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

This has got to hurt.  After all of the efforts by one of its reporters to mischaracterize hydraulic fracturing as an environmental disaster, the NYT is reporting that New York State's Governor Cuomo plans to lift the state's moratorium on the use of that process to develop its shale resources:  "The Cuomo administration is seeking to lift what has been, in effect, a moratorium on hydraulic fracturing, a controversial technology used to extract natural gas from shale, state environmental regulators said Thursday."

Ouch.

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With all of the negative media regarding hydraulic fracturing, we thought you might be interested in this video from reason.tv:

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U.S. EPA is proposing to extend certain time periods for using best available monitoring methods (BAMM) for Petroleum and Natural Gas Systems under the GHG Mandatory Reporting Rule.  If you are interested, comments are due no later than July 27, 2011.

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U.S. EPA and the U.S. Army Corps of Engineers have published for comment a new guidance document that they intend to use to identify jurisdictional waters.  See here.  They have extended the public comment period to July 31, 2011.

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We noted previously the NYT's attempt to impede domestic drilling through a series of articles on the "environmental dangers" presented by hydraulic fracturing (see here), and the failings of those articles (see here).  Well, having fallen short at its attempted environmental scaremongering, the "Paper of Record" appears to be at it again with a series of articles attacking the economics of shale development in the United States:  "But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells."  See here.

The author appears to have missed the mark yet another time, however, relying on years-old, outdated communications and analyses while ignoring more recent data.  As John Hanger, former Secretary of Pennsylvania's Department of Environmental Protection, states in an excellent take down of this new attack:  "Reader beware. This reporter puts sensationalism ahead of fairness or truth. Pennsylvania's drinking waters are not poisoned with radionuclides, as substantial testing has verified, and the reading public should drink from this journalistic cup with great caution."

For more, see here (Energy in Depth) and here (Forbes.com:  "Most of this argument is absurd on its face.").

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The NYT published an editorial over the weekend praising President Obama for releasing tens of millions of barrels of oil from the Strategic Petroleum Reserve:  "It should provide a modest boost to the American economy. It will help consumers at the pump as they head into the summer vacation season. And it sends an important message to the Organization of the Petroleum Exporting Countries that the United States is capable of protecting its domestic market, at least in the short term, even when those countries refuse to increase production."

A recognition that supply impacts price, and the economy?  Maybe we should consider similar support for increasing our domestic production ...

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That's the title to an article in the WSJ seeking to separate fact from myth regarding the claims about hydraulic fracturing:  "Fracking contaminates drinking water. One claim is that fracking creates cracks in rock formations that allow chemicals to leach into sources of fresh water. The problem with this argument is that the average shale formation is thousands of feet underground, while the average drinking well or aquifer is a few hundred feet deep. Separating the two is solid rock. This geological reality explains why EPA administrator Lisa Jackson, a determined enemy of fossil fuels, recently told Congress that there have been no 'proven cases where the fracking process itself has affected water.'"

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We have reported previously on the study being conducted by U.S. EPA regarding the claimed impacts of hydraulic fracturing on the environment (see here, for example).  U.S. EPA has settled on seven case studies (past and prospective) in various producing locations around the country, including several in Pennsylvania's Marcellus shale.  From the press release:

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The Edmund Sun is reporting on a new economic impact study finding that Oklahoma's oil and gas industry provides 300,000 jobs in the state:  "The study found that 71,224 Oklahomans are directly employed by the drilling and production sectors of the oil and natural gas industry. Another 228,115 jobs are supported indirectly by the oil and natural gas industry. In all, those roughly 300,000 jobs generate more than $14 billion in labor income."

For more on the study, see here.

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The Daily Journal is reporting that the city of Morgantown, WV, has banned the use of hydraulic fracturing within the city and a one-mile radius:  "City officials say a ban on horizontal drilling and fracturing is necessary in and near city limits because of the proximity to large infrastructure."

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The U.S. District Court for the Eastern District of Louisiana recently found, among other things, that plaintiffs lacked standing to bring claims for injunctive relief under the Clean Water Act, CERCLA, and the Endangered Species Act (ESA), relating to the explosion and capsizing of the Deepwater Horizon offshore drilling rig in the Gulf of Mexico.  See In re:  Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010 (MDL No. 2179) (Jun. 16, 2011).  The court reasoned:

Although an injunction need not return the waters to the pre-spill state, it must, however, provide some benefit or reduction in pollution. *** In this case, no such benefit may be achieved by the Court's injunction.  In fact, the injunction at this stage would be useless, as not only is there no ongoing release from the well, but there is also no viable offshore facility from which any release could possibly occur.

