed

The U.S. Government Accountability Office recently released a report (GAO-10-621) finding that the Low-Income Home Energy Assistance Program (LIHEAP) needs greater fraud prevention controls.  "About 9 percent of households receiving benefits—totaling $116 million—in the selected states [including Ohio] contained invalid identity information, such as Social Security numbers, names, or dates of birth. Although some of these cases are likely due to simple errors such as typos or incomplete data, thousands of other cases show strong indications of fraud and improper benefits. For example, the identities of over 11,000 deceased individuals were used as applicants or household members for LIHEAP benefits. Hundreds of individuals were used as applicants or household members even though they were incarcerated in state prisons, making them ineligible."

For more see here.


Increased Environmental Scrutiny

The Philadelphia Inquirer is reporting that citations by the Pennsylvania Department of Environmental Protection (DEP) have doubled with respect to drillers in the Marcellus Shale.  "Five companies were responsible for half the violations, and nearly three-quarters of them occurred in five north-central Pennsylvania counties where shale-gas drilling is most intensely concentrated ***.  DEP Secretary John Hanger, who provided the numbers to the Senate committee, said *** that the growing volume of violations did not indicate a deterioration in safe practices, but rather reflected a dramatic increase in Marcellus drilling activity, along with an increase in regulatory oversight."

We're likely to see this across the producing states.


Final Rule: Mandatory Reporting of Greenhouse Gases

U.S. EPA has issued a final rule for the mandatory reporting of greenhouse gases from four additional sources:  magnesium production, underground coal mines, industrial wastewater treatment, and industrial waste landfills.

Moreover (from the press release):  "In a separate proposed rule, EPA is requesting public comment on which industry related GHG information would be made publicly available and which would be considered confidential. Under the Clean Air Act, all emission data are public. Some non-emission data, however, may be considered confidential, because it relates to specific information which, if made public, could harm a business’s competitiveness."  (Emphasis is ours.)  For more on that rule, see here.

SAB: Hydraulic Fracturing Study

We've reported previously on U.S. EPA's plans to conduct a study on the potential impact of hydraulic fracturing on the environment (see here, e.g.).  EPA's Science Advisory Board (SAB) was asked to review and make recommendations on the proposed scope of the study.  It has now published those recommendations here (see Final Report(s)).  Not surprisingly, it concludes that the overall approach and scope for the research plan was "appropriate and comprehensive."  Its suggestion:

[T]hat initial research be directed to study sources and pathways of potential impacts of hydraulic fracturing on water resources, especially potential drinking water sources, and that investigations eventually occur on the impact on water resources more generally. To support this effort, ORD should consider performing in-depth case studies at five to ten different locations selected to represent the full range of regional variability of hydraulic fracturing across the nation. The SAB also recommends that ORD emphasize human health and environmental concerns specific to or significantly influenced by hydraulic fracturing rather than on concerns common to all oil and gas production activities.  (Emphasis is ours.)

Wonder which locations they are thinking of?

Weekly Storage Report

The Energy Information Administration (EIA) is reporting a 60 Bcf net increase into storage over the past week.  This is "27 Bcf less than last year at this time and 287 Bcf above the 5-year average of 2,397 Bcf."  Graphically:

For more, see here.