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 highlighting in summary form some of the financial data related to lease transactions over the past year in West Virginia.  For example:  "Lease revenue payments have ranged from as low as $5 per acre to about $4,000 per acre over the past year with production royalty payments ranging from 12.5 percent to 18.75 percent. Many residents leased their gas rights in 2010, which led the Sunday News-Register to begin publishing weekly oil and gas lease transactions each Monday."

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There have been a number of articles recently about the opportunity for residential customers to purchase their natural gas supplies from retail marketers rather than a natural gas utility (something that Ohio has long had in place).  Here, for example, is an article from the Richmond Times-Dispatch noting that two major gas suppliers are coming to the Columbia Gas of Virginia service territory.  And here is an article from the Courier-Journal noting a recent report by the Kentucky Public Service Commission addressing whether the state's retail natural gas market should be opened up to broader competition.

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The Daily Review recently published an article giving an overview of drilling activity in the Marcellus Shale in Bradford County, Pennsylvania.  Interesting.

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U.S. EPA has released its enforcement initiatives for FY 2011-2013.  Not surprisingly, the oil and gas industry has been targeted:

Some energy extraction activities, such as new techniques for oil and gas extraction and coal mining, pose a risk of pollution of air, surface waters and ground waters if not properly controlled. *** Drilling activities have led to concerns about ground water pollution and the safety of drinking water supplies in various parts of the country. To address these emerging problems, EPA will develop an initiative to assure that energy extraction activities are complying with federal requirements to prevent pollution of our air, water and land. This initiative will be undertaken in particular areas of the country where energy extraction activities are concentrated, and the focus and nature of our enforcement activities will vary with the type of activity and pollution problem presented

Happy New Year!

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U.S. EPA has announced that it will be holding four workshops in February and March, 2011, to discuss a number of topics related to its Hydraulic Fracturing Study, including well construction and operation and water resource management.  It is currently soliciting subject-matter experts to participate as presenters and provide technical knowledge during the discussions.  Applications to serve as an expert will be taken until January 3, 2011, at http://hfworkshop.cadmusweb.com.

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The LAT is reporting that California regulators at the Air Resources Board have adopted the country's first carbon trading program:  "'This is an historic venture,' said Mary Nichols, chairwoman of the California Air Resources Board, as the panel voted 9 to 1 to approve some 3,000 pages of regulations and supporting documents, crafted over three years of intense negotiations with businesses and public interest groups."

Concerns over the economic impact of the regulations appear to have been discounted.  In the very next paragraph of the article, Ms. Nichols states:  "'[M]ost political people said we should do as little as possible as slowly as possible.' Instead, she said, 'we are being cautious and careful, but in the context of a very bold effort.'"

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The Energy Information Administration (EIA) recently published the following reports that you may find of interest:

Short-Term Energy Outlook (December 2010):  "The Henry Hub spot price averaged $3.71 per million Btu (MMBtu) during November, an increase of about 28 cents from October's price of $3.43 per MMBtu (Henry Hub Natural Gas Price Chart). Over the winter heating season, the projected monthly average spot price peaks at $4.29 per MMBtu in January 2011, before dropping back down to close to $4.00 per MMBtu in June 2011. This month's Outlook slightly raises the average 2011 Henry Hub spot price to $4.33 per MMBtu from last month's forecast of $4.31 per MMBtu."

Annual Energy Outlook 2011 (Early Release):  "The technically recoverable unproved shale gas resource is 827 trillion cubic feet (as of January 1, 2009) in the AEO2011 Reference case, 480 trillion cubic feet larger than in the Annual Energy Outlook 2010 (AEO2010) Reference case, reflecting additional information that has become available with more drilling activity in new and existing shale plays. The larger resource leads to about double the shale gas production and over 20 percent higher total lower 48 natural gas production in 2035, with lower natural gas prices, than was projected in the AEO2010 Reference case."

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We reported previously on last September's PG&E pipeline explosion in San Bruno, California.  To update you, there are signs that federal investigators suspect that a weld failure might be one of the causes of that deadly explosion (LAT article).  Additionally, the LAT is reporting that state regulators are taking a closer look at pipeline welds on PG&E's system:  "The PUC directive calls for internal, X-ray or liquid pressure tests to ensure the integrity of lines not previously examined that are similar in size and age to the pipeline that blew. That line was 30 inches in diameter and more than half a century old. The utility also is required to drop pressure in such lines until the inspections are completed."

