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."
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.]
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."
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."
USA Today has another example of how landowner interests are divided on the use of hydraulic fracturing in NY. For instance: "To Noel van Swol, a retired teacher who owns 400 acres of timberland, gas leasing is an economic lifeline and the controversy is "class warfare" between local residents struggling to make a living and wealthy weekenders who care only about preserving their scenic views."
The Federal Energy Regulatory Commission (FERC) held last month that the prohibition on buy/sell transactions applies equally to interstate open-access transportation services provided by intrastate pipelines under Section 311 of the Natural Gas Policy Act of 1978 and Hinshaw pipelines pursuant to blanket certificates issued under Section 284.224 of the FERC's regulations. See Order Denying Request for Clarification and Granting Limited Waiver, Arizona Public Service Co. and Sequent Energy Management, L.P., Docket No. PR10-45-000 (Jul. 23, 2010). This has generated substantial interest, including a request by several marketers for rehearing that asks the FERC to reverse its ruling expanding the buy/sell prohibition to non-interstate pipelines - which the FERC acknowledges is an issue that it has not previously addressed.
The lawsuits have already started for the Enbridge oil spill into the Kalamazoo River late last month. The Battle Creek Enquirer is reporting that a second class action has been filed accusing Enbridge of various tort claims, including trespass and negligence. And the Detroit Free Press is reporting that the Great Lakes Environmental Law Center, a group of environmental lawyers based in Detroit, has sent to Enbridge the 60-day notice required before filing suit under the Clean Water Act's citizen suit provisions.
In Interstate Natural Gas Association of America v. FERC (No. 09-1016), the United States Court of Appeals for the D.C. Circuit recently upheld the Federal Energy Regulatory Commission's (FERC's) decision in Order No. 712 lifting the price ceilings for short-term capacity releases for shippers but retaining them for capacity sales by pipelines. In general, the court found reasonable the distinctions made by FERC between pipelines and shippers when participating in the capacity market.
In case you missed it:
U.S. EPA has proposed to extend the SPCC compliance dates for most onshore facilities to November 10, 2011.
DTI and Tennessee have reached a 10-year agreement to move Marcellus gas from PA to NY, according to the Houston Chronicle.
U.S. EPA is proposing - among other things - to establish a GHG reporting threshold of 460,000 Mcf per year for LDCs, instead of mandating all LDCs as currently requiring.
Road-repair rules in West Virginia may increase industry's costs (IOGA-WV).
Speculation on what the Gulf spill means for the oil and gas industry, and energy economics, is ongoing (see LAT).
It may be that government reports of oil dissipation in the Gulf were premature (via NYT).
Several shale producers have put themselves on the market (WSJ, subscription required).
The push for federal regulation of hydraulic fracturing operations continues in PA (Philadelphia Inquirer).
The NYT is reporting that the New York state senate has passed a moratorium on the use of hydraulic fracturing in the drilling of horizontal wells. "While the measure cannot become law before the state Assembly passes a similar bill, and that chamber is not expected to take up the issue until September, environmentalists said the vote was significant in that it gave state officials more time to examine safety issues."
Not everyone is impressed, however: "Pennsylvania’s top-ranking environmental official suggests New York should stop buying natural gas produced in the Keystone State." He apparently used the phrase, "moral high horse." And fun was had by all.
If you are following oil spill news around the country, you know that a 30-inch pipeline owned by Enbridge, Inc., ruptured in Marshall, Michigan, releasing hundreds of thousands of gallons of crude oil into Talmadge Creek, a waterway that feeds into the Kalamazoo River (as reported by U.S. EPA and others). The Detroit Free Press is reporting that Enbridge is working proactively to alleviate neighbor concerns: "Enbridge Inc. offered to buy up to 200 homes in the 30-mile-long zone at their full-list price or appraised value before the spill to ease homeowners’ concerns."
For more, see here (U.S. EPA, Region 5 website) and here (Detroit Free Press).
The Federal Energy Regulatory Commission (FERC) has clarified its regulations requiring major non-interstate pipelines to post daily scheduled volume information and requiring interstate pipelines to post information on the provision of no-notice service (FERC Order No. 720-B).
The Texas Commission on Environmental Quality (TCEQ) has announced that it is proposing new rules to amend the air emissions regulations that govern oil and gas facilities. "The rule proposal updates administrative and technical requirements, and includes enforceable monitoring, sampling, and record keeping requirements. This proposal helps the agency make certain that oil and gas facilities are properly operated and maintained, in order to continue to ensure that public health is protected." Until those rules are formally published next week, however, their precise scope and burdens remain unclear.
The NYT has several article on the Deepwater Horizon spill that may be of interest: One, most of the oil that is believed to have leaked from the well has evaporated or otherwise been dispersed (see here). "The government is expected to announce on Wednesday that three-quarters of the oil from the Deepwater Horizon leak has already evaporated, dispersed, been captured or otherwise eliminated — and that much of the rest is so diluted that it does not seem to pose much additional risk of harm." Two, the well itself may soon be sealed (see here). Both sound like good news!
Congress is considering legislation that would have a substantial impact on both onshore and offshore production activities in the United States. The Senate issued an energy and oil spill bill last week, for example, containing chemical disclosure provisions related to hydraulic fracturing and measures to eliminate the $75 million cap on liability under the Oil Pollution Act (S. 3663, the Clean Energy Jobs and Oil Accountability Act). Meanwhile, the House has passed its version of an oil spill bill in response to the Deepwater Horizon incident - (HR 3534, the CLEAR Act). Among other things, it also contains chemical disclosure provisions related to hydraulic fracturing, and raises the financial responsibility level for offshore spills to $1.5 billion.
For more, see this article from the LAT.
[Update: The NYT is reporting on Senator Reid's withdrawal of the Senate bill for the time being: "Senate Majority Leader Harry Reid (D-Nev.) yesterday called off dueling test votes planned for today on the Democratic and Republican energy and oil-spill response bills, saying more time was needed to convince senators to support the measure. While he blamed Republicans for blocking efforts to earn the needed 60 votes, the GOP blasted back, accusing Democrats of playing politics all along in bringing up the competing measures."]
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.
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."
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).
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).
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.
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.
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.
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.
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).
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."
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.
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.)
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."]
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.
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?
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.
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."
Nice.
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."
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?
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.
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.
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?
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:
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For more, see here.
The Intelligencer has an interesting article on drilling activity in the Marcellus Shale in West Virginia (with a side note regarding Ohio). "The Marcellus Shale rush is hitting on the west side of the Ohio River as well. Information provided by the Ohio Department of Natural Resources shows there are currently 12 completed Marcellus wells in Belmont County, with eight in Jefferson County and seven in Monroe County. Permits to drill even more Marcellus wells also have been issued for these counties."
Natural gas is expected to double its share of the energy market, according to a study done by the Massachusetts Institute of Technology and reported on here by the NYT. The article: "The increase, the report concluded, will come largely at the expense of coal and will be driven both by abundant supplies of natural gas — made more available by shale drilling — and by measures to restrict the carbon dioxide emissions that are linked to climate change."
For more on the report, including links to a copy of the full report and related press release, see here (MIT).
Directed to study whether natural gas retail market competition would benefit the state's small-volume consumers, the Kentucky Public Service Commission (PSC) is seeking public comment from everyone that might be impacted by the change. See here (public notice). For related testimony and other information, see here (Case No. 2010-00146).
The United States Court of Appeals for the Tenth Circuit recently upheld a Bureau of Land Management (BLM) decision allowing natural gas development in Wyoming's Powder River Basin. See Biodiversity Conservation Alliance v. Bureau of Land Management, Case No. 09-8011 (Jun. 18, 2010) (here; search using case number). Environmental groups challenged the decision, arguing that it violated the National Environmental Policy Act by failing to study in detail a decades-long phased-development plan proposed by the environmentalists.
The court: "The Bureau reasonably refused to give detailed study to a plan that would not meet the project's purposes." Interesting.
The Federal Energy Regulatory Commission (FERC) issued Order No. 704-C recently to clarify certain aspects of Form 552, "under which natural gas market participants must annually report information regarding physical natural gas transactions that use an index or that contribute to or may contribute to the formation of a gas index." Among other things, Order No. 704-C exempts from reporting any unexercised options to take gas under take-or-release contracts; addresses the exemption for unprocessed natural gas transactions (not all are exempt); and exempts cash-out and imbalance transactions.
For more, see here.
The Federal Energy Regulatory Commission (FERC) has issued a Notice of Proposed Rulemaking (NOPR) soliciting comments on a proposal to revise certain financial reporting requirements for natural gas companies in Form Nos. 2, 2-A, and 3-Q. Among other things, the revisions would require information on the amount of fuel waived, discounted or reduced as part of a negotiated rate agreement.
For more, see here (Docket No. RM07-9-003).
The U.S. District Court for the Eastern District of Louisiana issued a preliminary injunction today prohibiting the Interior Department from enforcing a six-month moratorium on all drilling in the Gulf of Mexico's Outer Continental Shelf in water at depths greater than 500 feet. See Hornbeck Offshore Services, LLC v. Kenneth Lee "Ken" Salazar, Case No. 10-1663 (you can find copies of the court's decision and order here). The court found, among other things, that the plaintiffs had established a likelihood of successfully showing that the Department acted arbitrarily and capriciously in issuing the moratorium:
After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no time line for implementation, though many of the proposed changes are represented to be implemented immediately. The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium.
For more, see this article from the NYT.
Dominion Transmission, Inc., has filed an application with the Federal Energy Regulatory Commission (FERC) for approval of its Appalachian Gateway Project. See here (Docket No. CP10-448). Among other things, it requests authorization to construct approximately 107 miles of varying diameter pipeline, several new compressor stations, and approval of related incremental transportation rates. Estimated cost: Just under $634 million.
The Bristol Herald Courier is reporting that two class action lawsuits were filed last week claiming that EQT Corp. and Consol Energy, Inc., failed to pay Southwest Virginia landowners for producing coalbed methane from their properties. This follows a 2004 Virginia Supreme Court ruling that methane constitutes a distinct mineral estate from coal for purposes of ownership.
The Ohio General Assembly recently enacted Sub. S.B. 232, which (among other things) exempts certain qualified energy projects from real and personal property taxation for upcoming tax years; expands the solar panel revolving loan program to include other alternative energy technologies; and requires the Public Utilities Commission to study reactive power in the state.
[Note: Vorys has published two client alerts looking at this bill in greater detail. The first looks at new low-interest options for financing alternative energy projects. The second looks at the advanced energy property tax exemptions.]
With all of the talk of a moratorium on drilling in the Gulf, one group of workers gets little national attention: Rig workers. The NYT has an article looking at the impact a drilling ban would have on these skilled employees. A sample: "The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work."
Building on the royalty-interest owners' success in Estate of Garrison G. Tawney v. Columbia Natural Resources, LLC (West Virginia), plaintiffs filed a nearly-identical suit in Ohio asserting class-action claims for the deliberate and fraudulent underpayment of natural gas royalties by CNR and its successors. See Lutz v. Chesapeake Appalachia, LLC, Case No. 4:09CV2256 (United States District Court, Northern District of Ohio). Today, the District Court issued its decision dismissing those claims - based largely on Ohio's new 4-year statute of limitations.
Effective April 6, 2007, Ohio changed its statute of limitations for breaches of oil and gas leases from 15 years (i.e., the limitations period ordinarily applicable to breach of contract claims) to 4 years (i.e., the period applicable to UCC sales of goods). See Rev. Code Section 2305.041. Notably under the new statute, the "cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach." See Rev. Code Section 1302.98. To overcome the fact that they had alleged royalty claims beginning in 1993 and 2000, plaintiffs argued the new statute of limitations should not be applied because it would retroactively extinguish an accrued substantive right. The court disagreed.
Continue Reading...The WSJ is reporting that a proposal made by Senator Sanders (I-Vt.) to repeal the expensing of intangible drilling and development costs and percentage depletion has been defeated (at least for the moment), despite being part of a budget request made by the President this year.
(Note: Subscription required.)
The Delaware River Basin Commission has announced that its ban on new drilling permits in the Delaware River Basin has been expanded to include exploratory wells too, according to this article in the Philadelphia Inquirer. "The commission said the action was a recognition of 'the risks to water resources . . . that the land disturbance and drilling activities inherent in any shale gas well pose.'"
Dominion has announced that its transmission and storage subsidiary, Dominion Transmission, has entered into a 15-year firm transportation agreement with CONSOL Energy, Inc., for CONSOL's Marcellus production.
Take the oil spill forecasts you hear with a grain of salt. This article from the Houston Chronicle reports on the related uncertainties and warns: "Predicting the long-term trajectories, it seems, is therefore a riskier business than even long-range hurricane forecasting." Sounds like good advice.
The Philadelphia Inquirer is reporting on the loss of state solar tax credits despite homeowner reliance when installing the related equipment. "Turns out that the money for those tax credits - about $50 million over eight years from the state's general fund - was eliminated as part of the 101-day budget duel last fall."
The federal government is meeting with Hollywood celebrities to discuss options for addressing the Deepwater Horizon spill in the Gulf of Mexico. The Houston Chronicle reports here on congressional testimony given by Kevin Costner on separators that he has been developing over the last several years (motivated by the Exxon-Valdez spill); and here on a meeting between U.S. EPA and Avatar director James Cameron, "considered an expert on underwater filming and remote vehicle technologies."
The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for June 2010. Among other things, it projects that natural gas consumption is going to grow by 3.8% (or 2.4 Bcf/d) in 2010. Regarding prices:
Sustained low natural gas prices this summer are expected to contribute to a decline in natural gas drilling activity over the next several months. As a result, the current 2011 forecast of higher prices comes as production begins to decline later this year and next. The projected Henry Hub spot price averages $4.49 per MMBtu in 2010 and $5.06 per MMBtu in 2011.
For more, see here.
The Dallas Morning News is reporting on an explosion caused by utility workers digging into a 36-inch high-pressure natural gas pipeline owned by Enterprise Products Partners. As observed by the Pipeline and Hazardous Materials Safety Administration (PHMSA), this is one of the leading causes (i.e., dig-in) of injuries related to natural gas pipeline incidents.
[On a related note, one of our attorneys will be giving a presentation on the applicability of federal pipeline safety regulations to production and gathering operations at the PIOGA Summer Meeting at the Seven Springs Resort - Champion, PA, later this week. For more, see here.]
Continue Reading...The Columbus Dispatch has an interesting - and overall, fair - report on the Ohio E&P industry today. A sample: "At one time, Ohio was an oil epicenter. One of the first, if not the first, wells in North America was drilled in 1814 in Noble County in southeastern Ohio. The state’s first commercial-scale well was drilled around 1860, according to the Ohio Oil and Gas Association, a trade group. *** The industry entered a two-decade boom in the 1880s with the discovery of large oil and gas reserves in the Lima and Findlay areas. Ohio rose to become the leading oil-producing state for the last few years of the 19th century. This helped nurture corporate giants such as John D. Rockefeller’s Standard Oil in Cleveland."
Read it for yourself.
The Chicago Tribune is reporting that Sen. Debbie Stabenow (D-Mich) is urging U.S. officials to persuade Canada to halt natural gas drilling in Canadian waters of Lake Erie over concerns raised by the Deepwater Horizon oil spill in the Gulf of Mexico. Really.
[Natural gas production is prohibited in the U.S. side of Lake Erie already.]
This didn't take long. The NYT is reporting that the Justice Department is opening a criminal probe of the Deepwater Horizon spill in the Gulf of Mexico. The first paragraph hints at the reason: "The Obama administration said Tuesday that it had begun civil and criminal investigations into the massive oil spill in the Gulf of Mexico, as the deepening crisis threatened to define President Obama’s second year in office."
The Federal Energy Regulatory Commission (FERC) has granted a request to extend the filing deadline for 2009 Form 552 to September 1, 2010. See here for more.
The Federal Energy Regulatory Commission (FERC) recently issued a final rule revising the contract reporting requirements for natural gas pipeline companies falling under the Commission's jurisdiction under section 311 of the Natural Gas Policy Act (NGPA) and section 1(c) of the Natural Gas Act (NGA) (i.e., Hinshaw pipelines). Designed to increase market transparency, it increases the reporting frequency from annual to quarterly, requires certain additional information related to storage transactions, and makes the reports public and not to be filed with information redacted as privileged (among other things).
Sex-offender failure to register used to justify imposition of new severance tax on Pennsylvania industry, according to this article in the Times Leader. "Gov. Ed Rendell’s office cited those crime problems as well as road damage caused by overweight and unsafe trucks serving the natural gas industry as just two reasons a state severance tax should be imposed on the industry."
Two new studies came out this month on the benefits of drilling the Marcellus Shale, according to this report from News Channel 34, Binghamton. The Business Council of New York State recently published a report from Petro Enterprises, Inc., a New Hampshire consulting firm, finding that the Marcellus and Utica shales will be more extensive and more prolific than the Barnett in production of natural gas for New York. More: "We project that New York State will experience an annual economic uplift of $92 billion from the Marcellus and Utica shale development," based on Petro's analysis of the Barnett Shale.
Also, Penn State University released a report entitled, The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An Update (May 24, 2010), finding that producers spent a total of $4.5 billion to develop Marcellus shale resources in 2009. "We estimate that this spending generated $3.9 billion in value added, $389 million in state and local tax revenues, and more than 44,000 jobs." Moreover, the study finds that producers plan to spend even more this year and next, generating over $8 billion in added value in 2010 and another $10 billion in 2011. "This higher economic activity generates almost $1.8 billion in additional state and local tax revenues during 2010 and 2011. Employment in the state expands by more than 88,000 jobs during 2010 and 2011."
Not bad.
Hydraulic fracturing has seen several legislative initiatives lately. For example, the Kerry-Lieberman climate legislation introduced earlier this month (at just under 1,000 pages) contains the following 36-word provision: "A hydraulic fracturing service company shall disclose all chemical constituents used in a hydraulic fracturing operation to the public on the Internet in order to provide adequate information for the public and State and local authorities." See here (NYT article on legislation generally); here (Senator Kerry's website); here (text of bill itself).
Also, Representative DeGette (D-Colo.) planned last week to introduce an amendment to the Assistance, Quality and Affordability Act in the House Energy and Commerce Committee designed to accomplish the same thing, i.e., require public disclosure of chemicals used in hydraulic fracturing. See here (from the Dallas Morning News). The NYT has reported that Rep. DeGette withdrew that amendment after considering the possibility of a compromise with industry.
Don't think it won't come up again ...
We linked recently to a roundup of articles at the NYT and a BP website on the Deepwater Horizon incident (see here), and encourage readers to visit those sites often if they are interested in the latest information. We thought we'd link to this article as well from the LAT, illustrating the tension between BP and U.S. EPA on the appropriate means of cleanup - with BP refusing to switch to a less-toxic oil dispersant that, in its view, would be less effective.
The Energy Information Administration (EIA) recently posted a summary analysis on natural gas residential choice programs that also provides an overview of the status of natural gas industry restructuring in each State. In a good overview of Ohio, it finds: "More than 50 percent of the State's residential natural gas customers were participating in choice programs as of December 2009, with by far the largest participation (94 percent) in Dominion East Ohio's (Dominion) service area." In tabular form:
For more, see here.
The Scranton Times-Tribune is reporting that UGI Penn Natural Gas will be asking for two 14% rate cuts this year due to expectations about local natural gas volumes produced from the Marcellus shale. Local benefits from local production.
That's the message being sent by the Administration over the Deepwater Horizon spill, as reported in this article from the Houston Chronicle. "Obama castigated company executives for 'a ridiculous spectacle' during two days of congressional hearings on the oil spill this week, as the business leaders — all targets of negligence lawsuits — traded blame over what went wrong." The article goes on to note the changes being made at the Minerals Management Service as a result of the incident.
At a recent summit, the Acting Secretary for the Pennsylvania Department of Environmental Protection has asked operators to comply with new E&P rules even before they become effective, according to this article in the Scranton Times-Tribune. "The summit came ahead of action by the state Environmental Quality Board on Monday on several proposed regulations to require that oil field-grade cement be used in Marcellus Shale wells, to delineate responsibility and notification procedures for gas migration problems and to strengthen requirements for treating drilling wastewater and limiting sediment erosion from wells."
For more on the regulations themselves, see this press release issued by the PA DEP. Also, see here, which contains links to presentations, comments and other documents related to the proposed rulemakings (scroll down to the May 17, 2010 Meeting Agenda).
The Star-Telegram is reporting that a Texas Department of State Health Services investigation has found that residents of Dish, TX, do not have higher levels of benzene and other contaminants in their bodies compared to the general population - dealing a significant blow to claims that residents were being injured due to natural gas E&P operations in the area. For a copy of the report, see here.
The Energy Information Administration (EIA) has posted its Short-Term Energy Outlook for May 2010, stating - among other things - that it:
[E]xpects total natural gas consumption to increase by 3.0 percent to 64.4 billion cubic feet per day (Bcf/d) in 2010 and decline by 0.4 percent in 2011 ***. Consumption growth in 2010 is led by the industrial and electric power sectors. Despite higher natural gas prices in the first quarter of 2010 compared with the same period in 2009, natural gas accounted for a slightly higher share of generation in the electric power sector. This gain in the natural gas share of electric-power-sector generation is expected to continue through this year. In the industrial sector, EIA's natural-gas-weighted industrial production index (a measure of industrial activity in natural-gas-intensive industries) showed a year-over-year increase of 6.8 percent during the first quarter of 2010 and is forecast to rise by 5 percent on average for the entire year. [Emphasis is ours.]
For more, see here.
Earlier this month, the United States Court of Appeals for the Seventh Circuit affirmed a lower court decision finding that a mineral deed granting "all the coals, clays, minerals and mineral substances underlying" the defendants' land, "together with the right to mine and remove said coals," did not grant the right to strip mine the land. See American Land Holdings of Indiana, LLC v. Jobe (Case Nos. 09-3151, 09-3265), here. Particularly significant to the court was the state of technology at the time - Permitted extrinsic evidence showed that there was no strip mining of coal anywhere in the United States beyond isolated experimentation.
The natural gas market remains potentially volatile despite the recent calm, according to this article in the WSJ. "But the domestic nature of the gas market also makes it less liquid than much larger, globally traded commodities such as crude oil and gold, which means gas futures should remain volatile enough to attract financial traders. A hurricane in the Gulf of Mexico, which remains a major source of gas production despite growing shale-gas output, could spark a double-digit percentage rally in gas futures, for example." Very interesting.
(Note: Subscription required.)
The Times-Leader has an article on EnCana Oil & Gas (USA) Inc.'s move into the Marcellus Shale in Pennsylvania. Not a bad local take on development.
The WSJ has a good article on the potential of shale gas. A sample: "The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there's a cheap, plentiful fuel out there that's a lot cleaner than coal, even if gas isn't as politically popular as wind or solar."
