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

We mentioned earlier that it was unlikely that a severance tax would be imposed on Marcellus production in Pennsylvania this year (see here).  It appears that doesn't sit well with the current governor (from the Philadelphia Inquirer):  "Gov. Rendell signed an executive order Tuesday that bans further leasing of state forests for Marcellus Shale natural gas drilling, a move lauded by environmentalists but shrugged off by Republicans as the symbolic effort of a lame-duck leader."

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The Federal Energy Regulatory Commission (FERC) has published its winter energy market assessment for 2010-2011.  It shows domestic natural gas production growth:

And comments:

Shale gas development has turned the economics of drilling for gas on its head.  The cost of developing shale gas has declined and well productivity has increased as drillers gained experience with the new technology. In some instances, the time needed to drill a shale gas well has plunged from weeks to just days. This has driven down breakeven costs for most gas shales to less than $4/MMBtu, and even lower where natural gas liquids such as propane, ethane and butane are present.

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Earlier this week, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking comment on whether it should regulate certain pipelines currently exempt from hazardous liquids safety regulations (among other things).  See here (75 Fed. Reg. 63774) (Oct. 18, 2010).

Comments are due January 18, 2011.

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These days, it's not often that you see an article on hydraulic fracturing that doesn't blame the energy resource industry for the end of the world.  That's why this article from National Geographic was so refreshing (discussing the use of the technology in the Marcellus Shale).  Regarding water issues, for example:  "If shale development continues to grow in the Marcellus, water usage for well fracking could reach 650 million barrels per year in Pennsylvania, New York and West Virginia, concluded a report done earlier this year for the U.S. Department of Energy and state authorities. It sounds like a lot until it’s compared to the other water uses in the three states. It would total less than 0.8 percent of the 85 billion barrels drawn yearly out of watersheds in the three states, said the study by ALL Consulting of Tulsa, Oklahoma. Coal and nuclear power plants, in particular, draw many times more water."

Nice job overall, and highly recommended reading.

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The Ithaca Journal is reporting that cuts in the state work force at the New York Department of Environmental Conservation will likely have an impact on oil and gas development in the state:  "Staff reduction could make permitting and oversight of Marcellus Shale drilling sites difficult, the DEC contends. The department is reviewing its permitting guidelines, and drilling for gas in the Marcellus -- a gas-rich formation underneath much of the Southern Tier and Pennsylvania -- remains on hold in New York until they are finalized."

With NY - The best advice may be "Don't hold your breath."

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The Pittsburgh Tribune-Review is reporting that there will be no severance tax imposed on Marcellus production in Pennsylvania this year:  "Lawmakers won't consider taxing natural gas extracted from Marcellus shale before the 2009-10 session ends next month, but supporters and opponents predict it will become an issue when the next governor and Legislature take office in January."

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Ohio's oil and gas industry celebrates its 150th anniversary this year!  From the Suburbanite:  "While energy, economics and jobs dominate the headlines, a homegrown industry has been supplying these benefits for a century and a half in the Buckeye State. This year, Ohio’s natural gas and crude oil industry celebrates its 150th anniversary, and its benefits to the state may surprise you."

For an article celebrating that achievement and the new technology available to continue that success in the Marcellus and Utica Shales, see here (from the Marietta Times).  "'We're talking about something so big and vast that it could provide (much of the nation) with 50 to 100 years of gas production,' said Bob Chase, professor and chairman of the Department of Petroleum Engineering and Geology at Marietta College."

You can find more here, at the Ohio Oil & Gas Energy Education Program.

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U.S. EPA has announced that it is extending the deadline for complying with recent amendments to its Spill Prevention, Control, and Countermeasure (SPCC) Rule to November 10, 2011, for most onshore production facilities.

There was only a month to go!

[Update:  Here's a copy of the federal register notice.  You know, to make it official.  (Bumped.)]

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The issue of forced pooling has been a topic of conversation in Pennsylvania for some time.  The Scranton Times-Tribune is reporting that related legislation is unlikely to become law this year:  "Although there was talk of including forced/fair pooling in the natural gas severance tax that passed in the House and is now being considered in the Senate, Senate Republican President Pro Tempore Joseph Scarnati, R-25, Jefferson County, has indicated it isn't likely to happen this term."

On a related note, Ohio's mandatory pooling law was substantially modified earlier this year (see S.B. 165).