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The NYT is reporting that New York Governor David Paterson has vetoed the proposed legislative moratorium on the use of hydraulic fracturing to develop the state's mineral resources.  But the article goes on:  "Instead, he [i.e., Gov. Paterson] issued an executive order instituting a longer moratorium that extended until July 1, 2011, but that more narrowly defined the types of drilling to be restricted."  A copy of the Executive Order can be found here once it is posted (it has not been at the time of this writing).

Whether producers will exercise force majeure provisions in their leases remains an open question.

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We've reported frequently on the efforts by U.S. EPA to inject itself (yes, pun intended) into the hydraulic fracturing debate.  Now the NYT is reporting that the Regional Director for EPA Region 6 has issued an order to a Texas producer to provide water supplies to residents whose water wells have been impacted by methane and benzene (see here).  To do so, however, EPA has ignored the work of the Texas Railroad Commission, which has stated that EPA's actions are premature:  "Texas officials accused EPA of grandstanding and making 'false claims' about its actions. 'If this is another EPA action designed to reach predetermined conclusions and to generate headlines rather than conduct a successful environmental investigation, then the public is poorly served,' TRC member Elizabeth Ames Jones said. 'The commission will not deny due process to the parties involved in spite of the false claims made against our investigative actions by the EPA staff.'"  (Emphasis is ours.)

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We have reported previously on the Laser Marcellus proceeding before the Pennsylvania Public Utility Commission (see here "PA Gathering Update," e.g.).  The Administrative Law Judge has issued her recommended decision in the matter, finding that the application for a certificate of public convenience should be denied - despite the joint stipulation filed by several of the parties.  Her reasoning:  There is no reason - nor any statutory authority in Pennsylvania - for granting gathering companies the power of eminent domain.  For example:

A gathering system is not analogous to a local distribution company. Eminent domain is not an appropriate tool for a gathering company to have when those citizens burdened by the pipeline do not benefit from it.

For a copy of the decision, see here.

Now it's up to the Commission.

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The Supreme Court has agreed to hear an appeal challenging the ability of a plaintiff to claim that utility carbon dioxide emissions are creating a public nuisance by contributing to global warming, according to this article in the NYT.  "It is the first public-nuisance suit related to climate change to reach the Supreme Court. Lower courts have generally declined to allow such suits to proceed because it would put judges in the position of deciding how much carbon dioxide was too much."

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A moratorium on new drilling permits relying on hydraulic fracturing to stimulate the well has passed the NY State Assembly and awaits Governor Paterson's signature, according to this article in the NYT.  "The State Assembly voted 93 to 43 on Monday night to block new permits for the drilling practice, known as hydraulic fracturing, until May 15. The purpose would be to give the state more time to address safety and environmental worries, especially concerns that the drilling could contaminate groundwater supplies."

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U.S. EPA has issued a final rule requiring the reporting of certain greenhouse gas emissions from the natural gas industry.  From its press release:  "Beginning in 2011, petroleum and natural gas facilities that emit more than 25,000 metric tons of carbon dioxide equivalent a year are required to monitor and report all greenhouse gas emissions to EPA. Data collection for petroleum and natural gas sources will begin January 1, 2011, with first annual reports due to EPA March 31, 2012."

Note that the definition of "facility" may not be what you think.  From the rule:  "[A]s proposed in April 2010, the definition of an onshore petroleum and natural gas production facility for this subpart is all petroleum or natural gas equipment associated with all petroleum or natural gas production wells and CO 2 EOR operations that are under common ownership or common control including leased, rented, and contracted activities by an onshore petroleum and natural gas production owner or operator and that are located in a single hydrocarbon basin as defined in 40 CFR 98.238. Where a person or entity owns or operates more than one well in a basin, then all onshore petroleum and natural gas production equipment associated with all wells that the person or entity owns or operates in the basin would be considered one facility."  (Emphasis is ours.)

Here is a copy of the pre-publication rule.

A copy of the final, published rule can be found here.  (Bumped.)

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Did you know that there are only 110,000 natural gas vehicles in use in the United States?  That's according to an article in the WSJ, which goes on to note:  "Experts say one of the reasons natural-gas vehicles haven't caught on is because the U.S. lacks a widespread network of refueling stations. Indeed, most of the natural-gas vehicles in use today are in government or corporate fleets that have centralized refueling stations."

Very interesting.  (Note:  Subscription required.)

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The WSJ is reporting that Shell Oil Co. is planning on selling its South Texas gas fields.  Moreover:  "The most likely buyer for the natural-gas assets is an energy-focused private-equity firm or Master Limited Partnership."

(Note:  Subscription required.)

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The International Code Council (ICC) has made available a public version of a working draft of the International Green Construction Code.  To learn more about the ICC and its Green Construction Code, see here.

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