Michigan's Department of Natural Resources and Environment is reporting a record oil and gas lease auction of state-owned land - $178 million. "'To put the historic significance of this auction in perspective, since 1929, the state has collected a total of $190 million in bonus payments,' said Lynne Boyd, chief of the Department of Natural Resources and Environment's Forest Management Division, which administers the oil and gas program. 'In one day, we collected nearly as much as we have collected in 81 years.'" Congratulations!
The auction was driven by reports of a successful well drilled in the Utica Shale.
The Philadelphia Inquirer is reporting that Pennsylvania has entered into a lease with Chesapeake Energy Corp. to drill the Marcellus Shale under a 7-mile stretch of the Susquehanna River - for $6.15 million. Nice.
The Oil Pollution Act (33 U.S.C. s. 2702 et seq.) contains liability limits related to oil spills, including a potential $75 million limit applicable to the Deepwater Horizon spill in the Gulf of Mexico. Not surprisingly, there are efforts to raise that limit - substantially. See, e.g., here (from the Sun Herald, noting an effort to raise the limit - retroactively - to $10 billion).
We mentioned in a previous post that the E&P industry can expect increased regulatory scrutiny as a result of the spill in the Gulf of Mexico. That, of course, isn't the only reason to anticipate such scrutiny. This article from the Pittsburgh Tribune-Review is a timely reminder of the environmental issues being raised regarding development of the Marcellus Shale. At a conference intended to develop a series of recommendations for the Pennsylvania legislature, the state's Department of Environmental Protection Secretary warned that "[u]nless steps are taken to protect the state's environment, development of Marcellus Shale natural gas reserves could overwhelm its benefits."
A separate article regarding the same event suggests that industry, rather than being a guest at the table, is really on the menu - see here, from the Philadelphia Inquirer.
Last week, I had the privilege of giving a presentation on hydraulic fracturing at the Ohio State Bar Association's 25th Annual Ohio Environment, Energy and Resources Law Seminar (yes, shameless self-promotion). I mentioned as part of the talk the benefit that shale oil production was seeing from the technologies developed to access gas in the Barnett Shale and other shale formations around the country. As luck would have it, the Fort Worth Business Press yesterday had a related article here, observing that: "The past decade has been all about gas, gas, gas, but new technologies developed for that commodity are turning out to be just as effective in a burgeoning rejuvenation of a more storied fuel: oil."
On April 20, 2010, an explosion occurred on the Deepwater Horizon, an oil rig working in the Gulf of Mexico 50 miles offshore Louisiana, that led to the deaths of 11 crew members and possibly one of the worst oil spills in American history. For a roundup of articles, see here (NYT). See also here (a link to BP's website, including also a link to the Joint Information Centre established to provide the latest information and response). Producers, even onshore producers, should expect increased scrutiny in the future.
The Pittsburgh Business Times has a good article on the various infrastructure projects planned to process and take Marcellus gas to Northeast markets. For example: "The Keystone Connector will be a 240-mile pipeline stretching across southern Pennsylvania from Dominion’s Crayne Compressor Station in Waynesburg to Williams’ TRANSCO pipeline in Delta, Pa., with an expected in-service date of 2013."
The Dallas Morning News has an article on the attempts by independents to preserve decades-old industry tax incentives - such as percentage depletion. "Devon and other producers say the tax subsidies don't give them any special favors. They note that the incentives were originally designed to help offset the risk of prospecting for oil and gas. They argue that the same risk exists today, particularly in offshore exploration."
The Houston Chronicle has an editorial authored by Andrew Liveris, president, chief executive officer and chairman of the board of the Dow Chemical Co., explaining the need for stable natural gas prices from a manufacturer's perspective. Addressing American job losses since the 1990's, Mr. Liveris writes: "America did not lose these jobs because it lacked capable employees, nor was it as simple as the reason most immediately believe, wages. A principal reason for the loss of jobs was the high and extremely volatile cost of energy. Manufacturing depends heavily on energy, and volatility in energy costs has been driving production and the high-paying jobs that support it away from our shores and to competing countries." Interesting. Read it all.
Consol Energy, Inc.'s purchase of the Appalachian exploration and production operations of Dominion Resources Inc., closed last Friday, tripling its Marcellus Shale assets, according to this article in The Intelligencer.
We reported previously that the Energy Information Administration (EIA) planned on modifying the methodology it uses to estimate production data. Here is the revision methodology (EIA's new simple ratio method implemented for the first time this month). From EIA's website: "Beginning this month, EIA introduces a new method to estimate monthly natural gas production and uses it to estimate production in February 2010 and to revise previous estimates for 2009 and January 2010. Using the new method, EIA revised January 2010 estimates downward 0.6 Bcf/d for the lower 48 States. Nearly all of this revision came from 3 areas: the Federal Gulf of Mexico (GOM), Louisiana, and Texas. Revisions to 2009 estimates for the lower 48 States were generally negative as well, ranging from -0.3 percent at the beginning of the year to -1.3 percent at year end."
Every year, the Federal Energy Regulatory Commission (FERC) issues a state of the market report reviewing significant events of the past year. This year, the agency addresses what it characterizes as a new gas paradigm:
Not that long ago, it would take several months from the start of drilling to initial production. Average-time-to-drill in 2009 was about 20 days. Nowadays, production is almost certain before drilling begins, and well efficiency increases as producers learn the particular nuances of a given play. Because shale production has many of the characteristics of gas in storage, companies have greater flexibility to produce gas when the market calls for it. Production can be deferred without risking the integrity of the well. Ending long production lead times and the risk of failure or loss may dramatically temper the gas market's systemic boom-and-bust cycle.
For a complete copy of the report, see here. Review it all - it's pretty interesting.
In Discovery Operating, Inc., v. BP America Production Co., the Texas Eleventh Court of Appeals recently held that a producer can bring a negligence per se claim - for violating a state regulation prohibiting waste - against the owner of a nearby injection well for damages sustained when the producer encountered a highly pressurized flow of brine water while drilling an oil well. See here (Case Nos. 11-08-00127-CV and 11-08-00171-CV). The primary factual issue: Whether BP's injection of brine at a depth of about 6,100 feet into the War-San San Andres reservoir really caused the water flow encountered by Discovery at a depth of 3,895 feet nearly one mile away.
The matter has been remanded for a new trial.
The first offshore wind farm in the United States has been approved for off the coast of Cape Cod, according to this article in the NYT. "The Cape Wind turbines would lie in Nantucket Sound, about five miles from the nearest shoreline, and cover 24 square miles, roughly the size of Manhattan. The tip of the highest blade of each turbine would reach 440 feet above the water." Interesting ... and, congratulations!
The Commodity Futures Trading Commission (CFTC) met yesterday to consider whether certain contracts offered for trade on ICE, the Natural Gas Exchange, or the Chicago Climate Exchange, performed significant price discovery functions - and therefore must be regulated. The Staff believes that 7 natural gas basis contracts meet the necessary criteria, with price locations at the Southern California border (with Arizona), PG&E Citygate (San Francisco area), Northwest Rockies (Wyoming, Utah, and Colorado), Alberta (Canada), Chicago, Houston Ship Channel, and Waha (West Texas near New Mexico border).
For more, including video, see here.
We've observed that a number of our recent posts illustrate the challenges faced by our nation's energy industry, environmental and otherwise. For a fun and vigorous defense of energy producers in general, see this article from the WSJ. A sample: "Oil, and foreign oil in particular, has been a favorite whipping boy for American politicians since the 1970s. They say that we are 'addicted' to oil, that oil fosters terrorism and that we can 'win the oil endgame.' While those claims are effective at rousing the masses, here's the reality: The world isn't using too much oil. It's not using enough."
(Note: Subscription required.)
The New York Department of Environmental Conservation (NYDEC) has decided to require an environmental impact review for each well proposed to be sited in the Catskills watershed, according to this article in the NYT. One probable reason: "The decision by the State Department of Environmental Conservation also means that New York City will not have to worry about spending billions of dollars on a filtration plant to protect its water supply from possible contamination by the drilling."
On May 13th, the Pennsylvania Department of Environmental Protection (DEP) will be hosting a meeting with industry members having permits to drill in the Marcellus Shale to discuss how to prevent gas migration. For more, see here.
Last week, the U.S. Senate Committee on Energy and Natural Resources heard testimony on the need for comprehensive carbon capture and storage (CCS) legislation, including support for several of the legal choices made in draft legislation - such as declaring that the federal government owns the subsurface pore space where it also owns the surface estate. You can find more here, including links to the written testimony and a video of the hearing.
The Texas Railroad Commission is re-examining the state's mandatory pooling rules, according to this article in the Star-Telegram. "[I]t's creating headaches for gas operators, landowners and state regulators alike as they try to figure out how to balance the rights of all the owners. How can they allow drilling to proceed for the 75 to 80 percent of owners who have signed leases without trampling on the rights of those who haven't?"
The Energy Information Administration (EIA) has posted its weekly natural gas storage report, finding that we had 1,829 Bcf of working gas in storage as of Friday, April 16, 2010 - a net increase of 73 Bcf from the previous week. Graphically:
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Note that this is above the 5-year range. For more, see here.
Dominion Transmission has announced its Marcellus 404 project, intended to "gather, process and transport the growing volumes of high-Btu (wet) Marcellus natural gas production in Marshall and Wetzel counties, West Virginia, and surrounding counties in West Virginia, Pennsylvania and Ohio."
Exxon Mobil has drilled the longest extended-reach well offshore California with a well that extends more than 7,000 feet below sea level and has a horizontal lateral reach of over one mile, according to this article in the Houston Chronicle. Nice.
The Energy Information Administration is reporting that natural gas storage increased last week by 87 Bcf to 1,756 Bcf, 64 Bcf higher than last year at this time and 246 Bcf above the 5-year average. Graphically:
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The Houston Chronicle has a number of interesting energy-related articles. Here, it notes that ConocoPhillips is planning on selling its stake in a Canadian oil-sands project to a Chines oil company for $4.7 billion. And here it reports on a plan by the Interior Department to review the royalties the federal government receives when leasing public lands for oil and gas development (as well as a more global review of what producers pay to develop resources off-shore).
Apache Corporation is planning on buying the Gulf of Mexico oil and gas assets of Devon Energy for $1.05 billion, according to this article in the NYT.
This is interesting. The NYT has an article looking at one possible solution to the problem of intermittent wind power generation: "One proposed solution to the intermittency problem is to tie many wind farms together with a transmission line — making an electric grid, as it were, consisting of wind turbines. Now, Willett Kempton of the Center for Carbon-free Power Integration at the University of Delaware and colleagues have shown how this 'all-for-one' approach might work with offshore wind farms along the Eastern Seaboard."
U.S. EPA is proposing to add emissions sources to its mandatory greenhouse gas (GHG) reporting program, including onshore petroleum and natural gas production, processing, transmission and storage facilities (see here). Its rationale: "Fugitive and vented GHG emissions from this industry (i.e., the petroleum and natural gas industry sector) are the second largest source of human-made methane emissions in the United States *** and represent a critical addition to the emissions data that EPA is already collecting under other parts of the MRR [Mandatory Reporting Rule]."
Facilities that emit 25,000 metric tons or more of CO2 equivalent per year would be captured in the program. Notably, "[d]ue to the unique characteristics of these industry segments, the proposed definition of 'facility' for onshore and offshore petroleum and natural gas production, and natural gas distribution differ from the definition of facility applied in the remainder of the MRR." For production facilities, the relevant definition proposed by EPA:
Onshore petroleum and natural gas production facility means all petroleum or natural gas equipment associated with all petroleum or natural gas production wells under common ownership or common control by an onshore petroleum and natural gas production owner or operator located in a single hydrocarbon basin as defined by the American Association of Petroleum Geologists which is assigned a three digit Geologic Province Code. Where an operating entity holds more than one permit in a basin, then all onshore petroleum and natural gas production equipment relating to all permits in their name in the basin is one onshore petroleum and natural gas production facility.
A public hearing has been scheduled for April 19, 2010, in Arlington, VA. The comment period will be open for 60 days following publication in the Federal Register.
[Update: The notice has now been published in the Federal Register, which can be viewed here. The related notice regarding CO2 sequestration can be found here. (Moved up.)]
The Energy Information Administration (EIA) has released its Short-Term Energy and Summer Fuels Outlook for April 2010. Among other things, EIA expects:
[T]he Henry Hub natural gas spot price to average $4.44 per million Btu (MMBtu) this year, a $0.49-per-MMBtu increase over the 2009 average, but a significant downward revision from the $5.17 per MMBtu projected in last month's Outlook. The price outlook is lower primarily because of an average 2 billion cubic feet per day (Bcf/d) upward revision to the 2010 domestic natural gas production forecast.
For more, see here.
This is cool. The Houston Chronicle has an article on a Chevron Corp. project in the Gulf of Mexico looking for oil nearly 6 miles below the ocean's surface using a new high-tech drillship called the Discoverer Inspiration. The risk is tremendous: "'You can do all the planning you want,' said Tom Jones, drilling superintendent of Chevron's Moccasin prospect, aboard the new rig called the Discoverer Inspiration. 'But there's only one way to find out, and that's to drill a well.'”
The Pittsburgh Tribune-Review has an interesting article on new rules being considered in Pennsylvania for wastewater treatment and disposal from drilling activities. Did you know that the industry is reusing more than 60% of its wastewater, for example?
The NYT is reporting that a petition drive to delay the implementation of climate legislation in California until state unemployment falls to 5.5% or less for four consecutive quarters is being bankrolled by Texas oil companies. The reason (in part): "A Valero spokesman, Bill Day, said costs would rise at the company’s two large refineries in California under the new emissions law because refineries use a lot of electricity and natural gas to heat and refine crude oil. Electricity prices would go up under the law, he said, and the consumption of natural gas produces carbon emissions that would be penalized under the legislation."
EOG Resources, Inc., has announced that it plans to re-focus its energies on oil exploration and development rather than natural gas, according to this article in the WSJ. "The Houston-based energy company said that it would sell as much as $1.5 billion in natural gas assets over the next 14 months to fund its exploration and may even seek a partner to develop other gas fields as part of an ongoing strategy to search out more U.S. oil reserves."
(Note: Subscription required.)
The Energy Information Administration (EIA) held its 2010 Energy Conference earlier this week, with a keynote address by Energy Secretary Chu. It has posted many of the presentations, which you can find here. Some look very interesting.
The Energy Information Administration (EIA) will be modifying the methodology it uses to estimate production data to, among other things, use more recent data from non-sampled companies. See here. For more, see this WSJ article: "But the Energy Information Administration, the statistical unit of the Energy Department, has uncovered a fundamental problem in the way it collects the data from producers across the country—it surveys only large producers and extrapolates its findings across the industry. That means it doesn't reflect swings in production from hundreds of smaller producers." The belief is that EIA has overestimated production as a result - and that these changes will correct the issue.
(Note: Subscription required for WSJ article.)
At least, that's a significant possibility raised in this article in the Denver Post. Colorado legislation directing Xcel Energy to come up with a comprehensive plan to cut pollution at the utility's smaller, aging coal-fired plants gives primary consideration to switching to natural gas. Long term contracts might be one way to accomplish that: "To facilitate that [i.e., long-term price stability], the act says utilities may, with PUC approval, enter into guaranteed gas contracts of three to 20 years."
The Cleveland Plain Dealer has an article on purchasing natural gas for the upcoming year. It's advice: "For the consumer, this means take your time [when deciding on a natural gas purchase plan for your home] and stop worrying about next winter." See the article for the author's reasoning.
The Energy Information Administration (EIA) is reporting a net injection of 12 Bcf for the week ending March 26, 2010. This puts working gas in storage near the high end of the 5-year range (at 1,638 Bcf):
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For more, see here.
The Dallas Morning News is reporting that Edward "Coots" Matthews has died. For those who don't know, Coots was a famous oil well firefighter who served as part of the inspiration for the 1968 John Wayne classic "Hellfighters," and a co-founder of the oil fire fighting company Boots & Coots.
The Department of Transportation and U.S. EPA have issued a final joint rulemaking setting the nation's first greenhouse gas emission standards, and new stringent fuel-economy standards, for 2012 through 2016 model-year vehicles. "They require these vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile, equivalent to 35.5 miles per gallon (MPG) if the automobile industry were to meet this carbon dioxide level solely through fuel economy improvements. Together, these standards will cut greenhouse gas emissions by an estimated 960 million metric tons and 1.8 billion barrels of oil over the lifetime of the vehicles sold under the program (model years 2012-2016)."
For more, see here.
The Houston Chronicle is reporting that Royal Dutch Shell has started producing from its Perdido hub in the deep water Gulf of Mexico. "The Perdido complex will handle production from three deep water fields called Great White, Silvertip and Tobago, which are located about 200 miles south of Freeport. It is designed to produce 100,000 barrels of oil and 200,000 cubic feet of gas per day." Nice.
We've previously noted that some major oil producers are looking to the shale basins for natural gas production. See here, e.g. Well, it seems that turn-about is fair play - the Star-Telegram is reporting that some independent natural gas producers with large positions in the shale basins are turning to oil. For example: "Oklahoma City-based Chesapeake has derived more than 90 percent of its production from natural gas. But McClendon, speaking at Hart Energy's annual Developing Unconventional Gas conference at the Fort Worth Convention Center, said today's economics 'just compel you to look for oil.'"
It is being reported that President Obama today will announce plans to allow drilling for oil and natural gas off much of the U.S.'s Atlantic coast, but will continue to restrict drilling off the California, Washington, and Oregon coasts, as well as in Alaska's Bristol Bay. See here, for example (LA Times); and here (NY Times).
Pennsylvania Governor Rendell has taken a more strident tone regarding taxation of natural gas production in the state, according to this article at philly.com. "In a talk before an energy conference in Dallas, Rendell said the natural-gas business was following 'some bad advice' in resisting a Pennsylvania tax on production, and it could face a future backlash resulting in a far more severe tax 'that will bleed the industry.'" Interesting article overall.
U.S. EPA has announced that stationary sources will not be required to get permits under the Clean Air Act (CAA) for greenhouse gases (GHGs) until at least January 2011. "Today’s action determines that Clean Air Act construction and operating permit requirements for the largest emitting facilities will begin when the first national rule controlling GHGs takes effect. If finalized as proposed, the rule limiting GHG emissions for cars and light trucks would trigger these requirements in January 2011 – the earliest model year 2012 vehicles meeting the standards can be sold in the United States. The agency expects to issue final vehicle GHG standards shortly."
The Houston Chronicle is also reporting on Marathon's recent expansion of its Garyville facility, in effect the first new refinery built in the U.S. in the last 30 years. "The new ultra-efficient behemoth is now processing its full nominal capacity 436,000 barrels of oil per day, producing 19.5 million gallons of fuel." Nice.
The Houston Chronicle is reporting on several large oil companies taking positions in natural gas shale basins. Regarding Shell, for example: "He [i.e., Marvin Odum, president of Houston-based Shell Oil Co.] now considers the holdings [in the Eagle Ford shale] a key piece of a North American gas portfolio the company has spent the last two years building, and that now encompasses 2.4 million acres of land and a resource holding of 21 trillion cubic feet of natural gas — 8 trillion cubic feet of which was added in 2009 alone." Interesting.
Wyoming is considering changes to its oil and gas regulations that may impact how hydraulic fracturing is done in the state, according to this article in the Billings Gazette. "The commission is considering several detailed rules for fracking, including requiring companies to disclose 'proprietary chemical component detail' of fracking fluids."
Enbridge, Inc., has announced plans to develop a natural gas liquids (NGL) pipeline from the Marcellus Shale in southern Pennsylvania and northern West Virginia to Midwestern markets in the Chicago area.
The Houston Chronicle is reporting that BP, ConocoPhillips and Shell Oil Co., have proposed language for climate change legislation that would prohibit federal regulation of hydraulic fracturing, which is currently regulated by the states. Among other things, "[t]he document recommends that states adopt standards for disclosing the contents of hydraulic fracturing chemicals 'to health professionals or state agencies' in order to protect health or environmental safety but maintain 'the confidentiality of trade secret information' in the fluids."
The Pennsylvania Supreme Court recently upheld the lower court's decision in Kilmer v. Elexco Land Services, Inc., Docket No. 63-MAP-2009, which found that the net-back method for calculating natural gas royalties did not violate the state's Guaranteed Minimum Royalty Act (GMRA) (which requires that leases guarantee a landowner-lessor at least a 1/8th royalty). See here (go to Supreme Court Opinions). After going through the parties' arguments in detail, the Court reasoned, in part, that the term royalty must be construed according to its industry meaning, and that:
The term royalty has been defined in the oil and gas industry as “[t]he landowner's share of production, free of expenses of production.” *** In the industry, as referenced above, the “expenses of production” relate to the costs of drilling the well and getting the product to the surface, but do not encompass the costs of getting the product from the wellhead to the point of sale, as those costs are termed “post-production costs.” “Although the royalty is not subject to costs of production, usually it is subject to costs incurred after production, e.g., production or gathering taxes, costs of treatment of the product to render it marketable, costs of transportation to market.” Id.; see also George A. Bikikos and Jeffrey C. King, A Primer on Oil and Gas Law in the Marcellus Shale States, 4 TEX. J. OIL, GAS, & ENERGY L. 155, 168-69 (2008-2009) (explaining post-production costs and noting that a majority of jurisdictions authorize the deduction of post-production costs in the calculation of royalties).
This, bolstered by the fact that the GMRA was intended to apply to both natural gas and oil royalties, and that oil royalties can be taken in-kind, persuaded the court to agree with the lower court that the GMRA should be read to permit the calculation of royalties at the wellhead, consistent with the net-back method in the lease at issue.
The Ohio Power Siting Board (OPSB) approved several large-scale wind farm projects yesterday, according to these press releases (Buckeye Wind Project, JW Great Lakes Wind, and Hardin Wind Energy Project). Copies of the decisions in these cases can be found here.
Congratulations to all!
[Disclosure: Vorys represented Buckeye Wind LLC.]
We mentioned previously that the Federal Energy Regulatory Commission (FERC) would be holding a technical conference to address certain issues identified by the FERC Staff regarding Form 552 (Transparency Provisions of Section 23 of the Natural Gas Act). The Staff recently posted an agenda (including industry panelists), noting that the issues to be addressed include: "Inconsistencies in reporting upstream transactions in the natural gas supply chain on Form No. 552, and whether these transactions contribute to wholesale price formation; (2) whether transactions involving balancing, cash-out, operational, and in-kind transactions should be reported on Form No. 552; and (3) whether the units of measurement (TBtu) currently used for reporting volumes in the form are appropriate."
For more, see here.
Baker Hughes is reporting that the U.S. rig count increased by 20 last week to 1,427. Horizontal rigs have increased to 711, more than the previous peak:
The Federal Energy Regulatory Commission (FERC) has announced a new policy statement on civil penalty guidelines to enhance its enforcement program. From the news release: "This approach promotes consistency by basing the penalty calculations on a set of uniform factors that are weighted similarly for similar types of violations and similar types of violators. The Penalty Guidelines also provide specific credit to companies for self-reporting violations and for implementing robust compliance programs, thus further encouraging compliance by the industry. Based on the specific facts and circumstances of a violation, the Commission retains the discretion to impose a penalty that is not based on an application of the Penalty Guidelines."