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We thought you might be interested in a few forecasts for this winter's natural gas supply and related prices.  The Natural Gas Supply Association (NGSA) has announced that it expects natural gas prices to remain relatively flat, due in part to warmer weather and plentiful supplies (both in terms of production and storage).  See here.  Similarly, the American Gas Association (AGA) anticipates that gas supplies will be plentiful.  See here.

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The Franklin County, Ohio, Court of Appeals recently found that an express pipeline easement failed to define its dimensions even though it specified where the pipeline was to be located.  Pomante v. Marathon Ashland Pipe Line LLC, 187 Ohio App.3d 731, 2010-Ohio-1823 (April 27, 2010) (for a copy, see here).*  "In these circumstances, the easement's dimensions may be established by use and acquiescence. *** Additionally, the dimensions may be determined based upon the language of the grant, the circumstances surrounding the transaction, and that which is reasonably necessary and convenient to serve the purpose for which the easement was granted."  Id. at 735-36.

The underlying issue:  Whether a 50' easement was reasonably necessary and convenient for the inspection, maintenance and operation of the pipeline.

*Okay, so the decision isn't necessarily recent ... but its publication was!

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It appears that California may have erred when it calculated pollution levels used to support the state's clean air standards - by 340%.  According to the San Francisco Chronicle:  "The pollution estimate in question was too high - by 340 percent, according to the California Air Resources Board, the state agency charged with researching and adopting air quality standards. The estimate was a key part in the creation of a regulation adopted by the Air Resources Board in 2007, a rule that forces businesses to cut diesel emissions by replacing or making costly upgrades to heavy-duty, diesel-fueled off-road vehicles used in construction and other industries."

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The Houston Chronicle is reporting that a presidential panel has concluded that:  "The Obama administration rejected government scientists' requests to publicly detail its worst predictions about the oil gushing into the Gulf of Mexico and repeatedly underestimated the size of the spill."

You can finds copies of the four reports here.  From Staff Working Paper No. 3:

The federal government's estimates of the amount of oil flowing into and later remaining in the Gulf of Mexico in the aftermath of the Macondo well explosion were the source of significant controversy, which undermined public confidence in the federal government's response to the spill. By initially underestimating the amount of oil flow and then, at the end of the summer, appearing to underestimate the amount of oil remaining in the Gulf, the federal government created the impression that it was either not fully competent to handle the spill or not fully candid with the American people about the scope of the problem.  (Introductory remarks.)

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As readers of this blog know, hydraulic fracturing is a hot topic across the country.  We thought you might be interested in one pundit's thoughts (from the WSJ):  "Those who value pastoral poverty and bucolic quietude over all this grubby commercialism will just have to adjust, as the fishermen and sportsmen and sun bathers of the Gulf Coast have learned to live with oil drillers (and vice versa)."  (Emphasis is ours.)  Ha!

(Note:  Subscription may be required.)

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The Oklahoman has a fairly sympathetic article on the challenges faced by Oklahoma's oil and gas industry.  Discussing a report on 2009 activity:  "The state's production numbers were roughly on par with prior years, but drilling applications — which observers say is a good way to gauge the state of the industry — plummeted last year, according to the Oklahoma Corporation's annual report on oil and gas activity in the state for 2009."

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We've previously mentioned the study on hydraulic fracturing now being considered by U.S. EPA (see here and here, e.g.).  The NYT is reporting that IPAA has objected to a couple of the experts proposed for the panel:  "'Unfortunately, a number of nominees' past comments betray a strong and unambiguous antipathy toward shale development in general, and hydraulic fracturing in particular,' IPAA President and CEO Barry Russell wrote."

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The LAT is reporting that an advisory group appointed by President Obama is recommending that monies collected through penalties and fines related to the Deepwater Horizon oil spill should be distributed to a Gulf Coast Restoration Council that would include state and federal authorities.  "Under current law, penalties levied against BP and others for violating the Clean Water Act would go into the Oil Spill Liability Trust Fund, to be used in any future oil spills."  Changes the motivations for seeking penalties ...

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The Philadelphia Inquirer has an interesting article illustrating another mechanism activists are using to attack shale development - pressuring customers to use alternative sources of supply.  "Philadelphia Gas Works is not currently buying natural gas that comes from Pennsylvania's Marcellus Shale, but a PGW executive suggested Tuesday that a proposal to ban future purchases might put the utility at odds with regulators."  (Emphasis ours.)

That proposal came from anti-drilling activists, according to the article.

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