Additionally, the court rejected the claim that the violations could be considered "ongoing" for purposes of pursuing the federal environmental citizen suit claims - "First, there is no longer any facility from which a release could occur.  Second, there have been multiple closures of the well, which leaves no reasonable possibility that there will be any release in the future."  Good decision.

You can find more here (including a copy of the order and a brief history).

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Signed by Texas Gov. Rick Perry, HB 3328 becomes effective September 1, 2011, requiring operators to disclose the chemicals used in their hydraulic fracturing operations.  For a copy of the legislation, and its history, see here.

Interestingly, it relies on the FracFocus registry created by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission.

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The Supreme Court issued its ruling today in the long-awaited climate change nuisance suit.  The Court concluded that federal common law nuisance claims cannot be brought against utilities for their greenhouse gas emissions.  In an 8-0 decision, the Court ruled that the Clean Air Act and rules authorized by the Act displace the federal common law cause of action and that there is no room for parallel action.  The U.S. Court of Appeals for the Second Circuit had previously ruled that eight states, New York City, and three environmental groups could proceed with lawsuits alleging under federal common law that the companies' carbon dioxide emissions constitute a public nuisance in contributing to global warming.  (Connecticut v. American Electric Power Co., 582 F.3d 309, 69 ERC 1385 (2d Cir. 2009)).  This Supreme Court decision overturns that ruling.

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We thought you might be interested in a couple of articles:  First, one on how Ohio oil and gas development is already having a positive impact on the local economy (from the Canton Repository).  Second, one on a Quinnipiac University poll finding that 63 percent of Pennsylvania voters are for allowing Marcellus Shale development because of the economic benefits (from the Philadelphia Inquirer).

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Addressing an issue of first impression, the Ohio Supreme Court recently held that a "most favored nation" clause in an electric power supply agreement did not apply only to the price to be paid for power, but also to the term of the agreement.  In Sunoco, Inc. (R&M) v. Toledo Edison Co., Sunoco had entered into a power agreement with Toledo Edison that provided, in part:

If the Company provides an arrangement, rates or charges which is or may be in effect at any time during the term of this Agreement, to a Comparable Facility within its certified territory, then the Customer will have the right to utilize that arrangement, rates or charges for its Facility.  The Customer must comply with all other terms and conditions of the arrangement including firm and interruptible load characteristics/condition.

When a competitor's term extended, Sunoco claimed a similar extension for itself - with a value of more than $13 million.

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U.S. EPA has extended the time period for commenting on a draft NPDES general permit for stormwater discharges from construction activities to July 11, 2011.  For more, see here.

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That's the title to an article in the WSJ:  "The shale drilling boom now underway in Texas, Louisiana, Pennsylvania, Oklahoma and other states is already creating jobs, slashing natural-gas prices, and spurring billions of dollars of investment in new production capacity for critical commodities like steel and petrochemicals. Better yet, it's spurring a huge increase in domestic oil production, which has been falling steadily since the 1970s."

More energy production is better for all of us.

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The WSJ is reporting on an interesting phenomenon - there is a growing separation between the two major oil indices (Brent and WTI).  "The nearly $20 gap is an all-time high, and would have been unthinkable before this year. The two contracts historically have traded within $1 of each other. But a glut of oil at the Nymex contract's delivery point in Cushing, Okla., has weighed on U.S. futures prices, while production problems in the North Sea have boosted Brent's value."

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PG&E culture played a part in the San Bruno incident, according to this article in the San Jose Mercury News.  "That telling lapse was one of many disturbing signs that the company's culture had turned 'dysfunctional,' according to a five-member expert panel picked by the California Public Utilities Commission to look into the explosion. The panel's report, released Thursday, drew headlines for its suggestion that improperly monitored work on a nearby sewer pipe may have led the San Bruno pipe to rupture."

For a copy of the Commission's report, see here.

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The Columbus Dispatch is reporting that American Electric Power (AEP) is planning on closing several electric power plants due to new federal clean-air regulations proposed by U.S. EPA, with 600 jobs lost and increases in utility bills of 10-15%.  "The costs of complying with the new rules would hit Ohio customers in their monthly bills, with electricity costs rising by 10 percent to 15 percent over the next few years, in addition to other rate increases that would happen anyway, said Nick Akins, AEP president."

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U.S. EPA is developing an Underground Injection Control (UIC) Class II permitting guidance document under the Safe Drinking Water Act for the use of diesel fuels in hydraulic fracturing operations.  For more, including a UIC primer, see here.