A copy of the Policy Statement can be found here.
U.S. EPA has announced that it intends to conduct a comprehensive study of hydraulic fracturing and its potential adverse impacts on the environment. From the news release: "The agency is proposing the process begin with (1) defining research questions and identifying data gaps; (2) conducting a robust process for stakeholder input and research prioritization; (3) with this input, developing a detailed study design that will undergo external peer-review, leading to (4) implementing the planned research studies."
An EPA Science Advisory Board (SAB) meeting has been scheduled for April 7th and 8th to evaluate and comment on the proposed approach.
The Pennsylvania Public Utility Commission is considering natural gas gathering regulation, according to this article in the Scranton Times-Tribune. It has scheduled a hearing for April 22 to take comments from interested parties, including industry.
Penn Virginia Resources Partners, L.P., has announced that it has entered into an agreement with a Marcellus producer to construct gathering and compression facilities in Wyoming County, PA. "PVR Midstream will construct a 12-inch gathering pipeline and compression facilities with 25 million cubic feet (MMcf) per day of throughput capacity. This system is expected to become operational during the second quarter of 2010, with the potential for additional system extensions."
The Richmond Times-Dispatch is reporting that Dominion Resources, Inc., is selling its Appalachian oil and gas E&P operations to Consol Energy, Inc., for just under $3.5 billion. It includes more than 9,000 wells, 1.46 million acres, and 1 Tcf of proven natural gas reserves. For a copy of the Dominion news release, see here.
The Philadelphia Inquirer has an interesting article on drilling in the Marcellus Shale. It ranks, for example, the players in the region by number of wells drilled in the shale since 2008. The results ... well, take a look for yourselves.
The Dallas Morning News has an interesting article on the views of Exxon Mobil Corp.'s CEO regarding natural gas vehicles. In sum - He has doubts about the wide-spread adoption of natural gas vehicles. He sees, however, significant potential for natural gas for power generation.
The Energy Information Administration (EIA) is reporting a draw of 111 Bcf from storage last week, leaving 1,626 Bcf as of Friday, March 5, 2010. This is well within the 5-year range:
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For more, see here.
The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for March, 2010. Regarding natural gas prices:
EIA expects this year’s annual average natural gas Henry Hub spot price to be $5.17 per million Btu (MMBtu), a $1.22-per-MMBtu increase over the 2009 average. EIA projects price increases to continue in 2011, averaging $5.65 per MMBtu for the year. Projected working gas inventories end the first quarter of 2010 at about 1,550 billion cubic feet (Bcf) compared with 1,644 Bcf in the previous Outlook because of colder-than-normal weather in February. Natural-gas-weighted heating degree-days were nearly 11 percent above the 30-year norm last month.
It makes that prediction based in part on an expectation that total marketed natural gas production will decline by 2.7 percent to 58.7 Bcf/d. For more, see here.
The Federal Energy Regulatory Commission (FERC) has issued several notices regarding upcoming technical conferences: for Electronic Tariff Filings, see here; for Guidance on the Preparation of Market-Based Rate filings, see here (with webcast available); and for FERC Form 552 potential changes, see here.
[Update: If you are interested in the technical conference on FERC Form 552, it will now be webcast. See here for the details. (Moved up.)]
A new study released by the University of Texas and Southern Methodist University finds a correlation between a series of minor earthquakes in north Texas and the operations of a disposal well on Dallas-Fort Worth International Airport property, according to this article in the Houston Chronicle. The take away at the end of the article: "But he [i.e., an SMU geophysicist who worked on the study] said the study raises more questions, since no quakes have been reported around the 200 other disposal wells in seven north Texas counties."
Just remember: Correlation does not imply causation.
The WSJ is reporting that EQT intends to sell at least 12.5 million shares to fund production operations at its Marcellus Shale and Huron-Berea properties. It also plans to raise its capital expenditures for the year by 41%, to $1.2 billion.
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The NYT is reporting on a plan by the Los Angeles Department of Water and Power to increase electric utility rates to cover a $6 million a week budgetary shortfall and subsidize renewable energy sources, including the use of solar panels by Los Angeles' residents to contribute to the power grid. While noting that solar energy should be a thriving local industry, the article further observes "that has never been the case, and experts cite cost as the main reason."
The Charleston Daily Mail is reporting that legislation to require reporting on source water and disposal plans related to hydraulic fracturing, as well as the additives used in the frac fluids, has cleared the Senate Natural Resources Committee. Next stop: the Senate Energy, Industry and Mining Committee.
The future of oil production in Mexico looks bleak, according to this article in the NYT. The U.S. link: "'As you lose Mexican oil, you lose a critical supply,' said Jeremy M. Martin, director of the energy program at the Institute of the Americas at the University of California, San Diego. 'It’s not just about energy security but national security, because our neighbor’s economic and political well-being is largely linked to its capacity to produce and export oil.'”
The NYT has an article on the challenges for expanding U.S. wind power generation, including a push for American jobs, rather than sending jobs to China; and low prices for competitive fuels such as natural gas.
We reported previously on the petition filed by Laser Marcellus Gathering Company, LLC, for a declaratory order that pipeline facilities it intends to construct from Pennsylvania into New York are functionally gathering and therefore exempt from Federal Energy Regulatory Commission jurisdiction under Section 1(b) of the Natural Gas Act. The Commission recently granted that petition, noting that the fact that the facilities crossed the Pennsylvania-New York border did not affect the exemption:
The history of Commission and court interpretation of Section 1(b), … makes clear that there is a distinction between gathering and transportation, such that the two functions are mutually exclusive. Consequently, otherwise non-jurisdictional production or gathering does not become jurisdictional on the basis that the facilities employed therefor cross a state line.
For a copy of the Commission's decision, see here (search Docket No. CP10-35).
The Department of the Interior has found that the greater sage-grouse warrants protection under the Endangered Species Act (ESA), but that its listing is precluded by the need to address higher priority species first. See here. As a consequence, it will be placed on a list of candidates for future action and not receive statutory protection under the ESA.
For commentary, see this NYT article.
On December 28, 2009, U.S. EPA issued a Notice of Availability of Preliminary 2010 Effluent Guidelines Program Plan (74 Fed. Reg. 68599) (see here) and asked for comments on both its preliminary 2010 Plan and on its 2009 review of existing effluent guidelines and pretreatment standards, including comments on industrial categories not currently regulated by effluent guidelines and pretreatment standards. See Docket No. EPA-821-R-09-006 at www.regulations.gov.
Comments were submitted by both industry and environmental groups on the appropriateness of effluent guidelines for the oil and gas industry. Earthjustice, for example, submitted comments urging U.S. EPA to expand its study of CBM operations "to include all techniques that may result in contamination of surface water or groundwater, including hydraulic fracturing in all formations." See here. The American Petroleum Institute filed comments, on the other hand, noting that CBM operations should not be subject to national effluent limitations guidelines and objecting to an expansion of U.S. EPA's study of CBM extraction to oil and gas operations more generally.
The Courier Press is reporting that Eagle Resources is targeting the New Albany Shale Group in southeastern Illinois. Its current plans: To drill three core sample wells around the first quarter of 2011, followed, hopefully, with drilling for production. To success!
The U.S. Supreme Court recently held in Mac's Shell Service, Inc. v. Shell Oil Products Co., LLC, Docket No. 08-240 (Mar. 2, 2010), that a franchisee cannot recover for constructive termination under the Petroleum Marketing Practices Act (PMPA) if the franchisor's wrongful conduct failed to compel the franchisee to abandon the franchise. See here.
The U.S. Court of Appeals for the District of Columbia Circuit recently rejected a shipper's attempt to require FERC approval for a pipeline's rate changes under a negotiated contract. See Iberdrola Renewables, Inc. v. Federal Energy Regulatory Commission (Docket No. 08-1195) (Feb. 26, 2010) (see here - opinions). The court found that:
The contract’s plain language settles this matter. Even if we were to consider this extrinsic evidence, it is of no help to Iberdrola. Both parties were aware that FERC had instructed Alliance to remove that language [i.e., language making rate changes subject to FERC review] from its tariff and to include it in the Transportation Agreement if the parties wanted FERC approval for any negotiated rate changes. They were, therefore, on notice that FERC would only review rate changes if the parties included such a provision in their contract. Their knowledge of how FERC would read the contract is the most probative piece of extrinsic evidence of the parties’ intent, and it cuts strongly against Iberdrola.
Because the negotiated contract did not include an express role for FERC, the court followed "the well-established rule that freely negotiated rates are presumed just and reasonable."
The Daily Sentinel has an article on potential Colorado environmental legislation that would convert several coal-fired power plants to natural gas (900 megawatts). From the article, it looks like everyone wins.
Senator Rockefeller (D-WV) has introduced legislation to delay action by U.S. EPA on greenhouse gas regulation for stationary sources for a period of two years, according to this press release from the Senator's office. "The legislation directs that for two years after enactment the EPA can take no regulatory action and that no stationary source shall be subject to any requirement to obtain a permit or meet a New Source Performance Standard under the Clean Air Act with respect to carbon dioxide or methane, except for the widely-supported motor vehicle emission standards."
The press release provides a link to the proposed legislation.
The NYT is reporting on steps being taken by the European Union (EU) to strengthen its access to reliable natural gas resources, including pledging nearly $300 million to fund the Nabucco project - a pipeline designed to bring gas in from the Caspian Sea region and bypass Russian supplies.
The Dallas Morning News is reporting on claims made by researchers that mobile methane detectors have found plumes near natural gas facilities located in Barnett Shale counties. Looks like they may be centered around compressor stations.
The Energy Information Administration (EIA) has reported a 116 Bcf decline in storage from the previous week. Graphically:
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That leaves working gas in storage at 1,737 Bcf, only 21 Bcf above the 5-year average and well within the 5-year range (as illustrated above).
Several utilities and states are looking at harnessing the hydrokinetic energy of ocean waves, according to this article in the NYT. Marine renewables? Very interesting.
The WSJ has an interesting article on the tension between wind power producers and the owners of natural gas power plants in Texas. For one thing, while power producers generally are responsible for their own backup costs in the event that they fail to deliver as promised, it appears that wind power producers in Texas are not - creating an unfair advantage according to some.
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The U.S. Supreme Court has declined to hear an appeal by Missouri Gas Energy contesting a ruling by the Oklahoma Supreme Court that natural gas in storage is subject to ad valorem taxes, according to this article in the Oklahoman.
For more on the case, including a copy of the underlying decision, Petition for Certiorari, and related briefs, see here (SCOTUSblog).
The Chairman of the House Committee on Energy and Commerce, Rep. Henry Waxman (D-Ca), and the Chairman of the House Subcommittee on Energy and Environment, Rep. Edward Markey (D-Ma), have sent a letter to the American Public Power Association (APPA), demanding to know whether the APPA disputes the scientific validity of U.S. EPA's greenhouse gas endangerment finding, and if so, the basis for that dispute. See here. The Congressmen expressed a deep concern that "APPA appears to be actively misinforming its members about this issue."
We have reported previously on the narrowing definition of "navigable waters" under the Clean Water Act, particularly with respect to the federal SPCC Rule (see here, for example; but see here (Rapanos decision in Sixth Circuit)). The significance of that trend - especially on enforcement - has finally been recognized by those outside of industry and the regulators. From the NYT today: "[M]idlevel E.P.A. officials said that internal studies indicated that as many as 45 percent of major polluters might be either outside regulatory reach or in areas where proving jurisdiction is overwhelmingly difficult."
Will this spur on a legislative fix? We'll keep you posted. (Yes, pun intended.)
The WSJ has a good article on the potential of the Bakken Shale. Takeaway: "[T]echnological improvements in the past two years have taken what was once a small, marginally profitable field and turned it into one of the fastest-growing oil-producing areas in the U.S." Worth a read.
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The rig count - and associated drilling activity - is on the rise despite low natural gas prices, according to this article in the WSJ: "But the number of rigs drilling for gas has bounced back 36% since July, as energy companies plowed into new fields in Pennsylvania, Louisiana and elsewhere that remained profitable even at low prices." Nice, brief discussion.
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The Pittsburgh Post-Gazette is reporting on the impact that Marcellus drilling is having on the local real estate market, and it's working to support real estate prices!
The WSJ has an article on the migration of shale exploration to our friends in the north, leading to uncertainty for Canadian producers. "Over the course of six months last year, Canada's National Energy Board shifted from a prediction that the decline in conventional gas output would far outstrip new shale supplies, to saying that shale gas could satisfy domestic demand 'far into the 21st century' and spur exports of liquefied natural gas." Interesting.
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The Obama Administration is stepping up its efforts to pass a hybrid energy and climate bill, according to this article in the NYT. "Fred Krupp, president of the Environmental Defense Fund, said the ongoing efforts are aimed at a bill that is a 'hybrid of ideas' that would attract enough votes from fence-sitting Democrats whose states are heavily reliant on coal and from Republican ranks to secure passage through the Senate." The precise contours of that legislation remain indeterminate, however.
The WSJ has an interesting article on the reluctance of utilities to compel the use of smart metering technology on customers. The reason: Fear that it might cause resistance that stalls the technology (not an unreasonable concern).
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The Oklahoman is reporting that the House Energy and Commerce Committee will be investigating the environmental risks allegedly posed by hydraulic fracturing operations used to produce natural gas from many of our country's shale reservoirs.
[Update: For a good summary, see this article from the NYT.]
The Houston Chronicle has an article on the possibilities presented by shale gas reserves for long time production. "That's part of the reason a company like Exxon Mobil Corp., which reported a 3 percent decline in net reserves worldwide from 2007 to 2008, is willing to pay $38 billion, based on current market value, to acquire shale gas driller XTO Energy."
The NYT is reporting that energy company mergers are expected to increase this year. "This time, companies are focused on buying fast-growing small companies, or on acquisitions that expand their reserves in an era when it is hard for them to find new places to drill."
The NYT is reporting that ConocoPhillips, Caterpillar Inc., and BP America are leaving the U.S. Climate Action Partnership - a coalition industry and environmental groups formed to lobby Congress on climate change legislation. The reason (one among many in all likelihood): Not enough was being done to encourage natural gas use.
El Paso Corporation has announced that Tennessee Gas Pipeline (TGP), a wholly-owned subsidiary, has entered into 20-year contracts with Chesapeake Energy Marketing, Inc., and StatOil Natural Gas LLC, for all of its Northeast Upgrade Project capacity - i.e., 636,000 Dth/day from TGP's 300 Line in Pennsylvania to an interconnect in New Jersey. "The Northeast Upgrade Project is a natural extension of TGP's presence in the heart of the developing Marcellus Shale play. The project would cost approximately $400 million with a majority of the capital spending taking place during 2013."
Shell and HP are collaborating to develop new seismic technology with a higher channel count and broader sensor frequency range, according to this press release. "'These advances in technology to discover energy resources could transform the ability to pinpoint abundant new oil and gas reserves,' said Joe Eazor, senior vice president and general manager, HP Enterprise Services. 'HP is uniquely positioned to offer Shell a complete sensor system that delivers innovation to address key technical seismic challenges.'"
The Southeastern Legal Foundation has filed suit, together with more than a dozen U.S. representatives and nearly two dozen associations, to challenge U.S. EPA's efforts to regulate carbon dioxide as a pollutant under the Clean Air Act (i.e., EPA's related "Endangerment Finding"), according to this opinion piece in the Washington Examiner.
A copy of the petition, and related materials, can be found here.
[Update: Texas is filing suit too, according to this article in the Houston Chronicle. (Moved up.) And more here from the NYT (note the "skeptic" pejoratives).]
The WSJ is reporting that the Director of U.S. EPA's Drinking Water Protection Division believes that states are doing a good job of regulating hydraulic fracturing: "'I have no information that states aren't doing a good job already,' Steve Heare*** said on the sidelines of a [NARUC] conference here. He also said despite claims by environmental organizations, he hadn't seen any documented cases that the hydro-fracking process was contaminating water supplies."
Interesting. (Note: Subscription required.)
The Energy Information Administration (EIA) released its storage report showing a decline of 191 Bcf from the previous week. Graphically:
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For more, see here.
The Energy Information Administration (EIA) has released its February 2010 Short-Term Energy Outlook, finding in part:
EIA expects this year's annual average natural gas Henry Hub spot price to be $5.37 per million Btu (MMBtu), a $1.42-per-MMBtu increase over the 2009 average of $3.95. EIA projects continuing price increases in 2011, averaging $5.86 per MMBtu for the year. EIA expects working gas inventories to end the first quarter at about 1,644 billion cubic feet (Bcf) compared with 1,734 Bcf in the previous Outlook, because of colder-than-normal weather in early January.
Columbia Gas Transmission, LLC, recently filed an application with the Federal Energy Regulatory Commission (FERC) asking to abandon pipeline facilities located in Marshall County, West Virginia, and Washington County, Pennsylvania, by transfer to a newly created affiliate, NiSource Midstream Services, LLC. It further requested the FERC to determine that such facilities would be considered gathering following the transfer.
For a copy of the application, see here (Docket No. CP10-44).
The Herald-Dispatch is reporting on legislation introduced last week in the state House and Senate regarding landowner notification and wastewater issues.
The Philadelphia Inquirer is reporting that the budget proposed by Governor Rendell includes not only a wellhead tax anticipated to generate $160 million next year, but also a proposal to increase the leasing of state forest lands, anticipated to raise $180 million. Not everyone is happy, though. "Some Democratic lawmakers are decrying the governor's effort to cash in on the Marcellus land rush as an affront to efforts by the Department of Conservation and Natural Resources (DCNR) to sustainably manage 2.1 million acres of state forests."
The Cleveland Plain Dealer is reporting on the threat to biodiesel development due to Congress' failure to extend related federal tax credits. "The profit margins are so thin for the organic product that it cannot compete with petroleum-based diesel without the tax break."
The WSJ has an article on Denbury Resources Inc.'s plan to use CO2 recovered from industrial plants to improve its oil recovery. "Denbury wants to capture the entirety of the Dow plant's annual carbon-dioxide emissions, taking a liability off Dow's hands equivalent to the annual emissions of 27,000 cars." Interesting.
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The NYT is reporting on the aggressive questioning of Energy Secretary Chu at a hearing on the Obama administration's fiscal 2011 budget proposal for the Energy Department by both Senate Democrats and Republicans. A sample: "Chairman Jeff Bingaman (D-N.M.) also criticized DOE's suggestion to cut all funding for oil and gas research, 'especially in light of the recent natural gas discoveries here in the U.S.'"
The Federal Energy Regulatory Commission (FERC) will be holding a technical conference on Wednesday, March 3, 2010, focusing on the mechanics of preparing an initial electric public utility market-based rate application and subsequent filings. For a copy of the public notice, see here.
The Obama Administration has announced several initiatives designed to enhance American energy independence while building a foundation for a new clean energy economy, including the creation of an Interagency Task Force on Carbon Capture and Storage. For more, see this press release (which includes links to the source documents).
The Washington Post has an article reporting on wastewater treatment and disposal issues related to Marcellus production. A sample: "Before that can happen [i.e., the Marcellus can become one of the most prolific natural gas fields in the U.S.], the industry is realizing that it must solve the challenge of what to do with its wastewater. As a result, the Marcellus Shale in on its way to being the nation's first gas field where drilling water is widely reused."
We reported previously on the Federal Energy Regulatory Commission's (FERC's) request for supplemental comments on possible revisions to the posting requirements adopted in Order 720 (Docket No. RM08-2-000). The FERC has now issued Order 720-A, modifying its regulations requiring major non-interstate pipelines to post daily scheduled volume information and other data for certain points. "These modifications include a requirement that major non-interstate pipelines post information for receipt and delivery points at which design capacity is unknown."
The Pennsylvania Department of Environmental Protection (DEP) is proposing new well construction regulations, including updated casing and cementing requirements. For a copy of the published notice, see here; for the proposed regulations see here. Comments are due March 2, 2010.
[Update: The DEP is going to be hiring 68 more inspectors this year, according to this article in the Philadelphia Inquirer. "With the new hires, the DEP will have 193 people dedicated to oil and gas." (Moved up.)]
The Energy Information Administration is reporting an 86 Bcf withdrawal. "Stocks were 120 Bcf higher than last year at this time and 87 Bcf above the 5-year average of 2,434 Bcf." Graphically:
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For more, see here.
The Federal Energy Regulatory Commission (FERC) has issued several proposed rulemakings related to the wholesale electric energy market, including a rulemaking designed to address the risk and cost of default shared among market participants (credit reform) (see here); and one proposing to grant blanket authorization to acquire securities under Federal Power Act Section 203 and amend the definitions of “affiliate” in Subpart H and Subpart I of Part 35 of the Commission’s regulations (see here). For a list, see here.
Earlier this week, the Ohio Supreme Court issued a decision affirming the PUCO's (i.e., Public Utilities Commission of Ohio's) approval of modified straight-fixed-variable (“SFV”) rate designs in both the Duke Energy Ohio, Inc., and East Ohio Gas Company proceedings. A copy of the court's decision can be found here (Case No. 2010-Ohio-134).
The Texas Commission on Environmental Quality (TCEQ) released a study of air emissions in the Barnett Shale last Wednesday finding:
All chemicals monitored at the majority of monitoring sites were either not detected or were detected below levels of immediate health concern. At two monitoring sites in one geographic area, benzene was measured above the TCEQ short-term, health-based comparison value of 180 parts per billion (ppb) and the Toxicology Division (TD) recommends a reduction in volatile organic compounds (VOC) emissions in this area. While not an immediate health concern, benzene was measured at short-term levels that could cause concern about long-term cumulative exposure levels at an additional 19 monitoring sites in 11 geographic areas.
For a sample of the differing ways the study's results are being reported, see here (Houston Chronicle) and here (ABC News).
The Houston Chronicle is reporting that industry executives are optimistic about 2010. "Vincent[, Chairman of IPAA,] cautioned that the industry outlook depends on what Washington decides to do on energy policy — particularly as to taxes and regulation of hydraulic fracturing."
We reported previously on the Exxon Mobil - XTO purchase. The NYT is reporting that a House Energy and Commerce panel will be looking at the financial ramifications of the deal. But that isn't all: "In addition to discussing the financial ramifications of the deal and the environmental impact of hydraulic fracturing, lawmakers could also question the executives about other oil and gas issues, such as increased offshore and public lands drilling or executive compensation, [one analyst] said."
[Update: For more, see this NYT article (e.g., "Tillerson and XTO Energy CEO Bob Simpson told the congressional panel they could support a federal requirement that producers disclose those chemicals. But they said additional U.S. EPA regulation -- or an outright ban on the process to protect drinking water -- would bring a quick and certain end to unconventional gas development in the United States."). (Moved up.)]
The Houston Chronicle is reporting on Texas Petro Index report showing drops in employment, drilling rig counts, and oil and natural gas production in Texas in 2009. "The index, though regionally focused, has bigger implications for the U.S. oil and gas industry, since roughly half of the nation's drilling rigs are working in Texas at any given time, [said the economist who prepared the report]."
