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

This is an interesting (read:  not bashing) article on hydraulic fracturing.  For example:  "Bob Anthony, Oklahoma Corporation Commissioner, said in an address to the National Association of Regulatory Utility Commissioners in July, 'In my 20-plus years as a commissioner, I can't think of anything that can compare to the all-out assault on hydraulic fracturing by groups that are obviously using it to put a stop to the tapping of America's abundant natural gas supplies.'"

The comments are interesting as well.

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Pennsylvania is inching closer to the imposition of a severance tax.  The Pittsburgh Post-Gazette is reporting that the state House has approved a 39-cent per Mcf severance tax on production from the Marcellus Shale.  "But the bill *** still has a long way to go. The Senate, which is controlled by Republicans, says the tax is too high."

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We've been reporting on development of the Marcellus Shale for some time now in the Appalachian Basin (see here and here, e.g.).  The Columbus Dispatch has a good article on Utica Shale development in Ohio:  "Geologists say the Utica shale formation, a layer of thick black rock that lies 8,000 feet beneath most of the state, might hold enormous oil and natural-gas reserves. This promise has oil and gas companies spending a lot of money to snap up land."  More:  "Utica shale is thinner and deeper, and covers more of Ohio. That and some recent drilling successes in Canada, New York and western Pennsylvania make large Ohio deposits more likely, Engelder [a Penn State geologist] said."

Nice.

[Immediate update:  There are substantial economic benefits to this type of development, noted even by NPR in a story on PA shale activity:  "Pennsylvania's natural gas industry is rapidly expanding, and the state may be on the verge of a decades-long drilling rush. Right now, most of the jobs are going to transient out-of-state workers, but that trend is providing a boost to pockets of Pennsylvania's economy."]

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The recent PG&E natural gas pipeline explosion in California has led to numerous news articles about potential problems with local utility pipeline systems, and Ohio is no exception.  From the Columbus Dispatch:  "Defective plastic pipe has raised fears of natural-gas leaks that could affect as many as 17,600 Columbia Gas of Ohio customers."  Columbia, according to the article, has so far checked 98% of the affected households in central Ohio and found no issues.

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The NYT is reporting that the Delaware River Basin Commission is reconsidering the $5 million financial assurance bond required for each well.  "The bonding requirement is shaping up to be a flash point in the fight over drilling in the four-state basin. DRBC has enforced a de facto moratorium while it decides how it will protect water quality in the 13,539-square-mile basin. The primary effect has been to block Pennsylvania's gas rush as it moves into the state's eastern counties."

That certainly has an impact on whether smaller independents will be able to develop their lease interests.

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The Houston Chronicle is reporting that the Obama Administration wants more restrictive pipeline safety regulation in response to the gas explosion in California and the Michigan oil spill.  "The proposal follows several accidents, including last week's huge gas explosion in suburban San Francisco, that have called attention to the nation's aging pipelines and how they are monitored. Transportation Secretary Ray LaHood said his department 'needs stronger authority to ensure the continued safety and reliability of our nation's pipeline network.'"

You can find a copy of the proposed legislation here.  But how do these accidents relate to the elimination of the exemption for natural gas gathering lines in rural areas contained in the bill?

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Two decades ago, following substantial study, U.S. EPA determined that many oil and gas E&P wastes were exempt from regulation as hazardous wastes under the Resource Conservation and Recovery Act (RCRA).  It concluded instead that these wastes could be better controlled through existing state and federal regulatory programs.  While the subject of perennial complaints by environmental groups, that exemption is now the subject of a petition to U.S. EPA by the Natural Resources Defense Council (NRDC).

From the petition:

[T]he Natural Resources Defense Council, respectfully requests that the EPA promulgate regulations classifying wastes from the exploration, development and production of oil and natural gas as hazardous waste subject to provisions of Subtitle C of RCRA. This request is based on overwhelming evidence that waste from the exploration, development and production of oil and natural gas is hazardous, taking into account its toxicity, corrosivity, and ignitability, that it is released into the environment where it can cause harm, that state regulations are inadequate, and that there are numerous methods available to manage it as hazardous waste.

We will keep you posted as this gets published in the Federal Register and matters develop.

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The Hill is reporting on a study done by a Louisiana State University economist finding that the Administration's proposed tax increases on the oil and gas industry would cost more than 150,000 American jobs.  "'Though politicians think they are selectively targeting 'Big Oil' with these energy tax proposals, they would actually devastate thousands of small American businesses nationwide as well as the workers who depend on them,' Mason said in prepared remarks."  (Fails to mention that he's a Senior Fellow at the Wharton School ...)

For more on Dr. Mason, see here.

[Immediate update:  On a related note, the Houston Chronicle is reporting on the failure of a proposal by Senate Democrats to eliminate the Section 199 deduction for producers.  Tied it to Obamacare of all things!]

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A recent decision out of the U.S. Civilian Board of Contract Appeals highlights the importance of proper drafting in the context of precedent agreements.  In Rockies Express Pipeline, LLC v. U.S. Dept. of Interior (Case No. CBCA 1821), the Board denied the Department's motion to dismiss an appeal filed by Rockies Express claiming, in part, that the Department had breached a Precedent Agreement requiring it to enter into a firm transportation agreement regarding its REX East project.  The Department argued that the Precedent Agreement was not a contract within the purview of the Contract Disputes Act of 1978.