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Ohio has passed new ratemaking legislation for regulated natural gas companies - H.B. 95.

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The WSJ is reporting on the new offshore discovery made by Exxon:  "Exxon Mobil Corp.'s massive new discovery of oil and natural gas in the Gulf of Mexico, which demonstrates there are still enormous amounts of untapped energy sources in the U.S., is rekindling enthusiasm for offshore exploration after months of delays and permitting difficulties."  Interesting.

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The Energy Information Administration has issued its Short-Term Energy Outlook for June finding, among other things, that:

Natural gas working inventories ended May 2011 at 2.2 trillion cubic feet (Tcf), about 10 percent, or 245 billion cubic feet (Bcf), below the 2010 end-of-May level. EIA expects that working gas inventories will build strongly during the summer and approach record-high levels in the second half of 2011. The projected Henry Hub natural gas spot price averages $4.25 per million British thermal units (MMBtu) in 2011, $0.13 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.58 per MMBtu.

(Emphasis is ours.)  For more, see here.

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According to the Hazleton Standard Speaker, "The Department of Environmental Protection is recommending a major overhaul of the state Oil and Gas Act with stronger buffer zones to keep natural gas drilling away from water sources, tougher penalties and bond requirements and a 'cradle-to-grave' manifest system to track wastewater from hydraulic fracturing, or fracking."  This is from a letter to the Governor's Marcellus Shale Advisory Commission.

Interesting.

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We thought you might be interested in the most recent monthly natural gas production data from the Energy Information Administration:

Production in the Lower 48 States shows a recovery from the weather-induced drop that was recorded during the first two months of the year. A gain of 3.8 percent or 2.49 billion cubic feet per day (Bcf/d) more than offset the previous declines. All areas in the Lower 48 posted increases except the Federal Offshore Gulf of Mexico which fell slightly, 0.4 percent or 0.02 Bcf/d. Texas contributed the largest gain at 6.1 percent or 1.23 Bcf/d; Louisiana and Other States, likewise posted gains totaling 0.65 Bcf/d as drilling activity continues in the Marcellus and Haynesville shale plays. New Mexico and Oklahoma had increases of 10.4 percent or 0.35 Bcf/d and 4.1 percent or 0.20 Bcf/d respectively.  [Emphasis is ours.]

Very interesting.  For more, see here.

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We reported previously on the threat made by New York State's Attorney General to sue the U.S. Army Corps of Engineers and others over their alleged failure to properly review oil and gas development regulations proposed by the Delaware River Basin Commission (see Bad Feds ...).  The Hill is reporting that New York has made good on that threat:  "New York Attorney General Eric Schneiderman opened a new front Tuesday in battles over controversial natural-gas drilling projects with a lawsuit alleging that federal agencies are shirking environmental review of dangerous development techniques."

Not unexpected.

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In Avenal Power Center, LLC v. U.S. EPA, the U.S. District Court for the District of Columbia rejected U.S. EPA's argument that despite the agency's failure to meet Congress' one-year statutory deadline for final agency action on a permit application, the most the Administrator could be required to do is to issue a decision appealable to the Environmental Appeals Board (EAB), characterizing it as an "oh so clever, but unsupportable, position."  Among other things, the court noted:

The EPA has labored mightily to convince this Court that the temporal requirement enacted by Congress is somehow ambiguous and, therefore, this Court should defer to its interpretation under Chevron. *** Horsefeathers!  The EPA's self-serving misinterpretation of Congress's mandate is too clever by half and an obvious effort to protect its regulatory process at the expense of Congress's clear intention.  Put simply, that dog won't hunt.  [Emphasis is ours.]

And:

Administrators of regulatory agencies derive their power from Congress's statutory enactments - not from their own discretionary regulatory pronouncements that are drafted for their assistance and convenience.

Good to remember.  You can find the opinion here.

[Disclosure:  Judge Leon is a former partner at the Vorys firm.]

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Kentucky recently changed its remediation/corrective action statute to formally adopt USEPA Region 3’s “Remedial Screening Levels” as the State’s official screening criteria for real property. The change becomes effective June 8.

Indiana DEM recently issued a new 400 page Remediation Closure Guide in draft form for public comment through mid-June. The Guide encompasses a wide variety of remedial programs. Because Ohio EPA’s new Director (Scott J. Nally) came from IDEM, and Ohio EPA has struggled for years to develop a comprehensive multi-program set of closure/remediation standards, don’t be surprised if this move eventually comes to Ohio. Here’s a link: http://www.in.gov/idem/6683.htm

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