For a copy of the report, see here.
Schlumberger, the world's largest oil services company, has reported better-than-expected earnings in the fourth quarter, according to this article in the Houston Chronicle. While net income was down 42% for the entire year, Schlumberger's CEO is cautiously optimistic for 2010.
For a related article regarding Halliburton, see here.
We reported previously on a Pennsylvania lawsuit challenging a settlement reached between the U.S. Forest Service and the Sierra Club that requires the Forest Service to analyze future drilling proposals on split estates in the Allegheny National Forest (ANF) under the National Environmental Policy Act (NEPA) prior to issuing a Notice to Proceed.
The court recently granted a preliminary injunction enjoining the Forest Service from implementing the terms of that settlement. It found, among other things, that the Service does not have the regulatory authority claimed over the processing of drilling requests, and that "[c]onsequently, its involvement in the approval process does not constitute a major federal action requiring NEPA compliance." It further found that industry members "have suffered significant financial losses as a result of the Forest Service's decision to halt drilling while an EIS is performed," with the potential that some may be forced out of business if the drilling ban continues. This was sufficient to find irreparable harm to the mineral owners.
More on the court's decision, including a copy of the opinion, can be found here.
We meant to mention: The West Virginia Department of Environmental Protection released on January 8, 2010, an industry guidance document for oil and gas producers looking at possible Marcellus Shale production. Its purpose:
[T]o assist well operators in planning for the drilling and operation of these wells and the associated need to either dispose of or reuse large water volume fracture treatment wastes. It is intended to facilitate compliance with applicable statutory and regulatory requirements and to generally minimize negative environmental impacts associated with these activities, by promoting the use of necessary best management practices.
A copy can be found here.
The WSJ has a good article discussing the history (briefly) and issues surrounding the use of hydraulic fracturing. A sample: "Hydraulic fracturing and some other technology improvements have created a way to tap a domestic fuel source that has proved abundant. U.S. natural-gas production has risen about 20% since 2005 in large part because of these developments, making gas a much bigger player in energy-policy planning." And: "What most worries environmentalists isn't the water in the fracturing process—it's the chemicals mixed in the water to reduce friction, kill bacteria and prevent mineral buildup. The chemicals make up less than 1% of the overall solution, but some are hazardous in low concentrations."
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The WSJ has a brief article on the revival of two major oil-sands projects as a result of falling costs, making the projects profitable at $80 per barrel.
Five companies bid over $128 million for the right to produce natural gas on Pennsylvania state forest land, according to this article in the Houston Chronicle. Average per acre bid - $4,100. For more, see this article as well, from the Philadelphia Inquirer.
[Update: Complaints that PA didn't get paid enough? (Moved up.)]
The California Coastal Commission has denied a request by a Santa Cruz County couple to install a wind turbine above their ocean-view home, according to this article in the San Jose Mercury News. The reason (at least in part): The "visual jolt" that it would cause in the neighborhood.
The WSJ is reporting that Williams Cos. is planning on merging two of its natural gas pipeline and processing affiliates to create one of the largest natural gas partnerships in the country. "The move will merge Williams Partners and Williams Pipeline Partners, which are entities called master limited partnerships. MLPs are tax-advantaged vehicles commonly used in the energy industry to own stable, fee-producing infrastructure assets such as pipelines and energy-processing plants." Interesting.
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The NYT is reporting that proposed ozone standards may pose a problem for oil and gas producers in Colorado, Wyoming, New Mexico and Utah. "While the effects of a tougher health standard would be most immediately felt in smog-choked urban areas, where motor vehicles contribute billions of tons of ozone-forming pollutants annually, the odorless gas is a growing problem in many more rural states, especially where oil and gas producers have sunk thousands of wells into the ground, resulting in releases of ozone-forming pollutants."
Air issues are becoming more prevalent.
The Energy Information Administration (EIA) reported on Thursday that we had a 266 Bcf withdrawal from storage the previous week, close to a record. Graphically:
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Puts us within the 5-year average! You can find more here if you are interested.
The NYT has a good article on the natural gas industry's continuing efforts to improve federal climate legislation (see here). For example: "If there is a renewable portfolio standard, natural gas argues, it should not force utilities to pick only fuel sources with no carbon emissions such as wind or solar. Instead, utilities should be allowed to pick fuel sources that reduce their greenhouse gas emissions. That would allow natural gas as an option."
The Mobile-Sierra doctrine requires FERC to "presume that the rate set out in a freely negotiated wholesale-energy contract meets the 'just and reasonable' requirement imposed by law. The presumption may be overcome only if FERC concludes that the contract seriously harms the public interest." Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County (Case Nos. 06-1457 and 06-1462) (June 26, 2008).
Yesterday, the U.S. Supreme Court held that this standard of review applies to contract rate challenges even when they are brought by non-contracting parties. See NRG Power Marketing, LLC v. Maine Public Utilities Commission (Case No. 08-674).
The Houston Chronicle is reporting that the Texas Commission on Environmental Quality will be taking a closer look at air quality issues in the Barnett Shale. Among other things, it will implement a rapid response plan for complaints regarding air quality and issue a report on extensive air monitoring later in January. The issue now is benzene.
[Update: TCEQ: No dangerous ambient air pollution found. Monitoring will continue, however. (Moved up.)]
This would be good: The Houston Chronicle is reporting that McMoRan Exploration Co. has possibly found one of the largest oil and natural gas discoveries in shallow waters offshore Louisiana in decades (Davy Jones prospect, 28,263 feet, estimated 2 Tcf).
An introductory program on the Marcellus Shale was recently held for landowners in Mineral County, West Virginia, according to this article in the Mineral Daily News Tribune. Included were tips for landowners to consider when possibly leasing property for development. Looks like it was informative.
The Energy Information Administration has issued its Short-Term Energy Outlook for January, 2010. Among other highlights, it concludes:
EIA expects the annual average natural gas Henry Hub spot price for 2010 to be $5.36 per thousand cubic feet (Mcf), a $1.30-per-Mcf increase over the 2009 average of $4.06 per Mcf. The price will continue to increase in 2011, averaging $6.12 per Mcf for the year.
More:
EIA estimates that total marketed natural gas production increased by 3.7 percent in 2009, despite a 59-percent decline in the working natural gas rig count from September 2008 to July 2009. Working natural gas rigs have since turned around from the mid-July 2009 low of 665, increasing to 759 as of December 31, 2009.
You can read the whole report here.
New legislation in Ohio considers the possibility of brine produced from the Marcellus Shale in Pennsylvania coming to Ohio for disposal, according to this article in the Columbus Dispatch.
The WSJ is reporting that the number of rigs looking for oil and gas in the U.S. rose to 1,220 last week, according to data from Baker-Hughes, Inc. The greater increase came from rigs looking for natural gas. (Note: Subscription required.)
[Update: In related news, the Pittsburgh Tribune-Review has an article on drilling in Pennsylvania in 2009. The upshot: Not great news except for the Marcellus.]
Stricter environmental standards are coming for oil and gas development of public lands in the west, according to this article in the NYT. This doesn't bode well for the industry, or the people who use these resources: "'In the prior administration the oil and gas industry were the kings of the world. Whatever they wanted to happen, happened,' Salazar said, adding that those days are over."
It appears that Laser Marcellus Gathering Company, LLC, is preparing to construct a new gathering line in Pennsylvania and New York, according to this notice in the Federal Register. If you are interested, you can find Laser's Petition for a Declaratory Order from the FERC that it is a non-jurisdictional line here (Docket No. CP10–35–000).
The WSJ is reporting that the U.K. is experiencing the coldest winter in Britain for decades, causing demand for natural gas for heating and power to surge by 30%. Moreover, "The lack of stored reserves leaves Britain exposed to competing with other countries for gas imports during periods of strong demand across Europe, and having to pay higher prices to lure it there." Watch LNG prices this winter!
Noble Energy, Inc., has announced that it will be acquiring substantially all of the Rockies upstream assets of Suncor Energy (Natural Gas) America Inc., and Petro-Canada Resources (USA) Inc., for $494 million. A copy of the press release can be found here.
The WSJ is reporting that French oil company Total SA (TOT) has entered a joint venture with Chesapeake Energy Corp. involving Chesapeake Barnett Shale assets. Consistent with reports about other European production companies looking to learn from the U.S. experience, Total's Chairman and Chief Executive Christophe de Margerie stated, "It will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide." Very interesting.
(Note: Subscription required.)
The Tennessee Valley Authority (TVA) plans on using more natural gas produced from eastern shales to generate power, according to this article in the Tennessean. Not everyone is happy about it, though: "[E]nvironmentalists say the chemical-laced drilling process used to break up the shale deep underground and release the gas could present as many problems as it solves."
Congress' failure to renew federal tax credits for biofuels is leading to the closure of a large biodiesel fuel plant in Port Neches, Texas, according to this article in the Houston Chronicle.
The Houston Chronicle has a noteworthy article on a conflict we are seeing more and more between environmental interests - the encouragement of alternative energy and the goals of conservation groups. In this case, the construction of a solar energy project is viewed as jeopardizing 6 square miles of habitat for a threatened desert tortoise species.
The WSJ has an interesting article on how small natural gas production companies are expanding their focus on oil exploration and development, contrary to a recent move made by Exxon Mobil. "The contrasting moves highlight the conundrum facing natural-gas producers and investors: Gas appears likely to become a favored fuel over the long run, because it is seen as a cleaner and more environmentally friendly fuel, but its near-term prospects are limited by a glut of supply and weak demand."
(Note: Subscription required.)
The NYT is reporting on the link between air pollution and the use of heating oil in NYC buildings, and the possibility that it might be regulated out in favor of natural gas. An interesting contrast to the recent complaints regarding natural gas drilling in NY.
The WSJ has an interesting article on natural gas producers seeking long-term contracts for their production, suggesting, according to the authors, that low prices are here to stay. "Gas executives, however, are finding that long-term deals are an unexpectedly tough sell. The same price stability that has made producers eager to sign contracts has made their customers reluctant, because they are less worried that prices will suddenly rise."
(Note: Subscription required.)
The deadline is fast approaching for filing comments on the NY rulemaking proposal regarding hydraulic fracturing (December 31, 2009). There have been a number of articles on the comments that have been filed to date, including this one from the Albany Times Union. For more on the issue generally, see here (NYDEC website).
The Fort Worth Business Press is reporting on the optimism felt by the oil and gas industry for an economic rebound next year. A sample: "The Deloitte Center for Energy Solutions, a Houston-based division of the global financial services firm, recently conducted a survey of oil and gas professionals in which the majority of respondents, 84 percent, said 'the best days for the natural gas industry are still ahead,' according to the Dec. 9 survey, which polled 200 college-educated employees earning at least $100,000 per year who have worked in the industry for at least five years. The energy center also has an office in Washington, D.C."
It may be that green technologies are not so green after, all due to their reliance on "rare earths" mined in China, according to this article in the NYT. "These elements come almost entirely from China, from some of the most environmentally damaging mines in the country, in an industry dominated by criminal gangs." Wow.
The NYT has an article looking at the economics of oil refining in the United States. A sample: "Refineries, especially smaller ones, have been closing for many years. The number of refineries in the United States fell to about 150 in recent years from more than 300 in 1982. At the same time, the nation’s refining capacity grew by about 13 percent, as companies expanded their most efficient refineries."
[Update: The Houston Chronicle has a related article on the possibility that some refineries will be sold to foreign companies.]
ABC News is reporting that the West Virginia Public Service Commission has rejected a proposed sale of natural gas utility Dominion Hope to SteelRiver Infrastructure Partners, a San Francisco investment company, because it was contrary to the public interest.
A copy of the Commission's order can be found here (Case No. 08-1761-G-PC).
National Fuel Gas Company announced this week that a third Seneca Resources Corp. (a wholly-owned subsidiary of National Fuel) well in the Marcellus Shale flowed gas at an initial 24-hour rate of over 10 MMcf per day, and averaged 9.5 MMcf per day over a seven-day period. For more, see here.
Ultra Petroleum Corp. has announced that it is acquiring approximately 80,000 (net) acres in the Pennsylvania Marcellus Shale for approximately $400 million. For more, including a PowerPoint presentation on the acquisition, see here.
The WSJ is reporting on the conflicting views of the Sierra Club regarding natural gas development. At the national level, the group promotes natural gas usage, while local chapters are often opposing it. "The rift in the Sierra Club, one of the country's oldest and most prominent conservation groups, highlights deep divisions in the broader environmental community over natural gas. And pressure from local activists is forcing some major environmental groups to revisit their positions on drilling."
(Note: Subscription required.)
U.S. EPA has published notice of a proposed consent decree with WildEarth Guardians and San Juan Citizens Alliance filed in the United States District Court for the District of Columbia under citizen suit provisions of the Clean Air Act (WildEarth Guardians, et al. v. Jackson, No. 1:09– CV–00089–CKK). Among other things, if approved it would require EPA to address the need for new source performance standards (NSPS) and national emission standards for hazardous air pollutants (NESHAP) for the Oil and Natural Gas production source category.
You can get a copy of the proposed decree here (EPA–HQ–OGC–2009–0918).
Exxon Mobil has agreed (subject to shareholder approval) to acquire XTO Energy for $31 billion and an assumption of $10 billion in debt. For more on the terms of the deal and commentary, see this article in the Houston Chronicle; this from the WSJ (subscription required); and this article from the NYT. According to an Exxon Mobil spokesperson: "'We think gas is going to grow more than any other major energy source. We think it's going to really become the fuel of choice for power generation and increase and replace coal,' Jeffers said. 'Depending on whatever carbon management scheme comes into play, that's going to change the economic scheme and push more people toward natural gas.'"
Very interesting.
[Update: For another good WSJ article, see here (subscription required).]
[Update: The Dallas Morning News is reporting that Exxon Mobil can void the deal if Congress passes a law that would make hydraulic fracturing illegal or commercially impracticable. Now that's an interesting provision ...]
[Update: For commentary from the Houston Chronicle, see here (moved up).]
This is interesting: A state-run escrow fund in Virginia holding millions of dollars in natural gas royalties owed to mineral owners who either cannot be located or who are involved in dispute over the funds will soon be audited, according to this article in the Richmond Times-Dispatch.
Dominion has announced a $253 million expansion of its gathering and processing assets in West Virginia. "Dominion will complete three compression units currently under construction and, over the next three years, add nine new units. Approximately 25 miles of replacement or new pipeline will be constructed at various places in its gathering system to address bottlenecks and increase delivery. Two new gas processing plants will be added, increasing Dominion's processing capacity from approximately 230 million cubic feet per day to 280 million cubic feet per day."
We are moving towards greater regulation of emissions from oil and gas exploration and production operations, according to this article in The Grand Junction Daily Sentinel. That looks quite possible.
The Richmond Times-Dispatch has a series of reports on forced pooling in Virginia (see here, for example). You may be interested.
We've reported previously on a geothermal project in California and the concerns raised over potential earthquake risks (see here). The NYT is now reporting that Altarock Energy, the Obama administration's first test of geothermal energy as a major alternative energy source - and despite millions in Department of Energy grants and private investment from Google and Kleiner Perkins (among others), is abandoning the project.
The Houston Chronicle is reporting that a group of New Mexico producers have filed a complaint with the New Mexico Public Regulation Commission claiming that the gathering rates charged by Enterprise Field Services LLP are excessive and asking the Commission to set the rates itself. Interesting.
The United States Court of Appeals for the Seventh Circuit in Rao v. BP Products North America, Inc. (Case No. 07-2065) recently found that a franchisee had been given appropriate notice of termination under the Petroleum Marketing Practices Act (PMPA) after he engaged in bribery and fraud.
The reasons for the termination were straightforward: Among other things, Rao, the franchisee, had paid a BP regional sales manager approximately $100,000 in cash and gifts in an effort to influence BP franchising decisions. When it came to light - for reasons unexplained in the decision, Rao actually raised the issue with BP - Rao claimed that he had been extorted by the manager. BP opened up an investigation and, initially, Rao cooperated. But when Rao ceased cooperating, BP management made the decision to end the franchise relationship.
Continue Reading...The Houston Chronicle is reporting on the results of a survey indicating that natural gas industry executives are optimistic about the future. Still, "Forty-four percent expect industry job cuts will increase over the next year, 75 percent say their companies are reducing operating expenses, and 56 percent say they're cutting capital expenditures." Interesting.
The WSJ has a short article on the volatile relationship between US and UK liquefied natural gas prices and what we might see in 2010. "The difference between the price of gas at the benchmark Henry Hub in Louisiana and the price of the fuel at the U.K.'s National Balancing Point, or NBP, hub is closely eyed by the gas industry as a key determinant of LNG flows in the Atlantic. When U.K. gas prices are higher than U.S. prices, more LNG will arrive in the British Isles; when the reverse is true, more gas comes to North America."
(Note: Subscription required.)
The Susquehanna River Basin Commission has announced that it will be installing electronic monitors to assess water quality on streams located in production areas, according to this article in the Philadelphia Inquirer. "The commission said the 30 monitors would provide real-time data on water quality to alert officials to any sudden changes that might indicate a spill or a leak, said Susan Obleski, spokeswoman for the basin commission." East Resources, Inc., is paying for the monitors.
Both the Energy Information Administration (EIA) and ExxonMobil have recently released their views on energy issues for the future. The EIA's Short-Term Energy Outlook for December 2009 can be found here, and finds, among other things:
EIA expects the annual average natural gas Henry Hub spot price for 2010 to be $4.62 per thousand cubic feet (Mcf). This represents a $0.67-per-Mcf increase from the estimated 2009 price of $3.95 per Mcf. Natural gas working inventories reached a new record-high level of 3.837 trillion cubic feet (Tcf) on November 27 as mild weather throughout much of the country contributed to uncommon storage builds for most of that month.
Similarly, ExxonMobil released its Outlook for Energy: A View to 2030, concluding in part:
ExxonMobil expects that global energy demand in 2030 will be almost 35 percent higher than in 2005, even accounting for the recession that dampened energy demand in 2009.
A copy of the full report can be found here, and is well worth your read (e.g., it concludes that even with growth of 10% per year, wind, solar, and biofuels will only make up about 2.5% of the energy mix in 2030).
Baker Hughes is developing drills and measurement technology that can be used in an emerging geothermal market, according to this article in the WSJ. "Finding a drill that can function reliably in such hot conditions deep under the earth's crust has been a problem throughout the industry. And failing drill bits eat up time and waste money." Very interesting.
(Note: Subscription required.)
The NYT has an article on the growing debate surrounding the use of hydraulic fracturing to produce shale plays. The hook - After noting the benefits of lower prices and "global warming" emissions, it asks, "What the drilling push will do to local environments is another matter." And yet, the article acknowledges: "So far, the evidence of groundwater pollution is thin." Read and enjoy.
West Virginia landowners are urging the state legislature to allow forced pooling for horizontal wells in the Marcellus Shale, according to this article in the Charleston Gazette. Interesting, coming from the landowners.
The Financial Times is reporting on a study done by the Edhec-Risk Institute that finds that speculation in oil futures (NYMEX) does not appear excessive in comparison to commercial hedging needs over the last three and one-half years. For a copy of the study itself, see here.
(Note: Registration required for FT article.)
The Pittsburgh Post-Gazette has a good article on the interest shown by industry in Pennsylvania Marcellus production. A small part: "Talk to anyone in the industry about the Marcellus Shale and the conversation is likely to turn to its potential economic impact -- not just the money that a company hopes to make, but the jobs that could be created and the tax revenues that could be generated."
The Washington Post has a couple of interesting articles on shale gas production: An energy answer in the shale below? (potential for natural gas development and environmental divide) and Drilling right into a heated environmental debate (hydraulic fracturing).
The WSJ has an interesting (brief) article on falling natural gas futures. Following updated storage information: "The front-month contract fell as low as $4.432 in earlier trading, following the release of Energy Information Administration data showing a late-season build of two billion cubic feet of natural gas."
(Note: Subscription required.)
The NYT has an interesting article on green jobs, and the fact that they are not growing as expected in the U.S. Telling paragraph: "'The clean energy market is gigantic and growing,' said Phyllis Cuttino, a director of the Pew Charitable Trusts’ Environmental Group. 'The U.S. has a rich manufacturing base, a well educated work force and we are an innovation center. But if we don’t have the policies in place to make investment here a sure thing, then we could potentially lose to other countries.'"
The Federal Energy Regulatory Commission (FERC) recently published a Notice of Proposed Rulemaking (NOPR) seeking comments on a proposal "to incorporate by reference the latest version (Version 1.9) of business practice standards adopted by the Wholesale Gas Quadrant of the North American Energy Standards Board (NAESB) applicable to natural gas pipelines." See 74 Fed. Reg. 62261.
Comments are due January 11, 2010.
The Philadelphia Inquirer is reporting on a study recently issued by PennEnvironment urging greater restrictions on natural gas production in Pennsylvania, including a moratorium on forest land leasing until the impacts of current drilling operations can be assessed. For a copy of the report, see here.
The Energy Information Administration (EIA) has published its Natural Gas Monthly report for November 2009. The following chart is interesting:
A copy of the full report can be found here.
Progress Energy plans on closing 11 coal-fired power plants by 2017 while increasing reliance on natural gas and nuclear energy in the future for its generation, according to this article in the NYT.
The North American Electric Reliability Corporation (NERC) - an international regulatory authority on the reliability of the bulk electric power system in North America - has issued its Winter Reliability Assessment for 2009-2010. Among other things, it finds that "[n]atural gas-fired generation represents over half of the capacity added since last year, growing by approximately 11,000 MW." Interesting, and offers some reason for optimism for natural gas producers.
The Federal Energy Regulatory Commission's Office of Enforcement has posted its Winter 2009/2010 Energy Market Assessment. This chart is telling:
The NYT has a good article on the debate taking place in New York over drilling in the Marcellus Shale. Interesting: "As New York environmental officials draft regulations to allow drilling in the shale as early as next year, thousands of residents like the Laceys in upstate counties have banded together in coalitions to sign leases with gas companies for drilling on their land — for $5,000 to $6,000 an acre for a term of five years, and royalties of up to 20 percent on whatever gas is found."
The United States is importing less oil this year due to increased domestic production and decreased demand, according to this article in the Kansas City Star. "For example, in the last three months of 2008, imports were never less than 10.5 million barrels per day, and since Oct. 1 of this year imports have never been higher than 10.1 million and have been as low as 8.84 million barrels per day, according to the Energy Information Administration."
The Marietta Times is reporting that AMP-Ohio has decided to abandon a multibillion-dollar coal-fired power plant in Letart Falls, Ohio. That means a loss of 1,600 construction jobs and a payroll of $220 million for the area.
The WSJ has an interesting article on the alternative energy research taking place. "The government's multibillion-dollar push into energy research is reinvigorating 17 giant U.S.-funded research facilities, from the Oak Ridge National Laboratory here to the Lawrence Berkeley National Laboratory in California."