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The LAT has an article on the tragic explosion of a PG&E natural gas line late last week.  It notes that a "7,481-foot segment of the San Bruno line, farther north, was identified as among the 100 riskiest, according to documents the utility filed with the California Public Utilities Commission. That segment, built in 1948, needs to be replaced because 'the likelihood of a failure makes the risk of a failure at this location unacceptably high,' the documents concluded. The company proposed to spend $5 million to replace it between 2012 and 2014."

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The NYT is reporting on a soon-to-be-released report from CERA (IHS Cambridge Energy Research Associates) concluding that plug-in electric vehicles may not be the panacea hoped for by the Obama administration.  One of the reasons that wind power may not be the silver bullet for reducing emissions related to these vehicles:  "Moreover, CERA believes that increasing production from large U.S. shale gas resources will restrain the cost of natural gas-fired generation, putting wind power at a continuing competitive disadvantage unless Congress puts a significant price on carbon emissions from fossil-fuel power plants -- an unlikely scenario as matters stand, Makovich said."

Of course, the article also helpfully explains that all of this can be changed if we would only artificially raise the price of our other energy resources ...

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BP issued its internal investigation report on the Gulf spill.  It found, in part:  "No single factor caused the Macondo well tragedy. Rather, a sequence of failures involving a number of different parties led to the explosion and fire which killed 11 people and caused widespread pollution in the Gulf of Mexico earlier this year."  For a copy of the report, and related information, see here.

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U.S. EPA has issued a "voluntary" information request from several service companies asking for data on the chemical composition of their frac fluids.  From EPA's press release:  "EPA has requested the information be provided on a voluntary basis within 30 days, and has asked the companies to respond within seven days to inform the agency whether they will provide all of the information sought. The data being sought by the agency is similar to information that has already been provided separately to Congress by the industry. Therefore, EPA expects the companies to cooperate with these voluntary requests. If not, EPA is prepared to use its authorities to require the information needed to carry out its study."  What authorities?

For more, including a copy of the letter sent by EPA, see here.

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The Miami Herald has a good article on a recent study done by federal scientists on impact of the Gulf oil spill.  "The report is the latest to suggest chemically-dispersed oil suspended near the sea floor did not become the drifting cloud of death some doomsayers had predicted. Instead, currents and oil-eating microbes appear to have steadily dissipated and degraded the crude in the two months since BP capped its well, said Steven Murawski, leader of a team of scientists that produced the report."

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The LAT has an interesting article entitled, "Environmentalists stunned by failures of key measures in Legislature."  Of course, industry is being blamed:  "'California's in trouble,' said the narrator in one [industry] ad. '2.3 million unemployed. A $19-billion deficit. And what are some Sacramento politicians focused on? Grocery bags.'''  It couldn't be that California voters want the legislature to actually focus on something else ...

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The Houston Chronicle is reporting on possible exploration and production activities beneath three Houston municipal parks.  "Under the terms of the three-year, $200,000 lease, Southern Star Exploration will spend about a year trying to determine whether there is any natural gas below Herman Brown, Brock and Maxey parks, as well as a city public works facility."

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Residents of Pavillion, Wyoming, have been concerned over drinking water contamination for some time, believing that it originates from E&P activities by EnCana Oil and Gas USA.  Recent testing done by U.S. EPA is inconclusive on origin, but recommends that are residents with private water wells find alternate sources of water for drinking and cooking.  From the Star-Tribune:  "The health concern is based on high sodium and sulfates that EPA officials believe are naturally occurring in the groundwater, and on the detection of petroleum compounds that officials believe shouldn't be in the groundwater."

For more on the issue, including a copy of the report, see here (U.S. EPA site).

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The NYT is reporting that another oil rig has caught fire in the Gulf of Mexico.  "'There was no blowout, no explosion, no injuries, no spill,' said Patrick Cassidy, the director of investor relations for Mariner Energy, a relatively small oil and gas company in Houston with 330 employees and about $1 billion in annual revenues."  That is a relief.

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The NYT is reporting on new federal rules intended to change the too-close relationship seen by some between federal agency regulators and industry.  That includes the following:  "All Bureau of Ocean Energy Management employees involved in offshore regulation will have to fill out a two-page form disclosing all personal and business relationships with companies supervised by the agency."

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Not surprising, given the economy.  Pennsylvania's governor is continuing to look at taxing locally-produced natural gas,with an eye towards gas produced from the Marcellus Shale according to this article in the Pittsburgh Post-Gazette.  "He'd like to see a tax structured like the one in West Virginia -- imposing a 5 percent levy on the value of the natural gas that's sold, plus an additional 4.7 cents for each 1,000 cubic feet of gas produced."

[Update:  No wonder.]

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The Houston Chronicle is reporting on a condemnation suit filed by Dominion Transmission to expand a West Virginia storage field.  The reason - gas migration, of course.  "Federal regulators approved the expansion, calling the reservoir 'a matter of public convenience and necessity,' but required Dominion to obtain rights to both the storage area and the protective areas around the reservoir. That includes easements in the Gantz sandstone, and 300 feet above and below the Gantz."

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The Detroit News has a one-month update on the Enbridge oil spill into the Kalamazoo River:  "Officials said 25 families remain displaced because of the oil spill. So far Enbridge has offered to buy two homes and appraisals have been conducted on another dozen."

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