[Note: Subscription required.]
The Pennsylvania Fish & Boat Commission will soon begin inspections of exploration and drilling sites in the Marcellus Shale to protect state waterways and wetlands, according to this article in the Wayne Independent. "'Because of the importance of this issue, waterways conservation officers and field staff have set aside other job duties and functions for a period of time in order to conduct these field inspections,' said Austen [the agency's executive director]."
WCAX is reporting that Fortuna Energy, Inc., has settled with the State of New York and agreed to renegotiate lease terms with landowners over claims that it improperly extended its leases.
Air pollution is becoming an issue of increasing concern for some with respect to exploration and production operations. The Star-Telegram has an article, for example, noting that the Texas Commission on Environmental Quality is seeking voluntary reductions in air emissions from E&P operators in the Barnett Shale.
The Washington Times has an interesting article on the stimulus' creation of green jobs. Takeaway paragraph: "But the reality is that after a big dose of spending in the stimulus bill, no more than 100,000 or so jobs have been created, economists say, and the prospects are for only modest growth in alternative energy jobs for years to come." And to make matters even more interesting, the article notes that the jobs are fairly expensive to create.
The Patriot-News is reporting that the Pennsylvania Department of Environmental Protection is seeing a number of applications for wastewater treatment facilities related to the increased drilling in the Marcellus shale.
The Houston Chronicle has an article about a Wood Mackenzie prediction that natural gas prices in the near term are likely to remain low - at least until increased demand for electric generation takes hold.
The impact of Marcellus drilling in Pennsylvania state forests is being felt, according to this article at philly.com. Interesting - The article states that the Department of Conservation and Natural Resources made $166 million last year from a single lease auction, more than the total for the last 53 years.
The Energy Information Administration (EIA) reported a net increase of 20 Bcf into storage as of November 13, 2009. Total working gas in storage - 3.833 Tcf. Graphically:
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For more, see here.
The Pennsylvania Public Utility Commission has approved the sale of Dominion Peoples Natural Gas Company to Peoples Hope Natural Gas Cos. This reversed the decision of the administrative law judge rejecting the sale. For the Commission press release, see here.
That didn't take long. The Wayne Independent is reporting that local landowners in Dimock Township, PA, are suing Cabot Oil & Gas for damages allegedly sustained when Cabot's drilling operations caused methane to contaminate the plaintiffs' drinking water.
The Federal Energy Regulatory Commission (FERC) has initiated Section 5 rate investigations for Natural Gas Pipeline Company of America, LLC (NGPL), Northern Natural Gas Company, and Great Lakes Gas Transmission LP. The purpose of the investigations - to determine whether the companies over-recovered costs causing their rates to be unjust and unreasonable.
Very unusual. For more, see here.
The NYT has an article on locating wind turbines for energy production miles off the coast on floating facilities. Very interesting.
U.S. EPA published its most recent amendments to the Spill Prevention, Control, and Countermeasure (SPCC) Rule last Friday, November 13, 2009 (74 Fed. Reg. 58784). Unintended foreshadowing, perhaps ...
By way of background, the SPCC Rule was originally adopted on December 11, 1973, to address the potential impacts of oil discharges to navigable waters of the United States. The Rule was amended - after years of comment and discussion - on July 17, 2002, in ways that substantially increased the demands imposed on crude oil producers and others when preparing and implementing their SPCC plans. Recognizing the increased burdens placed on producers, EPA extended the deadline for compliance several times to review and address the issues created by its regulatory amendments.
Continue Reading...The NYT has an article on the peak oil controversy and a recent study by IHS Cambridge Energy Research Associates finding that oil production will continue to grow for the next two decades. The report concludes that oil supplies will reach 115 million barrels a day around 2030 and remain there through 2050. The real challenge according to the authors - investment and access, not actual below ground supplies. Interesting.
We reported previously on an activist who had bid nearly $2 million on federal Bureau of Land Management leases that he did not have. The NYT is reporting that he will not be allowed to claim that he acted out of necessity to protect the environment from climate change as a defense. The activist is being charged with felony counts of making false statements and interfering with an auction.
The Houston Chronicle is reporting that BP confirmed the presence of oil in deep water reservoirs in the Gulf of Mexico in a western extension of the Kaskida field. The find may be as much as 3 billion barrels of crude oil equivalent.
Devon Energy Corp. announced today that it plans on divesting itself of its Gulf of Mexico and international assets, according to this article in the Bismarck Tribune. Anticipated after tax proceeds - $4.5 to 7.5 billion.
The Houston Chronicle has a good article on Mitchell Energy's contribution to shale exploration. "And now Mitchell's persistence in trying to coax energy from the common-yet-stubborn formations could be paying off for others, as shale natural gas is being embraced as a potentially huge energy source."
The Cumberland Times-News is reporting that Samson Resources Co. has applied for four drilling permits in Allegany and Garrett, Maryland counties to explore Marcellus production. If approved, they would be the first project of its kind in the last 15 years in Maryland. Interesting.
The Energy Information Administration's (EIA's) weekly storage report is out. "Working gas in storage was 3,813 Bcf as of Friday, November 6, 2009, according to EIA estimates. This represents a net increase of 25 Bcf from the previous week. Stocks were 350 Bcf higher than last year at this time and 409 Bcf above the 5-year average of 3,404 Bcf."
Graphically:
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For more, see here.
The Energy Information Administration (EIA) has published its Short-Term Energy Outlook for November. Among other things, it projects the average Henry Hub spot price for natural gas to be just over $5.00 per Mcf in 2010:
Although prices have more than doubled since reaching a low of $1.83 per Mcf on September 4, EIA expects any further price run-up to be limited through the remainder of the year. High storage levels and resilient domestic production are expected to keep prices around $5 per Mcf in the coming months, even as space-heating demand increases and economic conditions improve. Beyond the winter, limited demand growth constrains price increases through the forecast. The projected Henry Hub spot price averages $4.03 per Mcf in 2009 and $5.01 per Mcf in 2010.
For more, see here.
U.S. EPA has announced that it finalized amendments to the Oil Spill Prevention, Control and Countermeasure (SPCC) Rule designed to clarify and tailor regulatory requirements to particular industry sectors. Once the rule gets posted, we will provide an update.
[Update: For a pre-publication copy, see here.]
Hurricane Ida could take offline nearly two-thirds of Gulf of Mexico oil production according to this article in the Houston Chronicle. "Houston-based Weather Insight expects oil and gas producers to report about 750,000 barrels of daily crude oil production and 3 billion cubic feet of natural gas production shut in by Tuesday."
The Pittsburgh Post-Gazette is reporting that the Pennsylvania Department of Conservation and Natural Resources is set to lease almost 32,000 acres of state forest land for natural gas drilling operations to meet its budget mandate to raise $60 million for the 2009-2010 budget year. "The leases require a minimum bid of $2,000 an acre and royalties of 18 percent."
An Ithaca, NY researcher and environmentalist has created a list of more than 250 alleged wastewater spills, instances of well contamination, and methane migration related to E&P operations in NY over the last 30 years - challenging the notion that the industry is well-regulated, according to this article from pressconnects.com. The apparent genesis of the analysis: New drilling regulations proposed in NY and increased interest in the Marcellus shale.
The Houston Chronicle is reporting that coal demand has increased worldwide, except of course domestically. "'Nobody is seeing any effect of the stimulus in the U.S.,' said steel industry analyst Charles Bradford of Affiliated Research Group. 'There is recovery in world steel output.'”
The Houston Chronicle is reporting on the local industry's job outlook. "Houston's upstream oil and gas industry — consisting of exploration and production, oil field services and equipment manufacturing — lost 13,800 jobs in the 12 months ending September 2009." And it's not necessarily limited to Texas.
The Energy Information Administration is reporting that storage ended at 3.788 Tcf for this injection season, well above the 5-year average and the old record set in 2007. Graphically:
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Senate Democrats on the Environment and Public Works Committee approved a climate bill (S. 1733) sponsored by Senator Boxer (D-CA) without any Republican support, according to this article in the NYT. Interestingly, Senator Baucus (D-MT) voted against the measure.
We've posted several times on the challenges raised by environmental groups and others regarding hydraulic fracturing specifically and energy development more generally (see, e.g., here and here). Along those lines, Environment Texas recently published a report entitled, "Toxic Chemicals on Tap: How Gas Drilling Threatens Drinking Water." Don't expect the challenges to abate any time soon.
Chief Oil & Gas, LLC, has announced that its leasehold interest in the Marcellus Shale has increased to more than 560,000 acres; that it currently has 39 wells drilled into the shale (28 horizontal and 11 vertical); and that it has set a $325 to $350 million development budget for 2010 to drill approximately 70 wells. Interesting.
John Kerry announced plans for a “dual track” to revise the Clean Energy Jobs and American Power Act (S. 1733) along with Senator’s Lindsay Graham and Joseph Lieberman. This announcement comes after Senate Republicans in the Environment and Public Works Committee walked out of Committee hearings that were to begin on Tuesday. Senator Kerry indicated that they will work with business groups and the White House to develop a compromise on the climate legislation. According to Senator Kerry, the Senate Committee is expected to continue its work on the bill and the revisions developed by the two “tracks” would be merged into a single bill.
More information on the Clean Energy Jobs and American Power Act can be found at Senator Kerry’s website. This legislation was introduced September 30, 2009. Another hearing before the Senate Committee on Environment and Public Works is scheduled for November 5, 2009 at 9:00 AM. This legislation mandates a 20% reduction of greenhouse gas emissions from 2005 levels by 2020 and includes measures to allow for greenhouse gas emissions trading.
The Energy Information Administration (EIA) has published its estimates of U.S. crude oil and natural gas reserves as of the end of 2008. The summary:
Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved reserves of natural gas rose enough not only to replace production, but also to grow by almost 3 percent over 2007, largely due to continued development of unconventional gas from shales (see Table 1). In contrast, even though discoveries of crude oil rose for the third year in a row, proved reserves of crude oil fell by more than 10 percent.
The outlook is better, however, under new SEC rules. For more, see here.
The NYT is reporting on new technology being developed to adjust home power use by collecting data on customer usage and local weather. Looks like energy management may reach the residential level at a not too distant point in the future.
That's the title to an article in the WSJ on the potential of shale gas in the U.S. It starts: "The biggest energy innovation of the decade is natural gas—more specifically what is called 'unconventional' natural gas. Some call it a revolution." Very interesting, and written by two authors from IHS CERA.
Senate and House of Representative conferees have approved a $32.24 billion Interior and Environment Appropriations Bill for fiscal year 2010, including monies for U.S. EPA to conduct a second study of hydraulic fracturing:
Hydraulic Fracturing Study .--The conferees urge the Agency to carry out a study on the relationship between hydraulic fracturing and drinking water, using a credible approach that relies on the best available science, as well as independent sources of information. The conferees expect the study to be conducted through a transparent, peer-reviewed process that will ensure the validity and accuracy of the data. The Agency shall consult with other Federal agencies as well as appropriate State and interstate regulatory agencies in carrying out the study, which should be prepared in accordance with the Agency's quality assurance principles.
For more, including a copy of the text of the bill, see here.
[Update: The American Petroleum Institute (API) has published a new guidance document on best-industry practices for drilling and cementing wells that may be hydraulically fractured. A copy can be found here.]
The Houston Chronicle is running a series on the growth of natural gas production from shale formations. The first report - on the Haynesville Shale - can be found here. A sample:
For years, companies have used hydraulic fracturing — injecting water into underground formations to break apart rocks and release more oil and gas. The Woodlands-based Mitchell Energy perfected the techniques in the Barnett shale formations in North Texas. But it wasn't until Devon Energy acquired Mitchell in 2002 that engineers added horizontal drilling — turning the drill bit at a 90-degree angle to tap into a larger section of the strata.
The NYT is reporting that some policymakers are looking at oil refineries, natural gas processing plants, chemical plants, cement factories and ethanol plants as a new and different target for carbon sequestration. The reason - It would be simpler and cheaper.
The WSJ is reporting that the Security and Exchange Commission has amended its guidance on how the agency interprets reserve accounting rules for oil and natural gas companies. The primary changes: Removing the exclusion for unconventional methods used in oil sands and shale gas development and changing the price used in determining reserves.
For more, see here (look for SAB, "Staff Accounting Bulletin" 113).
(Note - Subscription required for WSJ article).
Baker Hughes is reporting that the number of rigs drilling for oil and gas in the U.S. rose last week to 1,069, according to this WSJ article. Gas rigs - 728.
(Note - Subscription required.)
At least that's what the court of appeals in Trans-Western Petroleum, Inc. v. United States Gypsum Co. (Case Nos. 08-4120 & 08-4121) recently found. In that case, Wolverine Gas & Oil Corp. had acquired a lease on certain properties in Utah containing a unitization provision that read:
In connection with operations for the production of oil and gas or either of them, Lessee may at any time or times pool or unitize this lease . . . with other lands and leases in the same area or field so as to constitute a unit or units whenever, in Lessee’s judgment, necessary or advisable to comply with a law, rule, order or regulation of a governmental authority having jurisdiction, . . . by filing for record an instrument so declaring subject to the following: . . . (b) Units formed . . . shall allocate to the portion of this lease included in any such unit a fractional part of production from any part of such unit on one of the following bases: (i) the ratio between the quantity of recoverable production allocable to the portion of this lease included in such unit and the total of all recoverable production allocable to such unit; or (ii) such other basis as may be approved by the governmental authority having jurisdiction thereof. (Emphasis added.)
Continue Reading...The Pennsylvania Department of Environmental Protection (PA DEP) has started collecting new fees for vertical wells (see here). Bore length up to 2,000 feet - base permit fee of $250. Additional $50 for each additional 500 feet of length. Marcellus and horizontal wells have a different fee structure.
The Pennsylvania Department of Environmental Protection (PA DEP) has revoked three erosion and sedimentation control permits issued to Ultra Resources, Inc., and Fortuna Energy, Inc., and sent notices of violation to the three licensed professionals who prepared the permit applications. For more, see here.
Chesapeake Energy has decided that it won't drill within the upstate NY watershed, according to this NYT article. Why? Newly proposed regulations.
Researchers with the Nature Conservancy, Audubon Society and University of Montana have issued a study finding that oil and gas development in the west could significantly reduce the sage grouse population, according to this NYT article. In terms of timing, the Administration is expected to determine whether the sage grouse should be listed as an endangered species in February.
Today, it should come as no surprise that everything is viewed as impacting health care. The NYT is reporting that burning fossil fuels costs the U.S. $120 billion in health care costs primarily related to premature deaths and air pollution.
The president of the Center for American Progress is chastising Canada for substantial increases in greenhouse gas emissions due to Alberta oil sands development, according to this article in the NYT.
Without examining the merits of the arguments pro and con, the Philadelphia Inquirer has an article on how the PA state budget came to omit a natural gas severance tax this year. Not surprising.
In a separate matter, U.S. EPA has imposed a $7,150 fine on the Hunt Oil Company for violating federal Spill Prevention, Control and Countermeasure (SPCC) regulations by failing to provide the required secondary containment and documentation of plan approval.
A jury award of more than $5 million against the Hunt Oil Company for negligent failure to protect a producing oil formation was recently reversed by the Texas appellate court in Hunt Oil Company v. Live Oak Energy, Inc. (No. 05-07-01553-CV) (a copy of which can be found here). It serves as a warning to counsel and companies undertaking oil and gas asset transactions to do their due diligence.
The facts were straightforward: Live Oak acquired certain leasehold interests in the Pettit formation located in the East Haynesville oil field in northwest Louisiana. Prior to its acquisition, Hunt Oil had drilled some fifty wells through the Pettit formation to recover oil from formations below. Live Oak claimed that Hunt Oil had failed to properly case and cement many of those wells, creating a 'leaky bucket' in the Pettit formation above - damaging Live Oak's leasehold interests.
The issue was whether Live Oak's claims were barred by the applicable statute of limitations. The court of appeals held that it was - rejecting the claim by Live Oak that the discovery rule applied to toll the limitations period.
Continue Reading...The INGAA Foundation recently issued a report on the need for natural gas infrastructure in the United States. It finds (in part):
To accommodate the changes in natural gas supply and demand, the U.S. and Canada will need 28,900 to 61,900 miles of additional natural gas pipeline by 2030. This will require an investment of $108 to $163 billion in pipeline assets. ***
Changes in gas supply and demand also require significant investment in gas storage. Between 2009 and 2030, the U.S. and Canada will need 371 to 598 Bcf of additional gas storage capacity. *** Much of the new storage capacity that is needed is high deliverability storage to meet the growth in gas demand for electricity generation.
You can find a copy of the report here.
Members of the U.S. House of Representatives launched a new caucus yesterday to promote the use of natural gas as a low emission energy source. The Oklahoman has a good article on the caucus' first hearing, which focused on how to expand this energy resource to take advantage of new shale discoveries.
The Interior Department has invited production companies interested in oil shale plays on federal lands in the West to apply for a new round of research, development and demonstration leases, reports this article in the Washington Post.
The Houston Chronicle is reporting on the third-quarter results for Nabors Industries, the world's largest onshore oil and natural gas driller. It gives a (not-unexpected) sense of drilling activity in the U.S. and worldwide.
The NYT is reporting on the global potential for natural gas vehicles. It finds that the enthusiasm for NGV's, especially in Europe, is waning as oil prices decrease. We'll see.
The Energy Information Administration (EIA) has published a report on the potential for oil and gas development in the Arctic (found here). It concludes, in part:
The good news is that the Arctic holds about 22 percent of the world’s undiscovered conventional oil and natural gas resources, based on the USGS mean estimate. The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly. The high cost and long lead-times of Arctic oil and natural gas development undercut the immediate importance of these sovereignty claims, while at the same time diminishing the economic incentive to develop these resources.
The biofuels industry is seeing increased investment from an unexpected source - the oil majors - according to this article in the WSJ. Interesting.
(Note: Subscription required.)
The NYT is reporting on the views of different segments of the domestic energy industry on climate legislation. The take away: "Some supporters of global warming legislation believe that the division in the once-monolithic oil and gas industry, as well as other splits among energy producers, could improve the prospects for the legislation."
[Update: For a related NYT article, see here.]
The Natural Gas Supply Association (NGSA) has posted its 2009-2010 Winter Outlook (which can be found here). Not surprisingly, it finds that the "[e]conomy [is] likely [to be] more significant to natural gas price pressure than weather this winter."
The NYT is reporting on impact that fugitive methane emissions have on climate change. "Natural gas consists almost entirely of methane, a potent heat-trapping gas that scientists say accounts for as much as a third of the human contribution to global warming." The article urges, in part, an aggressive campaign to rein in methane emissions from well production equipment.
The Houston Chronicle is reporting on New Mexico's Tres Amigas SuperStation in Clovis, N.M., which would interconnect the country's three massive power grids and help address significant barriers to the use of alternative energy in the U.S. "Tres Amigas would build a triangular pathway of underground superconductor pipelines, combined with AC/DC converters that synchronize the flow of power between the interconnections. The equipment allows electricity to be transferred from grid to grid."
Research suggests that oil demand peaked in industrialized nations in 2005, according to this article in the NYT. This is due in large part to efficiency gains in the transportation sector, aging populations and growth in renewable fuels. Not surprisingly, growth in oil demand will come from the developing world.
The NYT is reporting that technologies developed to produce shale gas in the United States are going global. "Italian and Norwegian oil engineers and geologists have arrived in Texas, Oklahoma and Pennsylvania to learn how to extract gas from layers of a black rock called shale." Leading innovation again ... nice.
The Canadian and Alberta governments have stated that they would contribute approximately $822 million to help fund a commercial-scale carbon capture and storage project by Royal Dutch Shell PLC, according to this article in the NYT. The project itself is designed to capture and store 1 million metric tons of carbon dioxide from the Athabasca Oil Sands. Very interesting.
The WSJ has a good article on Chevron's use of new enhanced recovery technologies to extend production in the Kern River field. Using steam, "The company hopes eventually to coax out as much as 80% of the field's oil compared with the 30% that is typical in many fields around the world."
[Note: Subscription required.]
The Energy Information Administration (EIA) has posted both its Short-Term Energy and Winter Fuels Outlook for October 2009 and a report on new pipeline capacity added to the U.S. pipeline network in 2008. The Outlook notes, for example:
The Henry Hub spot price averaged $3.06 per Mcf in September, $0.17 per Mcf below the average spot price in August. Spot prices fell early in September then moved higher as pipeline maintenance reduced available supply and natural-gas-fired electric generators increased demand. * * * Prices are expected to increase in 2010 but, even with a projected winter storage withdrawal greater than the 5-year average, end-of-March inventories still will be the highest recorded since March of 1991. * * * EIA expects the Henry Hub spot price to average $3.85 per Mcf in 2009 and $5.02 per Mcf in 2010.
It also notes that EIA is now tracking uncertainty in futures prices and the market’s assessment of the range in which those futures prices might trade, and will report confidence intervals around NYMEX crude oil and natural gas futures prices.
Continue Reading...The Ohio Oil and Gas Association (OOGA) recently held a seminar to prepare producers for anticipated Occupational Safety and Health Administration (OSHA) inspections in the oilfield. Highlights of the presentation, as well as a self-inspection checklist, can be found on the OOGA website, here. In addition, note that the Association and the Ohio Oil & Gas Energy Education Program (OOGEEP) will be offering additional seminars on H2S and oilfield safety in October and November this year.
[Update: OOGEEP has posted its new training schedule. (Moved up).]
[Disclosure: Several members of the Vorys firm are active members of the Association and serve on the Association's Board of Trustees, including as the Chair of the Environmental and Safety Committee. Also, one member of the Vorys firm was a presenter at the Association's OSHA seminar in September.]
The Public Utilities Commission of Ohio (PUCO) has proposed several amendments to its natural gas pipeline safety regulations (see here). The major changes appear to address testing for leaks prior to initial operation or reestablishing residential or nonresidential gas service, including after an outage. Comments are due no later than October 30, 2009.
To follow the docket, see here (Docket No. 09-0829-GA-ORD).
Yesterday, Public Citizen - a nonprofit consumer advocacy organization - sued the Texas Commission on Environmental Quality (TCEQ) to force the commission to regulate CO2 emissions when considering permits for new coal-fired power plants and other facilities. A copy of the organization's press release can be found here, including a copy of the complaint that was filed.
If successful, expect to see similar suits around the country.
The New York Department of Environmental Conservation (NYDEC) has released for comment its draft Supplemental Generic Environmental Impact Statement (SGEIS) for natural gas drilling operations in the Marcellus Shale. The SGEIS looks at the range of potential environmental impacts of shale gas development using large volume hydraulic fracturing and proposes standards and mitigation strategies that may be required of producers applying for related permits.
Comments are due by November 30, 2009. A copy of the draft SGEIS can be found here. A related NYT article can be found here.
[Update: The press is already reporting on the conflicts generated by the SGEIS. See, for example, here (from pressconnects.com). (Moved up.)]
Climate legislation was introduced into the Senate today by Senators Boxer (D-CA) and Kerry (D-MA), according to this article in the NYT. It calls for a 20% reduction in greenhouse gas (GHG) emissions by 2020 and an 80% reduction by 2050 (using 2005 as a baseline). Note - the terms "climate change" and "global warming" do not appear in the title ...
[Update: The Fort Worth Business Press has an article finding that the Senate's climate legislation may help the natural gas industry. (Moved up.)]
The WSJ has a good article on the impact that natural gas over-supplies can have on independent electric power producers. "Electricity prices are set by the last generating plant to be switched on. In most U.S. markets, that generator burns natural gas. That makes the revenue of all merchant generators highly susceptible to gas prices."
Dreams of drilling offshore California remain. The LAT is reporting that supporters of a project to drill the first well off the California coast in 40 years are hoping to move legislation in the state assembly that would create a governor-appointed panel that could approve the project on its own authority, overriding the state lands commission's previous rejection.
We reported earlier last month that PA Governor Ed Rendell had taken a new extraction tax on natural gas off the table for the year (see here). It seems that PA House Democrats think otherwise. The Philadelphia Inquirer is reporting that the PA House Democrats passed their own tax package on Friday that included a new natural gas severance tax.
[Update: Not everyone agrees that it's a good idea (from the Sun Gazette). Moved up.]
The Eagle Ford shale is turning out to be one of the most sought after prospects in the United States, despite declining prices and demand, according to this article in the Houston Chronicle. Interesting: "Producers in the Eagle Ford can break even when natural gas is priced as low as $3.88 per million British thermal units, the [Ross Smith Energy Group] said, versus break-even prices of $5.18 in the Barnett, $3.74 in the Marcellus and $4.49 in the Haynesville."
At the beginning of the year, we reported on the Department of Interior's unsuccessful efforts to suspend royalty relief established by Congress under the Outer Continental Shelf Deep Water Royalty Relief Act (see here). The NYT is reporting that the U.S. Supreme Court has decided not to review that case.
We've reported previously on air quality concerns raised with respect to natural gas development (see here, for example). The Fort Worth Star-Telegram is reporting also on the issue, noting several recent air quality reports finding high levels of disulfide compounds associated with natural gas production.
We have reported several times on the conflict between environmentalists looking for greater disclosure of the chemicals used in hydraulic fracturing and the service companies looking for protection for their trade secrets. According to a NYT report, based on a few industry statements, "The natural gas industry is moving to disclose information about chemicals used in controversial extraction technologies in the wake of spills at drilling sites in Pennsylvania and as New York is proposing new regulations."
The Energy Information Administration is reporting that working gas in storage reached 3.589 Tcf (trillion cubic feet), as of September 25, 2009. "This represents a net increase of 64 Bcf from the previous week. Stocks were 491 Bcf higher than last year at this time and 481 Bcf above the 5-year average of 3,108 Bcf." EIA's related chart:
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For more, see this article from the Houston Chronicle.
The court in Natural Resources Defense Council, Inc. v. U.S. State Department, et al., recently dismissed claims against the U.S. State Department that it violated the National Environmental Policy Act (NEPA) by issuing a presidential permit to TransCanada Keystone Pipeline, LP, for a cross-border pipeline between the U.S. and Canada without a sufficient assessment of the environmental impacts. The court found that the State Department, acting solely on behalf of the President in issuing the permit under Executive Order 13,337, was exercising a purely presidential prerogative that was not subject to judicial review under the Administrative Procedure Act.
A copy of the decision can be found here (Case No. 08-1363).
[Disclosure: Before joining the bench, Judge Leon practiced law with the Vorys firm.]
A managing director for research at Tudor, Pickering, Holt & Co., is forecasting that natural gas prices will rebound to $7.50 in 2010, according to this article in the Star-Telegram. The commodities research unit of Barclays Capital, on the other hand, is significantly less bullish, lowering its 2010 gas-price forecast to an annual average of only $5.05.
Dominion Transmission has announced that it has begun the FERC pre-filing review process for its Appalachian Gateway Project, which is designed to move gas from West Virginia and southwest Pennsylvania to storage fields and other pipelines in Pennsylvania for ultimate use by consumers in the Northeast and Mid-Atlantic regions. Construction is set to begin in 2011, with service to start in 2012.
Copies of the docketed information can be found here (Docket No. PF09-15-000).
The Houston Chronicle is reporting on cleanup efforts regarding a spill of 10,500 gallons of fuel oil in the Houston Ship Channel after a ship collided with a barge. The Coast Guard has reported that the ship's owner is taking responsibility for the cleanup, and that it doesn't look like a major problem at the moment.
The LAT has a good article on what may be the largest oil discovery in California in the last 35 years, by Occidental Petroleum Corp. Very interesting, and very secretive.
XTO Energy has hedged about 55% of its estimated 2010 production (oil and gas) at cumulative prices equivalent to $9.62 per Mcf, according to this article in the Star-Telegram. Not bad at all, particularly where prices are today.
The Star-Tribune has a good article on the benefits of pairing wind energy and natural gas for power production.
The NYT is reporting on a group of nine senators urging Senator Boxer to include in her climate legislation proposal a suite of measures that would boost natural gas production and use. In addition to promoting use for electric power and transportation, these lawmakers advocate maintaining current tax treatment for the industry, including the percentage depletion credit and deductions for intangible drilling costs.
[Update: For a related article on the industry's lobbying efforts, see this article in the NYT. Makes you wonder whether the authors are reading the paper as a whole, though.]
The NYT has a nice overview of worldwide oil discoveries this year. Pretty impressive.
The Buffalo News is reporting that National Fuel Gas Co.'s first wholly owned horizontal natural gas well in the Marcellus Shale region in northwestern Pennsylvania is showing some success, producing an average of nearly 6 MMcf per day. Nice job!
National Public Radio (NPR) is running a three-part series on the natural gas industry. Not a bad job at all. The opening from the first part:
In recent years, natural gas producers in the United States have struggled, mostly in vain, to be taken more seriously in the energy world. Big oil companies like Exxon had concluded that natural gas reserves in the United States were not sufficiently abundant to warrant big investments in exploration and drilling. When small independent gas producers argued otherwise, they were often ridiculed.
But then it goes on to take a brief look at shale gas and horizontal drilling, noting the recent revival for natural gas. The second part profiles small independents and can be found here. And the third part looks at the industry's late start in playing the climate legislation game (found here).
The charts and graphics are pretty good as well.
US EPA announced today that beginning January 1, 2010, large sources of greenhouse gas (GHG) emissions will be required to collect and report GHG emission data. These first reports, covering calendar year 2010, are to be submitted to US EPA in 2011. GHG reporting will be phased in for vehicle and engine manufactures (outside of the light-duty sector) beginning with model year 2011.
US EPA issued a proposed GHG Reporting Rule in April 2009. The public comment period for this rule expired on June 9, 2009. US EPA has indicated that GHG reporting requirements for some sources identified in the proposed are still under review.
A copy of US EPA’s announcement can be viewed here.
We will continue to monitor US EPA’s activities and provide updates on the GHG Reporting rule as they become available.
[Update: Under the final rule, covered entities can cease reporting through reductions in GHG emissions. Additionally, US EPA reduced the number of source and supply categories initially subject to the mandatory reporting requirement - deferring final action on oil and gas systems, for example.
More information on the Final Rule may be found here.]
The U.S. Court of Appeals for the Second Circuit has issued its decision in State of Connecticut, et al. v. American Electric Power Company Inc., et al. (Case Nos. 05-5104-CV and 05-5119-CV), finding that plaintiffs (several states and land trusts) may sue power companies for the public nuisance of global warming due to emissions of carbon dioxide. From the court's decision, and setting the stage:
Continue Reading...In 2004, two groups of Plaintiffs, one consisting of eight States and New York City, and the other consisting of three land trusts (collectively “Plaintiffs”), separately sued the same six electric power corporations that own and operate fossil-fuel-fired power plants in twenty states (collectively “Defendants”), seeking abatement of Defendants’ ongoing contributions to the public nuisance of global warming. Plaintiffs claim that global warming, to which Defendants contribute as the “five largest emitters of carbon dioxide in the United States and . . . among the largest in the world,” Connecticut v. Am. Elec. Power Co., 406 F. Supp. 2d 265, 268 (S.D.N.Y. 2005), by emitting 650 million tons per year of carbon dioxide, is causing and will continue to cause serious harms affecting human health and natural resources.
American Electric Power (AEP) is poised to begin a carbon capture and storage project at its West Virginia Mountaineer Power Plant to test the viability of the technology, according to this article in the NYT. Its plan - to inject about 100,000 tons of carbon dioxide, converted to a fluid, annually for two to five years, or roughly 1.5% of Mountaineer’s yearly CO2 emissions. Very interesting.
The LAT is reporting on the challenges faced by proponents of offshore drilling in the Arctic. The public comment period closed yesterday on the Department of Interior's pending decision to issue future leases for the Outer Continental Shelf.
The WSJ is reporting that Petrohawk is selling its Permian Basin assets - currently producing about 30 MMcf per day - to an unidentified purchaser for $376 million. (Note: Subscription required.)
The Washington Examiner has posted some "cool" energy facts, including:
The United States is the world's largest producer of nuclear power, but it derives a smaller percentage of its electricity from nuclear technology than many other industrial countries.
The Houston Chronicle is reporting that Russia's largest oil producer believes that Russia will be unable to sustain the increase in oil exports that saw it become the world's largest oil exporter in the post-Soviet era. The reasons: Domestic demand increases and a loss of tax incentives for exports.
A professor emeritus of petroleum and natural gas engineering at Penn State University - and co-author of a recent economic impact study regarding Marcellus Shale development - believes that Pennsylvania could be a net exporter of natural gas in the future, and potentially generate more than 175,000 jobs for the state, according to this article in the Observer-Reporter. We reported previously on the study he co-authored here.
We previously posted on the criticisms leveled at the natural gas industry for being late to the climate legislation game in Washington (see, e.g., here). Recent efforts by America's Natural Gas Alliance should come as no surprise, therefore, and are being noticed by the media. See, for example, this article in the Houston Chronicle: "Executives from some of the nation's largest energy producers are lobbying Congress for changes to a House-passed climate change measure that they say overlooks the benefits of natural gas and gives an unfair advantage to coal."
Yesterday, we posted on a recent economic impact study released by America's Natural Gas Alliance. They have also released the results of a recent poll finding that Americans have a very favorable opinion of natural gas as an energy source:
The American public not only expects to rely more on natural gas, but also has very favorable views about it. Opinions of natural gas rank right alongside solar power, hydro power, wind power, and domestically produced oil in favorable perceptions. In a “thermometer” ranking from cold/very unfavorable (0) to warm/very favorable (100), natural gas rated a mean score of 71, with other top tier energy sources ranging from 73-81. Second tier energy sources were ethanol and biofuels, nuclear power, coal and oil imported from foreign countries. Second tier thermometer ratings ranged from 26-54.
That's encouraging.
America's Natural Gas Alliance released today a study done by IHS Global Insight finding that the natural gas industry alone supported more than 2.8 million jobs in the United States in 2008. Moreover, its economic impact on the nation's economy for the year was $385 billion.
Interesting. A copy of the study can be found here.
The Natural Gas Supply Association (NGSA) recently released a study of price transparency in the U.S. natural gas market, finding that it is "arguably the most price transparent commodity market in the world."
An examination of the interaction between the physical and financial U.S. natural gas markets shows that there is enough transparency. In fact, the combination of transparency on both the physical and financial sides of the market makes the overall market close to being completely transparent.
A copy of the report, as well as the related NGSA press release, can be found here.
The Energy Information Administration (EIA) has issued its overview of the U.S. - International natural gas trade for 2008. It finds, for example, "In 2008 there was a 9 percent decrease in net imports from Canada. Despite this decrease Canadian pipeline imports continued to account for the vast majority of U.S. natural gas imports." A sample chart:
For more, see here.
The Government Accountability Office (GAO) has found that the Interior Department missed out on $21 million in natural gas drilling fees due to accounting errors in its royalty-in-kind program, according to this article in the Denver Post.
A copy of the GAO's report can be found here.
[Update: The NYT is reporting that the Interior Department has decided to end the royalty-in-kind program. Interestingly, this program has been a large source of revenue for the government (about $6.6 billion in energy resource deliveries in 2008).
Also, the GAO recently released a report concluding that energy companies may have underpaid royalties by more than $100 million in 2006 and 2007. (Moved up).]
U.S. EPA and the Department of Transportation’s National Highway Safety Administration (NHTSA) have proposed a National Program intended to reduce greenhouse gas emissions and improve fuel economy for new cars and trucks sold in the United States. Applicable to model years 2012 through 2016, the new standards would require an estimated average emissions level of 250 grams of carbon dioxide per mile (equivalent to 35.5 miles per gallon) and, if successful, would reduce carbon dioxide emissions by an estimated 950 million metric tons over the lifetime of the vehicles sold.
More on the program can be found here.
In a case recently published, though decided in April, the Ohio Second District Court of Appeals Ohio in Englewood v. Miami Valley Lighting, L.L.C., 182 Ohio App. 3d 58 (2009), discussed what makes a particular entity a "public utility". Generally speaking it is a mixed question of law and fact which requires an examination of the nature of the business. The court provides a nice synopsis of Ohio law on the matter.
The Sun Gazette has an interesting (and, for Pennsylvania, encouraging) article on the potential work force needed to develop the Marcellus Shale in Pennsylvania. Its source - two studies done recently by Penn State University and the Marcellus Shale Education and Training Center.
The Baltimore Sun has an article on the disappointment of Western Maryland landowners whose Marcellus Shale leases haven't been honored. It appears as if several of the landowners are investors who bought the land simply to lease for development.
The Energy Information Administration (EIA) has published its Short-Term Energy Outlook for September 2009. Among other things, it states:
EIA projects the monthly Henry Hub natural gas spot price to average $2.32 per thousand cubic feet (Mcf) in October, the lowest monthly average spot price since September 2001. Natural gas inventories likely will set a new record high at the end of this year’s injection season (October 31) reaching more than 3.8 trillion cubic feet (Tcf). The projected Henry Hub annual average spot price increases from $3.65 per Mcf in 2009 to $4.78 in 2010. However, upward price pressure next year is limited by the sensitivity of natural gas use in the electric power sector to higher natural gas prices and continued expansion of U.S. natural gas production from shale formations.
For producers, the outlook is challenging.
Senator Niehaus (R-14th Dist.) recently introduced S.B. 165 to amend and update Ohio's oil and gas conservation program. If adopted, it would address significant issues facing Ohio oil and gas development today, including funding for the Division of Mineral Resources Management (DMRM), and well construction and completion practices designed to promote safety and environmental concerns. It would also be one of the most substantial updates to Ohio oil and gas law since 1985.
A copy of the draft legislation and related information can be found here.
The NYT is reporting on new legislation introduced by House Energy and Natural Resources Chairman Nick Rahall (D-W.Va.) that would create a new federal agency for onshore and offshore leasing of public lands - the Office of Federal Energy and Minerals Leasing. Among other things, the draft legislation would create new "diligent development" rules for onshore and offshore leases and impose new fees on nonproducing leases.
A new report from IHS-Cambridge Energy Research Associates concludes that global oil demand will increase next year and possibly overtake old records by 2012, according to this article in the Houston Chronicle. The reason - Growing global demand in developing nations like China and India.
The Texas Supreme Court recently held that Apache Corporation could not seek recovery for a large volume of "unaccounted-for" gas lost between the wellhead and sale to customers at the gas processing facility (Dynergy Midstream Services, et al., v. Apache Corporation, Case No. 07-0043). It based its decision on the contract language, which focused on the volume of gas sold to the customer - and not the volume of gas delivered to the processing facility.
"When calculating the proceeds due to Apache under these 'percentage of proceeds' contracts, only one criterion matters: sales. Common throughout the natural-gas industry, these contracts unambiguously base payment on the amount of gas ultimately sold at the tailgate (not the amount initially delivered at the wellhead), and Apache admits that it was paid in full for 'every molecule of gas' sold at the tailgate of the processing plants."
If you are interested, the Supreme Court's website contains electronic versions of the briefs filed in the suit, as well as audio of the oral argument (that is, in addition to the decision itself). Very nice.
The NYT has an interesting blurb on potential new treatment methods for produced water.
We reported earlier on a FERC Notice of Proposed Rulemaking on whether to revise the contract reporting requirements for certain intrastate and Hinshaw pipelines providing interstate services pursuant to statute and Commission regulation. The Commission is soliciting comment on an additional standardized electronic information collection proposal, and has extended the comment period to November 2, 2009.
The PA Department of Environmental Protection has announced that wind farms in two Pennsylvania counties will "receive funding under an American Recovery and Reinvestment Act program that provides cash assistance to energy production companies in place of earned tax credits." The two grants total over $100 million.
BP announced yesterday that it has discovered a giant oil field at a depth of more than 35,000 feet in the Gulf of Mexico (the Tiber well), according to this report in the NYT. Estimates make it potentially greater than the three billion barrels of oil equivalent thought to exist in the nearby Kaskida field.
The Houston Chronicle is reporting that U.S. crude oil production is expected to increase for the first time in two decades due to new GOM offshore projects and a quiet hurricane season. Could increase production to 5.22 million barrels per day in 2009. Very interesting (and encouraging).
The Energy Information Administration (EIA) is reporting a 2.6% increase in working gas storage capacity over last year, estimated to be 3.889 Tcf. It finds that this is a "somewhat conservative[] measure of aggregate industry capability to store gas."
The Pittsburgh Tribune-Review is reporting that drilling in the Marcellus Shale is continuing apace despite the recession, due in large part to access to northeast markets and lower drilling costs. Interesting.
Governor Rendell told reporters yesterday that his proposed "extraction" tax on PA natural gas production is off the table for the year, according to this article in the Pittsburgh Post-Gazette.
U.S. EPA is seeking comment on new data related to its July 25, 2008, proposed rule, Federal Requirements Under the Underground Injection Control (UIC) Program for Carbon Dioxide (CO2) Geologic Sequestration (GS) Wells (73 FR 43492). In particular, it seeks comment on "a waiver process to allow GS injection above and between USDWs [Underground Sources of Drinking Water] under specific conditions in lieu of a blanket prohibition on injection above and between USDWs."
Comments are due October 15, 2009.
Duke Energy Corp. is planning a fourth wind farm in Wyoming, dubbed "Top of the World," according to this article in the WSJ. When finished, estimates are that it will provide enough energy to power 50,000 to 60,000 homes annually.
Baker Hughes has agreed to buy BJ Services in a $5.5 billion cash and stock deal, according to this article in the NYT.
Items from over the last couple of days:
The WSJ is reporting on the possible increase in working natural gas storage capacity (note: subscription required).
The Houston Chronicle is reporting on concerns that natural gas prices have further to fall.
The biofuel industry is facing substantial problems, according to this WSJ article (note: subscription required).
Efficiency will be the new watchword for the oil industry, reports this article in the Houston Chronicle.
California regulators are looking at a 'reverse auction' to increase the use/sales of solar power by California’s three big utilities, according to this article in the NYT.
The NYT is reporting on a substantial price drop in the cost for solar panels. Still, payout remains at 16 years (dropping from 22 years).
On August 27, 1859, Col. Drake drilled the world's first successful commercial oil well in Titusville, Pa. To celebrate this 150th anniversary, Titusville has planned a series of events. For more on this achievement and a calendar of activities, see here.
The NYT has both an interesting blurb and op-ed on peak oil and why the concept is based on poor data analysis and misinterpretations of technical material. The NYT? Whew . . . a look at the comments shows that we haven't entered the Twilight Zone after all.
This is interesting. The NYT is reporting that Chevron will be using a 29-megawatt solar steam plant sourced in one of its California oil fields to produce steam to inject into the field to enhance recovery.
The WSJ has an interesting article on the impact falling natural gas prices are having on the budgets of several producing states. Texas, for example, has reportedly lost $1 billion in state revenue as a result. (Note: Subscription required.)
The Binghamton Press & Sun-Bulletin has an article on sizable rally organized by landowner coalitions in support of oil and gas development in New York. Opposition to the "Frack Act" - proposed by NY Representative Hinchey to tighten regulations on hydraulic fracturing - was a topic for the day.
The oil and gas industry is beginning to detail the costs of climate legislation, according to this article in the WSJ. A study commissioned by API (the American Petroleum Institute), for example, finds that the U.S. could rely on foreign sources for nearly 20% of its refined fuel if the Waxman-Markey climate bill passes in its present form. (Note: Subscription required.)
Natural gas prices are in decline while oil prices are rising. Gas prices hit a seven-year low due to declining demand and abundant supplies, according to this NYT article. At the same time, the WSJ is reporting that crude oil prices have hit a high for the year at $73.89 a barrel (subscription required).
The State Department has approved a permit that will allow construction of the Alberta Clipper pipeline to bring crude oil produced from Canadian oil sands into the U.S., according to this article in the LAT. Interesting reasoning regarding environmental concerns . . .
A government auction for offshore leases was fairly quiet, according to this article in the Houston Chronicle. The recession and an abundant supply of natural gas are contributing factors to the somewhat less-than-enthusiastic reception by industry.
Hold the date. The Pennsylvania DEP will be conducting public hearings in October for two permit applications for proposed wastewater discharge facilities in Wyoming County associated with natural gas drilling activities. For more information, see here.
The Houston Chronicle has an article today on the challenges facing oil refineries generally, and in the Gulf Coast in particular. One report discussed in the article predicts that roughly 6% of U.S. refining capacity will be forced to close within the next two years due to a decline in demand.
Natural gas futures prices fell to a seven-year low, according to this article in the WSJ. (Note: Subscription required.)
The WSJ has an article on the interplay between natural gas and wind power entitled "Wind and Natural Gas: Frenemies Forever." Frenemies?
In March of 2008, New York's governor issued an executive order directing the creation of a state energy plan. A draft of that plan has now been published that recommends the "environmentally responsible development of [the Marcellus Shale] to large scale production, which would generate economic benefits, including increasing the stable supplies of indigenous fuel, lowering gas transportation costs for consumers, generating new State and local tax revenues, and increased revenues for landowners from land use agreements with natural gas companies."
More on the report can be found here.
Hydraulic fracturing remains a hot topic, particularly in the Marcellus Shale region where it appears to be relatively unknown. For example, the Ithaca Journal has an article looking at related waste disposal issues and recent regulatory activity by the NY DEC.
The NYT is reporting on an interesting investment in biofuels made by the Southern Ute Tribe in Colorado - introducing a strain of carbon-dioxide consuming algae into water tanks located near a natural gas processing plant having a significant carbon dioxide waste stream.
The Houston Chronicle has an article on the potential use of state lands for energy development as states faced with increasing budget deficits are looking for new sources of revenue. Interestingly, Ohio plays a major role in the piece.
The Denver Post is reporting on anticipated efforts of the natural gas industry to impact climate legislation in the Senate. The take away from the Sierra Club, which lobbied heavily in the House, on the industry's absence from House negotiations: "[I]f you aren't at the table, you're on the menu."
The Hill is reporting on a new study commissioned by the National Association of Manufacturers and the American Council for Capital Formation, which finds that the Waxman-Markey climate legislation passed earlier this year by the House could cost the country 2 million jobs by 2030. A copy of the controversial study can be found here.
Amaranth Advisors has agreed to pay a $7.5 million fine to settle charges that it manipulated the price of natural-gas futures contracts on two occasions in 2006, according to this article in the NYT.
Using oil tankers to store production offshore is on the rise, according to this article in the WSJ. The cause - contango in the oil futures market. (Note: Subscription required.)
The WSJ has a good article on the utility of futures markets to hedge against the risk that natural gas prices will fall for producers. (Note: Subscription required.)
The Energy Information Administration (EIA) has published its Short-Term Energy Outlook for August. Among other things, it concludes:
[T]he monthly average Henry Hub natural gas spot price [will] stay below $4 per thousand cubic feet (Mcf) until late in the year as natural gas inventories are projected to set a new record high at the end of this year's injection season (October 31). The Henry Hub price is projected to increase from an average of $3.92 per Mcf in 2009 to an average of $5.48 per Mcf in 2010.
The EIA also expects natural gas storage to set a new record this year, with "3,800 Bcf at the end of October, 235 Bcf above the previous record of 3,565 Bcf reported at the end of October 2007."
And for those of you interested in CO2 emissions, the EIA has started reporting on projected CO2 emissions from fossil fuels - projecting, for example, that they will decline by 5 percent this year due to lower coal emissions.
A copy of the full report can be found here.
Local opposition has put a stop to a carbon capture and storage demonstration project in Germany, according to this article in the Guardian. It's good to know that 'numbyism' - i.e., 'Not under my back yard' - isn't just a U.S. phenomenon.
The Energy Information Administration has updated its report on liquefied natural gas (LNG) and the role it can have in the U.S. Did you know:
The Waynesboro News Virginian has a good article on the development of wind energy in Virginia's national forests and the conflicts it creates for environmental groups.
The Fort Worth Star-Telegram has an interesting article on the similarities between Canada's Horn River Basin and the Barnett Shale in terms of natural gas production possibilities.
The federal government is holding millions of dollars for acres of energy leases in the Rockies that it has yet to issue despite being paid, according to this article in the LAT. The reason - bureaucratic delay because of environmental protests and lawsuits.
The Houston Chronicle is reporting on how several large producers are reacting to natural gas supply surpluses and demand declines - with greater production? The prisoner's dilemma.
The Energy Information Administration (EIA) has published an analysis of the Waxman-Markey climate legislation recently passed in the House. It focuses on the impacts of the legislation's energy and environmental policy proposals on consumer energy choices and the implications for the economy. While not comprehensive, it does reach some interesting conclusions. For example: "ACESA [i.e., the Waxman-Markey bill] increases the cost of using energy, which reduces real economic output, reduces purchasing power, and lowers aggregate demand for goods and services."
A copy of the full report can be found here.
The NYT is reporting on the possible impact shale gas may have on the passage of climate legislation. For example: "[S]ome politicians on Capitol Hill are pushing for new natural gas incentives in climate legislation moving through Congress. They note that the fuel resource sits in many states, like Michigan and Pennsylvania, whose lawmakers are needed for passage of a bill."
The WSJ has an interesting (brief) article on the testimony anticipated from one of the energy markets' largest speculators in today's CFTC hearings. His (expected) view: That the agency should limit trading in NYMEX natural-gas futures contracts because in-and-out activity can distort the underlying gas price. (Note: Subscription required.)
[Update: For more, see this NYT article reporting on the CFTC Chairman's desire to regulate energy markets not to address price volatility necessarily but rather an over-concentration in the market. And this article in the Houston Chronicle, which reports on testimony supporting limits on futures contracts that individual traders can hold for physical delivery of natural gas, but not on financial contracts where physical delivery is not part of the arrangement.]
The United States District Court for the District of Kansas granted class certification regarding free gas claims in Schell, et al. v. Oxy USA, Inc. (Case No. 07-1258-JTM). According to the plaintiffs, the case centers around the issue of whether the surface owner or the lessee has the implied duty to make gas useable for house gas use under the relevant oil and gas leases. A case to watch if you are a producer with free gas clauses in your lease.
A copy of the court's decision can be found here.
The Pittsburgh Post-Gazette is reporting on a study done by Penn State researchers finding that a proposed "extraction tax" would hurt natural gas development in Pennsylvania. A copy of the study can be found here.
[Update: It's not only industry associations doing the research. Broome County, NY, had an Economic Impact Study done by researchers at the University of North Texas and just released the preliminary results finding that Marcellus production could mean billions to local governments over the next decade. A copy of the press release and preliminary results can be found here. (Moved up.)]
The Energy Information Administration's weekly storage report is out, showing a net increase of 71 Bcf for the week and total supplies above the 5-year range:
Working Gas in Underground Storage Compared with 5-Year Range
More information (and a better quality graph) can be found here.
Despite low prices and substantial supplies, Chesapeake Energy Corp. is continuing to increase natural gas production according to this article in the WSJ. (Note: Subscription required.)
The U.S. Court of Appeals for the D.C. Circuit has ruled on the Department of Interior's request for clarification regarding an earlier decision to vacate the 2007-2012 Outer Continental Shelf oil and natural gas leasing program, finding that it does not apply to the Gulf of Mexico. A copy of the DOI's press release on the matter can be found here.
The WSJ has an interesting article on pipeline infrastructure projects (note: subscription required). The focus is on moving gas out of the shale production regions.
Britain's Financial Services Authority is poised to find that recent oil market volatility has more to do with uncertainty over economic growth than speculation in the market, according to this article in the WSJ (Note: Subscription required.). That finding is interesting in light of recent statements made by the CFTC regarding potential greater regulation of energy commodity markets.
[Update: In a timely article, the WSJ is reporting that the CFTC is likely to come out with a report next month blaming oil price volatility on speculators. (Subscription required.) And the Houston Chronicle is reporting that the CFTC has imposed new rules on natural gas swaps on ICE (the IntercontinentalExchange) to close the "Enron loop."]
The Dallas Morning News has an interesting article on Exxon Mobil Corp.'s view of the potential for natural gas and the use of hydraulic fracturing to develop unconventional resources.
The WSJ has an interesting article on earnings and share prices of oil services companies. It notes, for example, that prices for resource extraction are down 58% in June from a year ago. (Note: Subscription required.)
[Update: In a related article, the NYT is reporting that the oil field services company Halliburton said that its 2nd quarter profit declined by 48%, to $0.29 per share. Its chairman and CEO stated that he believes it is unlikely that there will be a meaningful recovery by year end due to a continued weakness in natural gas demand.]
[Update: In yet another article, the Houston Chronicle is reporting that Schlumberger Ltd.'s second-quarter earnings are down 57%. (Moved up.)]
Senators Casey (D-PA) and Enzi (R-WY) have introduced legislation to address long-term liability issues presented by carbon capture and storage projects according to this press release from Senator Casey's office. Among other things, the "Carbon Storage Stewardship Trust Fund Act of 2009" would require private insurance for construction, transportation, injection and monitoring activities, and establish a federal trust fund from fees paid by facility operators to address claims for damages after a facility is transferred to the federal government.
Occidental Petroleum Corp. may have made the largest oil and gas discovery in California in 35 years, according to this article in the LAT. The find may be equivalent to 150 million to 250 million barrels of oil, two-thirds of which is believed to be from natural gas.
The NYT is reporting on steps being taken by the Department of Energy and the Colorado State Oil and Gas Conservation Commission to address concerns over drilling in the Piceance Basin near Project Rulison. That project involved the detonation of a nuclear device 8,400 feet underground to develop natural gas reserves, but produced gas too radioactive to sell. And of course - hydraulic fracturing is mentioned in the article as a cause for concern.
It's no secret that California is facing a real budget crisis. The LAT is reporting that an earlier proposal to allow Plains Exploration & Production Co. to drill off the Santa Barbara County coast has been revived as one mechanism to address the state's financial problems.
The Federal Energy Regulatory Commission (FERC) published two proposed rulemakings yesterday. The first seeks supplemental comments regarding possible revisions to the posting requirements adopted in FERC Order 720 for major non-interstate pipelines (Docket No. RM08-2-000). Specifically, the Commission is looking for comments regarding various proposals to post information for virtual or pooling receipt and delivery points; the use of design capacity to determine whether a receipt or delivery point should be posted; and the use of an exemption for receipt points with de minimis gas flows even if the design capacity meets the posting threshold. Comments are due 30 days from publication in the Federal Register (which hasn't happened yet).
Continue Reading...We recently posted about energy security issues in South America. The LAT has a similar article observing that the European Union is encouraging member states to increase natural gas storage and pipeline facilities to protect against Russian manipulation.
The News-Journal is reporting on the arrest of a ring of thieves - employed by area gas companies - stealing condensate from well sites across East Texas. Speculation on the loss involved - potentially millions of dollars.
The LAT has an interesting article on competing theories over the cause of oil price volatility. The two culprits (as you might expect) - "speculators" and supply/demand imbalances.
The Bismarck-Tribune is reporting that North Dakota may have another vast crude-oil bearing formation below the Bakken. Recent production results from wells in the Three Forks-Sanish formation suggest that many are as good as or better than some Bakken wells according to the state's Department of Mineral Resources.
This article in the American Statesman reports on how Austin's GreenChoice program, which sells electricity generated entirely from renewable sources, is struggling to survive. Electricity produced from the nation's most successful green-energy program - by volumes of sales - now costs nearly three times as much as the standard service.
This is interesting: Exxon Mobil is planning on investing $600 million in producing liquid transportation fuels from algae, according to this article in the NYT. The potential energy yield is significant, especially compared to corn (2,000 gallons of fuel per acre of production each year, compared to 250 gallons per acre a year).
[Update: The WSJ has an article briefly discussing this and other algae projects. Interesting. (Note - Subscription required.).]
The NYT is reporting on the competition between natural gas and coal in climate legislation before Congress. According to the article, the natural gas industry is behind in its efforts to have an impact on the pending legislation. The take away if you are interested in lowering carbon emissions: "Natural gas emits about half the carbon dioxide, the principal greenhouse gas, that coal does for the same amount of energy produced."
Wind farms may not be the energy panacea that we are looking for, according to this article in Examiner.com (Cleveland, Ohio). The problem - Impact on wildlife such as the Oklahoma prairie chicken.
Exxon Mobil is using a variant of hydraulic fracturing to develop tight sands in the Piceance Basin, according to this article in the Houston Chronicle. Very interesting.
This article in the Houston Chronicle discusses Senate challenges to climate legislation recently passed in the House. Regional differences play a key role.
The North Dakota Supreme Court held this week that deductions for natural gas processing of sour gas made by Petro-Hunt, LLC, were properly deducted from royalty payments in Bice v. Petro-Hunt, L.L.C. (Case No. 20080265). The leases at issue paid royalties based on the market-value of the gas "at the well," and the court found that the majority rule in oil and gas producing states in the country allowed a lessee to deduct post-production costs related to improving gas-quality or transporting the gas to market under this type of lease language. Adopting that rule, the court therefore rejected claims made by royalty owners that the producer had an obligation to pay all costs incurred to turn unmarketable gas into a marketable product - i.e., rejecting the first marketable product rule.
[Note: Also interesting, the court addressed issues involving the royalty-free use of residue gas and deductions made for risk-capital and depreciation.]
The Energy Information Administration is reporting that natural gas storage inventories rose by 75 Bcf last week, leaving us 601 Bcf higher than last year at this time and well above the 5-year average.
We noted earlier this year the energy security issues between Russia, the Ukraine and Europe. Venezuela has now halted oil exports to Honduras to pressure reinstatement of ousted President Manuel Zelaya according to this article in the NYT, raising similar security issues.
The EIA has published its Short-Term Energy Outlook for July, finding: "The monthly average Henry Hub natural gas spot price is expected to remain below $4 per thousand cubic feet (Mcf) until late in the year given plentiful U.S. natural gas supplies and weak demand, particularly in the industrial sector. The Henry Hub price is projected to increase from an average of $4.22 per Mcf in 2009 to an average of $5.93 per Mcf in 2010 as expected economic growth increases industrial consumption of natural gas."
A complete copy can be found here.
The Washington Post is reporting that plans by T. Boone Pickens to construct the world's biggest wind farm in Texas - 4,000 megawatts at a projected cost of $10 billion - has been put on hold due to tight credit markets and low natural gas prices.
The NYT is reporting that the Commodity Futures Trading Commission is considering limiting the volume of energy futures contracts held by purely financial investors and publishing more detailed information about aggregate hedge fund activity and traders arbitraging between domestic and foreign energy prices.
The U.S. Senate Committee on Environment and Public Works is holding a hearing today to address the need for climate legislation, entitled, “Moving America toward a Clean Energy Economy and Reducing Global Warming Pollution: Legislative Tools.” The speakers include the Secretary of the Department of Energy, Steven Chu, the Administrator of the Environmental Protection Agency, Lisa Jackson, and the Director of Climate Programs for the Natural Resources Defense Council.
Cap-and-trade appears to be favored by many - but not all - of the participants.
Copies of the prepared testimony can be found here.
[Update: A related Washington Post article can be found here.]
We previously mentioned the enforcement concerns raised by federal agents in Australia over the prosecution of new carbon crimes here. It appears that our cousins in the United Kingdom are creating a similar criminal enforcement unit to police excessive CO2 emissions, according to this article in the Sunday Times. Is this something that will cross the Atlantic? Only time will tell.
The NY Department of Environmental Conservation (DEC) is reporting that natural gas production in 2008 fell slightly to 50.32 Bcf, an 8% decline from the previous year. Still, oil and gas production in the state earned landowners nearly $61 million in royalties, with local governments receiving an estimated $14.6 million in taxes.
"The Trenton-Black River formation remains New York's dominant gas production zone, accounting for 69 percent of total production in 2008." A new on-line database can give you individual well production information if you are interested (including well owners and operators, locations, and depths). Not bad.
The WSJ has an interesting article on the risks - at least in the short term - created by too strong a focus on transitioning to renewable sources of energy. California officials are concerned, for example, over a shortage in power supply and a "high risk" to its economy in order to meet a state mandate to provide 33% of its power from renewable sources by 2020.
(Note: Subscription required.)
We've posted several times on the challenges to local energy development presented by environmental groups and others. This article in the Plain Dealer reports on a new dispute brewing between the Oil & Gas Accountability Project - a Colorado-based interest group - and Ohio's oil and gas industry over widespread revisions now being drafted for Ohio production operations.
LimaOhio.com has an interesting article on the use of wind turbines by private individuals to offset utility costs. Payback period is an issue, though.
A California Superior Court Judge has halted an expansion at Chevron's Richmond oil refinery until it produces a new environmental impact report and receives a new permit from the Richmond City Council, according to this article in the San Francisco Chronicle. The downside - workers will lose $50 to $75 million in income and the city will lose $61 million pledged to community programs until the issues get resolved.
Exelon Corp. has increased its takeover bid for NRG Energy, Inc., to $8 billion in stock, according to this article in the Houston Chronicle. The combination, reports the article, would result in the largest power generating company in the country if successful.
The Houston Chronicle is reporting on the arrest of 10 suspects charged with stealing about $2 million worth of oil and gas condensate from producers and oil companies in three West Texas counties.
Columbia Gas of Pennsylvania and Columbia Gas of Maryland have named Carol Fox as their new President, according to this article in the Pittsburgh Tribune-Review.
The Dayton Daily News is reporting on a study done by Environment Ohio that claims that dependence on fossil fuels could cost Ohio $993.6 billion by 2030, while a move to alternative sources such as wind and solar energy could save Ohioans money. That stands in stark contrast, according to the article, to claims made by the Ohio GOP regarding the Waxman-Markey climate bill.
The International Energy Agency lowered its global crude oil demand forecast for the next five years because of sluggish economic growth, according to this article in the NYT. Notably, the IEA believes that demand for crude oil will decline in 2010 for a second consecutive year, something that hasn't happened since the early 1980s.
We reported previously on U.S. EPA's proposed finding that greenhouse gas (GHG) emissions are pollutants that endanger the public's health and welfare (a first step to potential regulation under the Clean Air Act). Comments were due yesterday, and can be found here (search Docket No. EPA-HQ-OAR-2009-0171). Just a quick look at the docket suggests that hundreds of comments were filed.
[Update: There is a controversy brewing over whether EPA suppressed internal documents challenging its decision to move forward with the endangerment finding. See here for a good roundup of the issue (CBS News Political Hot Sheet). Also, you can find what may be the source of the controversy here (including the internal EPA emails and study) at the Competitive Enterprise Institute. Interesting. (Moved up.)]
The LA Times is reporting that the Administration has set aside 1,000 sq. miles of public lands in the West for two years of solar energy study and environmental review.
The American Petroleum Institute (API) has released the results of a new survey finding that Americans continue to underestimate the amount of oil and natural gas that government experts predict will be needed to meet demand while overestimating the role that renewable energy sources will play in meeting future demand. For more - including a copy of the survey results - see here.
REX-East began to flow gas to the Lebanon Hub today, according to this article in the Dayton Daily News.
Valero Energy Corp. is using a windfarm to produce electricity for its oil refinery, according to this article in the WSJ. Ready to operate at capacity in August, Valero believes that the investment will pay for itself in 10 years. (Note: Subscription required).
The Times-Picayune has an interesting article on the use of interstate pipelines to transport carbon dioxide from underground deposits or manufacturing processes in one state (e.g., Mississippi and Texas) to be used for oil production in another.
That's how this article in the WSJ characterizes three Exxon Mobil liquefied natural gas (LNG) projects scheduled to start in Qatar this year. Resulting increase in supply - 3 Bcf per day. (Note: Subscription required.)
The NYT is reporting that the House passed the Waxman-Markey climate bill with a vote of 219-212. The take away: "The legislation, which passed despite deep divisions among Democrats, could lead to profound changes in many sectors of the economy, including electric power generation, agriculture, manufacturing and construction." Now we wait to see what the Senate will do.
We've noted previously the challenges faced by Canadian oil sands projects (see here, e.g.). This NYT article reports that 18 environmental groups - led by the Sierra Club - launched a campaign this week aimed at discouraging imports of crude oil derived from Canadian tar sands into the U.S.
EQT is planning on expanding their regional headquarters in Pikeville, KY, according to this report from WYMT TV. Expected to be completed in 2010, the project involves the construction of a new 45,000 square-foot complex located at a future energy park located at Scott Fork.
A recent producer survey found that Colorado was the least attractive state in the U.S. for oil and gas development, according to this article in the Grand Junction Daily Sentinel.
The York Daily Record is reporting that the state House Environmental Resources and Energy Committee has voted to approve a 5% severance tax on Pennsylvania production, with 60% of the revenue generated from that tax to go to the state and the remainder to local governments.
A West Virginia court has ruled that the state's Department of Environmental Protection erred when it refused to issue permits to Cabot Oil & Gas Corp. to drill 5 wells in Chief Logan State Park, Logan County, WV, according to this article in The State Journal.
As Congress considers the nation's first cap-and-trade legislation, California regulators are thinking about imposing the nation's first fee on carbon dioxide emitters as a means of funding the state's greenhouse gas emissions law, according to this article in the Mercury News. If adopted, it would raise approximately $50 million annually to fund the regulatory program.
This article in the NYT discusses the risks of a geothermal project in California that intends to use a method to drill into the subsurface that was shut down in Basel, Switzerland, in 2006, due to earthquake concerns. The take-away: "[While s]eismologists have long known that human activities can trigger quakes, [] they say the science is not developed enough to say for certain what will or will not set off a major temblor."
The Hill is reporting that the Waxman-Markey climate bill may make it to the House floor by the end of this week. It is still unclear whether the legislation has enough votes to pass, however.
Bankruptcy and energy are topics frequently in the news these days, reminding us of the following case:
Earlier this year, the United States Court of Appeals for the Fourth Circuit reversed and remanded for further proceedings a lower court decision holding that certain NAESB natural gas supply contracts entered into by National Gas and a few of its customers were not "swap agreements" protected from avoidance proceedings under the Bankruptcy Code. See In re National Gas Distributors, LLC (Case No. 07-2105) (a copy can be found here).
Continue Reading...The Herald-Standard reports on an interview with Lou D'Amico, Executive Director of the Independent Oil and Gas Association of Pennsylvania, discussing the benefits to Pennsylvania from Marcellus Shale development.
SolarReserve is hoping to construct one of the largest solar plants in the world in Nevada, using heat-transfer technology developed for space rockets, according to this article in the Washington Post. The plant would consist of a field of mirrors focusing sunlight on a receiver what would heat molten salt to 1,050 degrees Fahrenheit, which would then be flowed to a storage tank and used to generate steam and power conventional steam turbines.
But there are issues raised by the Air Force.
Very interesting article.
This article from the Houston Chronicle is reporting that the U.S. rig count rose by 23 last week to 899, only the second time this year that we've seen an increase. If you are interested, you can find more information at the Baker Hughes website, here.
U.S. EPA has set November 10, 2010, as the date by which facilities must prepare or amend, and implement changes to, their SPCC Plans to comply with substantive amendments finalized on December 5, 2008 (and earlier, where applicable). Contrary to previous agency proposals, this date applies to all facilities, including those that meet the "qualified facilities" criteria - meaning that small production facilities are required to meet this deadline as well.
Moreover, EPA emphasized:
Continue Reading...This article in the Houston Chronicle reports that an Ernst & Young study released yesterday concludes that U.S. oil and gas finding costs increased 35 percent last year. In 2008, the cost per barrel of oil equivalent was nearly $52, excluding acquisitions of proved reserves.
The NYT is reporting that a study due out today by the Potential Gas Committee finds that the country's natural gas reserves have grown by 35 percent, the largest increase in committee's 44-year reporting history. The number: 2,074 Tcf (2008). The prime mover: Shale gas. Very interesting.
[Update: According to this article (also in the NYT), the increased reserves play a part in the climate debate going on now in Washington. For more on the report, see here (including how to get a copy).]
On a 15-8 vote, the Senate Energy and Natural Resources Committee approved energy legislation that would allow oil and gas development in large tracts of the Gulf of Mexico and provide incentives for carbon capture and storage programs, according to this article in the NYT.
Rising crude oil prices are causing some in Washington to revive calls for greater oversight of futures-contract purchases by those not involved in the physical production or consumption of commodities, according to this CNNMoney report.
The WSJ is reporting that several of the lawmakers involved in drafting climate legislation have a financial stake in companies that will be affected. (Note: Subscription required).
A California legislative panel has approved a proposal calling for a new 9.9% levy on oil produced in the state as part of a plan to meet the state's budget gap, according to this article in the LA Times. Does that increase or decrease the incentive to develop energy resources for California producers?
The California Energy Commission (CEC) website has several interesting reports on issues related to the energy sector. Under the heading Joint Committee Workshop on Natural Gas Issues for June 16, 2009, for example, there is a report on natural gas volatility that asks the question: "Do accurate [natural gas] price predictions actually exist?"
Answer: "A comparison of natural gas price forecasts vis-a-vis actual prices does not yield encouraging results for the accuracy of long-range forecasts." (Emphasis is ours.)
You can find this and other studies here (along with Staff presentations).
Exxon Mobil must pay an additional $480 million in interest on delayed punitive damages awards to those injured by the 1989 Exxon Valdez oil spill, more than doubling the company's costs to settle the lawsuits according to this article in the LA Times.
The same article also reports that the U.S. Supreme Court has struck down as unconstitutional a tax imposed by the city of Valdez on oil tankers docking at the city's port.
According to this article in the NYT, the Senate Energy and Natural Resources Committee has approved an amendment to energy legislation that would give the Federal Energy Regulatory Commission (FERC) authority to address suspected market manipulation through the issuance of cease and desist orders without a prior hearing on the matter.
[Update: For more on upcoming hearings, see this article in the NYT. (Moved up).]
This article from the NYT reports on a study commissioned by the American Petroleum Institute (API) finding that the U.S. oil and gas industry invested $58.4 billion over the past 8 years in greenhouse gas-mitigating technologies, while the federal government invested only $19.2 billion over the same period. Not bad.
This article in the Houston Chronicle takes a look at efforts by natural gas producers to address falling prices, noting, for example, that rig use has dropped by 56% since it peaked last September at 1,600. Producers appear to be drilling their best wells first, with vertical rig use dropping more rapidly than horizontal rig use. The article goes on to note that the Energy Information Administration expects gas in storage to reach 3.659 trillion cubic feet by October — total storage capacity in the U.S. is about 3.8 trillion cubic feet.
Interesting.
The Senate Energy and Natural Resources Committee is considering an amendment to energy legislation that would bring oil and gas leasing in the Gulf of Mexico closer to Florida's coast, according to this article in the NYT. This could mean greater access to 3.88 billion barrels of oil and 21.51 trillion cubic feet of natural gas.
The downward demand for oil may be moderating, according to this article in the Washington Post. OPEC is reportedly "cautiously optimistic" about the future, believing that demand seems to have moderated after months of downward revisions. The article further reports that earlier this week both the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA) raised their global oil demand estimates for the year.
This is interesting. The Australian Federal Police Association is concerned that federal agents are going to be required to prosecute a new range of climate crimes - at the expense of protecting against traditional crimes - under the Australian Government's plan to combat rising greenhouse gas emissions, according to this article in the Herald Sun. Possible crimes - the underreporting of carbon emissions and false carbon offset schemes.
The article goes on to note that Interpol believes that criminal gangs will find the new carbon market "irresistible."
In Northup Properties, Inc. v. Chesapeake Appalachia, LLC (Case No. 08-5718), the United States Court of Appeals for the Sixth Circuit recently held that delay rental payments maintained an oil and gas lease despite the fact that the lease property went undeveloped for nearly forty years (applying Kentucky law). Notably, the court found that the lease was unusual in that it did not contain the typical habendum clause (e.g., it did not use the "as long as" or "so long as" language commonly found in lease term provisions).
[Note that the court did not address the impact of the producer's failure to timely pay the delay rental at one point, however.]
The Administration's proposed tax changes could have significant adverse consequences for the oil and gas industry says Alex Mills, president of Texas Alliance of Energy Producers, according to this article in the Times Record News.
Expanded oil and gas leasing in the Gulf of Mexico has been approved by the Senate Energy and Natural Resources Committee, according to this article in the NYT. The measure would allow drilling as close as 45-miles offshore Florida, and is part of a markup of broader energy legislation.
Companion bills were introduced yesterday in both the U.S. House and Senate to repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act and to require the disclosure of chemical constituents used in frac fluids (the "FRAC ACT" - Fracturing Responsibility and Awareness of Chemicals Act). More information can be found here. Copies of the legislation can be found here (Senate - S. 1215) and here (House - H.R. 2766).
[Update: For more, see here (article from WSJ, subscription required); and here (from the Wayne Independent).]
Water may be the largest challenge for western oil shale production, according to this report in the NYT. It appears that environmental groups are concerned about the acquisition of significant water rights at numerous locations in the Colorado River basin.
One expert has speculated that recent earthquakes in Cleburne, Texas, may be due to nearby oil and gas drilling activity, according to this report in the Dallas Morning News. Other scientists disagree, stating that there is no known link between drilling and earthquakes - reminding us of the adage, "Correlation does not imply causation."
Columbia Gas of Virginia has proposed several conservation programs estimated to save customers $22 million over time, according to this article in The Virginian-Pilot. Columbia plans on recouping revenues lost from implementing the conservation measures with a new customer charge. Unclear, ultimately, how the incentives will play out.
Some alternative energy sources are having better success at encouraging investment than others, according to this article from the NYT. Not surprisingly, there is growing competition between alternative-energy technologies.
[Update: A related article on local community opportunities can be found here, from the Akron Beacon Journal.]
This article from the Houston Chronicle provides some interesting statistics on natural gas prices. For example, according to the report the number of natural gas rigs dropped last week to 700, the lowest it's been since 2002.
This article in the Fort Worth Business Press points out one of the major issues presented by recent efforts to more-strictly regulate the use of hydraulic fracturing in oil and gas development - who should have jurisdiction, the federal government or state oil and gas commissions? Not a bad article.
The Tennessee Valley Authority has approved a new 880-megawatt gas-fired power plant in northeast Tennessee, according to this press release. Estimated cost - $820 million.
This article from the LA Times takes a look at rising oil prices at a time when there is a surplus in the commodity and where domestic demand is down. Interesting.
At least some mineral owners are unhappy over Colorado's new drilling rules, according to this article in the The Grand Junction Daily Sentinel. Take away quote from one mineral owner: "I didn’t donate my land to become wildlife habitat."
This article in the Houston Chronicle reports that some drilling costs are declining, while others - including personnel costs - remain relatively unchanged.
The Department of Interior has forwarded to Congress a report containing recommendations on a national program to reduce greenhouse gas emissions through a carbon capture and storage program on public lands. More information, including a copy of the report, can be found here.
The Ohio Supreme Court recently held that the state public utilities commission has exclusive authority over a landowner's claims regarding vegetation management (i.e., whether or not to remove a tree) within a utility easement. A copy of the court's decision can be found here (2009-Ohio-2524).
This article from the Houston Chronicle reports on industry opposition to increased federal oversight of hydraulic fracturing in the shales. Turns out, there is a House Natural Resources subcommittee hearing today on U.S. shale gas production. Interesting.
More information on the subcommittee's hearing can be found here.
[Update: A number of reports have surfaced recently on the issue. See, e.g., here (Dallas Morning News - noting the Ground Water Protection Council's recent report finding state regulation effective); here (WENY-TV News - reporting on Congressman Hinchey's reintroduction of legislation to repeal the exemption of hydraulic fracturing from the Safe Drinking Water Act); and here (WSJ - subscription required - discussing industry resistance to new regulations).]
A new lawsuit has been filed challenging the settlement requiring the application of NEPA standards and evaluation on mineral development proposals in the Allegheny National Forest, according to this press release from the Pennsylvania Oil & Gas Association. One of the plaintiffs - Warren County, PA.
This article from the NYT looks at renewed interest in Canadian oil sands production, with projects becoming economic at the $40 to $60 per barrel range according to one analyst. Politics is a great unknown, however.
This article from the Toledo Blade looks at the opportunities for residential natural gas buyers to lower their bills and some of the factors pushing prices down. Interesting.
It looks like legislation will be introduced in the next couple of weeks to overhaul Ohio's oil and gas regulatory program, according to this article from the Columbus Dispatch. Stay tuned.
We've reported previously on the State Lands Commission's rejection of new drilling offshore California. Governor Schwarzenegger has proposed a plan to overcome that rejection through legislative action, a move that the Commission also opposes according to this article in the LA Times.
According to this article in the News-Gazette, Champaign, Illinois, is considering imposing a 2.75 percent natural gas use-tax on entities purchasing natural gas produced outside the state. The possible benefit to Champaign residents - $1.4 million. If adopted, expect a challenge.
Chesapeake Appalachia, LLC, is considering the possible lease and development of natural gas underlying parks in Oglebay and Wheeling, WV, according to this article in The Intelligencer & Wheeling News-Register. Note the comments.
U.S. Geological Survey is reporting that the Gulf of Mexico has a very thick and concentrated gas-hydrate-bearing reservoir with the potential to produce gas using current technology. More here.
Baker Hughes is reporting that the number of active oil and gas rigs in the U.S. is down to 899, according to this article in the Houston Chronicle. This is less than half the number of rigs from only a year ago.
Despite depressed demand and a surplus of supply, the price of crude oil is rising - which some analysts attribute to the view of traders and investors that the U.S. economy is at or near bottom, according to this article in the Washington Post. Let's hope their right.
U.S. Geological Survey researchers have concluded that 30% of the world's undiscovered natural gas reserves and 13% of the world's undiscovered oil reserves are located north of the Arctic Circle, according to this article in the LA Times. Interesting - global warming may make these reserves more accessible.
The Ground Water Protection Council (GWPC) has released a new study on state ground water protection regulatory programs, a copy of which can be found here. The electronic copy has hyperlinks to background materials. A nice resource.
A new report by the Council on Foreign Relations suggests that development of Canadian oil sands will not lead to the climate disaster that activists fear or free the United States from dependence on Middle Eastern oil, according to this article in the NYT.
A copy of the report can be found here.
This article in the NYT takes a look at the renewed interest by major oil companies in ethanol production. The motivation - ambitious federal mandates for refineries regarding biofuel-gasoline blends.
The Houston Chronicle is reporting that compromises made to get approval of the Waxman-Markey climate change legislation may partly defeat the purpose of having a cap-and-trade program according to a study done by Point Carbon, a Norway-based news and analysis service covering electricity and natural gas markets. The reason - leveling the playing field between natural gas and coal reduces the financial incentive favoring lower-emitting fuels like natural gas.
This article from the NYT looks at how energy plans proposed by prior Administrations and mandated by Congress have fared over the years. As you might expect, the results are poor.
The International Energy Agency (IEA) is warning that cuts in new production investments may lead to significantly higher oil prices, according to this report in the LA Times. Cuts to planned investments amount to a decline in 2 million barrels of oil per day.
The NYT is reporting that the Waxman-Markey climate legislation has been approved by the House Energy and Commerce Committee, largely along party lines. Representative Rogers of Michigan said, “This is the biggest energy tax in the history of the United States." Stay tuned.
A new report from the consulting firm Wood Mackenzie suggests that this may not be a good time for state and federal mandates on renewable resources due to declining demand for electric power and new power plants scheduled to come online in the next few years, according to this article in the Houston Chronicle. No surprise there.
The Buffalo News is reporting that the early results from a new well drilled by a joint venture between National Fuel Gas Co. and EOG Resources in the Marcellus Shale are encouraging. Its initial rate of production appears to be more than 3 MMcf per day, more than 9 times the initial rate of production of the joint venture's first well. Nice.
Oil refiners are predicting higher gasoline prices as a result of the Waxman-Markey proposed climate legislation, according to this article in the WSJ. That's because the legislation allocates only 2% of the emissions allowances to the industry, requiring refiners to buy the rest of their needed allotment at auction or in the open market.
[Note: Subscription required.]
According to this article in the WSJ, material, labor and drilling costs have declined since the first quarter of this year - due in part to the lower price of steel, cheaper diesel fuel, and most importantly, a drop in demand for drilling equipment.
[Note: Subscription required.]
The Delaware River Basin Commission has announced that natural gas production from shale formations located within the drainage area of the Basin's Special Protection Waters may not commence without first applying for and obtaining Commission approval. This, according to the Commission, will impact most of the shale formations in the Basin in which new horizontal drilling and hydraulic fracturing techniques are being used. More information can be found here.
This article in the NYT reports on how cap-and-trade became the mechanism of choice in Congress for addressing greenhouse gas emissions. Clinton-era politics played a significant role.
The Secretary of Energy, Steven Chu, has announced an additional $2.4 billion in federal funding for the expansion of commercial deployment of carbon capture and storage (CCS) technology. This is part of the Administration's ongoing efforts to develop technologies to reduce carbon dioxide emissions. More information can be found here.
U.S. EPA has scheduled the first of two public hearing on its proposed greenhouse gas endangerment finding for next Monday, May 18, 2009, from 9:00 a.m. to 8:00 p.m. in Arlington, Virginia. More information - including an audio link to the hearing - can be found here.
Governor Schwarzenegger is proposing to raise $1.8 billion for California by reviving the first new oil drilling project off the state's coast in 40 years, a proposal that was rejected in January by the State Lands Commission according to this article in the Houston Chronicle. That . . . and selling San Quentin . . .
The Salt Lake Tribune is reporting that several exploration companies and Utah counties are suing the Department of Interior in federal court over the Bureau of Land Management's refusal to lease certain properties to winning bidders at a December 19, 2008 auction. Reading the article, you get a sense of the machinations involved to obstruct development.
The Maryland Public Service Commission has initiated proceedings to review the hedging policies of state gas and electric utilities for the 2009-2010 winter heating season. A copy of the notice can be found here.
The Energy Information Administration has released its May 2009 Short-Term Energy Outlook. It summarizes: "The Henry Hub natural gas spot price is projected to average $4.06 per thousand cubic feet (Mcf) in 2009, down from an average of $9.13 per Mcf in 2008. Then, buoyed by modest economic growth next year, the price is expected to increase to an average of about $5.21 per Mcf in 2010. The projected steep decline in industrial output this year is expected to reduce industrial natural gas consumption by 8 percent, resulting in a 1.9-percent decrease in total annual consumption of natural gas. Natural gas consumption in the electric power sector, however, is projected to increase by 2.1 percent since lower natural gas prices are expected to back out some coal consumption in this sector."
A copy can be found here.
The Electric Reliability Council of Texas (ERCOT) - which manages 85% of the state's electric load - has released a report on the near-term impacts of proposed federal climate change legislation. Among other things, the report finds that if natural gas prices are $7 per MMBtu, the carbon allowance costs must be between $40 and $60 per ton to reduce carbon emissions in ERCOT generation to 2005 levels, resulting in an annual increase in wholesale power costs of approximately $10 billion.
A copy of the report can be found here, posted by the Texas Public Utility Commission.
According to reports in both the Washington Post and the Chicago Tribune, rising oil prices may be the result of market investors and a moderating global economy (e.g., increased imports to China). Some analysts caution, however, that these price increases may be premature because of a continued weakness in the economy. Stay tuned.
This is interesting (politics). Today, the Senate Committee on Environment and Public Works is holding a hearing on U.S. EPA's 2010 budget proposal. While questioning EPA Administrator Jackson, Senator John Barrasso (R-Wyo.) produced a memorandum reportedly from White House Counsel to EPA that he characterized as a "smoking gun" because it suggests a lack of scientific support for EPA's proposed finding that greenhouse gases are a danger to public health. An OMB spokesperson has apparently confirmed that it was prepared by the President's administrative staff.
Video of the questioning, as well as a copy of the memorandum, can be found here.
The Colorado Oil and Gas Conservation Commission (COGCC) has amended its rules to eliminate the right of the Department of Public Health and Environment and the Division of Wildlife to appeal permitting decisions made by the COGCC director. The amendments take effect July 1, 2009. More information can be found here.
The Energy Information Administration (EIA) has released an update of its Natural Gas Market Centers special report, which examines the role and importance of these market centers to shippers, pipelines and other transporters of natural gas in North America. Offers a good overview of the issue. A copy can be found here.
This NYT article is reporting that venture capital appears to be moving away from investments in alternative energies - such as algae and solar - and returning to information technology used to increase energy consumption efficiencies. Very interesting.
The Pennsylvania Department of Conservation and Natural Resources (DCNR) has released a report discussing the viability of using the state's subsurface geologic formations for development of a carbon sequestration network. For more information, see here.
The Houston Chronicle has an interesting article on the need for greater communication by the American energy industry to defend itself publicly and dispel the myths about meeting the country's energy needs through the use of renewable resources.
The Philadelphia Inquirer is reporting that the PA Governor's plan to impose a new severance tax on energy production in Pennsylvania is meeting resistance, with the Senate passing a budget last week that did not contain the Governor's proposal. At least one lawmaker stated that the proposal is "off the table" at least until the industry can firmly establish itself in the Marcellus Shale.
U.S. EPA is reviewing whether to grant an ethanol industry request to raise the maximum amount of ethanol that can be added to gasoline to create a 15-percent blend from 10 percent allowed today, a move that could affect more than 500 million gasoline engines used in large pickups to lawn mowers, according to this NYT article.
The Department of Energy has decided to eliminate funding for research on automotive hydrogen fuel cells, finding that it won't be practical over the next 10 to 20 years, according to this NYT article.
The DEO is also likely to restore funding for FutureGen according to the article. Interesting.
The NYT is reporting that the President's budget proposal will include a repeal of intangible drilling cost expensing and of the percentage depletion for oil and natural gas. That doesn't sound like change the industry should believe in.
[Update: CBS News is reporting that the proposed budget - just released - will cost the industry $52.4 billion over the next 10 years as a result of these repeals. (Moved up).]
[Update: For more, see this press release from IPAA; or this article from the Salt Lake Tribune. (Moved up).]
Not dramatically. But this report from the Houston Chronicle notes that futures prices rose above $4 for the first time in weeks following information from the Labor Department suggesting that the recession may be easing.
This report from the Dallas Morning News discusses the difficulties faced by large producers in the Barnett Shale in slowing production because of the crash in natural gas price.
The Washington Post is reporting that President Obama and Vice President Biden are pressing House Democrats to take action on the American Clean Energy and Security Act of 2009 issued for comment last month by Henry A. Waxman (D Ca.), Chairman of the Energy and Commerce Committee, and Edward J. Markey (D. Mass.), Chairman of the Energy and Environment Subcommittee. Much of the concern appears to be that this initiative stands in the way of health care legislation that the Administration wants to move forward.
U.S. EPA has proposed a strategy for increasing the nation's supply of renewable fuels that includes a percentage-based standard that refiners and others must ensure is used in transportation fuel; and that requires renewables to achieve greenhouse gas reductions when compared to the gasoline and diesel fuels they displace.
For more information, see here.
Gulf of Mexico (GOM) oil production could peak by 2013 at more than 1.8 million barrels per day, but natural gas production in the Gulf is likely to continue to decline, according to this article from the Houston Chronicle reporting on a recent study issued by MMS. A copy of the MMS study can be found here.
The Pennsylvania Department of Environmental Protection (DEP) has concluded that Schreiner Oil and Gas Company is the entity responsible for gas migration and water supply issues in McKean County, according to this DEP press release. It reasoned: "Schreiner has been actively drilling combination oil and gas wells in the area since last fall and did not establish background water quality in the area prior to drilling. Therefore, Schreiner is presumed responsible for restoring water supplies within 1,000 feet of the drill sites."
This article from the LA Times discusses the impact gasoline prices have had on driving behavior in California. No surprise - people are driving less and looking to alternative fuels, like natural gas. Still, it is interesting.
The development of oil and natural gas resources underlying state lands gets more complicated when the mineral and surface estates have been severed, according to this article in the Pittsburgh Post-Gazette.
[Update: The article above refers to Belden & Blake Corp. v. Commonwealth of Pennsylvania, DCNR, a Pennsylvania Supreme Court decision issued just last week (April 29, 2009) and involving a producer's right to develop the minerals underlying state lands when the mineral and surface estates have been severed.
Continue Reading...This article from the Shreveport Times discusses the continued interest in and possibilities for development of the Haynseville Shale.
This column in Newsweek makes the case that the Administration is biased against the oil and natural gas industries, contrary to our national interest. Interesting.
A Vorys attorney recently had the opportunity to participate in a small group lunch with a member of the House Energy and Commerce Committee this week and shared several insights into the status of the Waxman climate change bill. First and foremost, it was clear to this Committee member that Chairman Waxman does not have the votes to move the bill as presently written out of the Energy and Commerce Committee. Blue Dog Democrats from the Midwest have said quite clearly that they will not vote for the current bill unless it is changed to, as one Blue Dog member put it, "make it less punitive to coal states."
There are a significant number of issues now being negotiated between the Blue Dogs and Chairman Waxman, including the level of energy that must be produced from renewable sources and the target date for achieving that goal; the variety of technologies that will be included in the definition of biomass energy production; and perhaps the biggest issue, whether CO2 emission allowances will be auctioned or distributed for free. The Blue Dogs are almost uniformly opposed to using the auction of allowances to pay for other unrelated government programs, like healthcare reform.
Continue Reading...Environmentalists have filed yet another lawsuit against the U.S. Forest Service and the Bureau of Land over the impacts of energy development on federal lands, according to this article from MSNBC. This time it involves claims that the agencies failed to curb air pollution in the San Juan Basin.
On Wednesday, the Pennsylvania Budget and Policy Center issued a report entitled Responsible Growth: Protecting the Public Interest with a Natural Gas Severance Tax, asserting that a well-structured severance tax will protect Pennsylvania taxpayers from the public costs associated with increased drilling in the state. More generally, it looks at the potential costs of natural gas drilling on taxpayers and the environment, how other states structure severance taxes, and the lessons that can be learned from those structures. A copy can be found here.
Pennsylvania producers - through their trade associations, primarily - have opposed new severance taxes on the industry, pointing out their adverse impacts on prices and development.
The WSJ published an Energy Report with several interesting articles. One takes a look at the technologies Western oil companies are using to increase their crude oil production, including the use of carbon dioxide and water flooding to increase reservoir pressure. A copy can be found here.
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American natural gas potential heralds a shift in the nation's energy landscape, according to this article in the WSJ. Interesting look at the potential for shale development and its impact on energy and environmental policies.
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On December 5, 2008, CenterPoint Energy Gas Transmission filed an application with the Federal Energy Regulatory Commission (FERC) to construct and operate an expansion of its Carthage to Perryville pipeline (Line CP) in order to increase deliveries of Haynesville Shale gas supplies to the Perryville Hub. The FERC granted that application earlier this week (see here, search for Docket No. CP09-29).
The Hill reports that one high-ranking Democrat has indicated that cap-and-trade legislation may not reach a vote in the House this year if there is a belief that it may not pass the Senate.
U.S. EPA has submitted a proposed finding to OMB that greenhouse gas emissions are pollutants that endanger the public's health and welfare, according to this report from the Washington Post. If finalized, it could lead to the regulation of carbon dioxide under the Clean Air Act.
[Update: EPA issued the proposed finding today, providing for a 60-day public comment period following publication in the Federal Register. A pre-publication copy can be found here. (Moved up).]
[Update: The proposed finding has now been published in the Federal Register here (as well as supporting documents). Comments are due on or before June 23, 2009, Docket No. EPA-HQ-OAR-2009-0171. (Moved up).]
The NYT has an article on how nuclear power may be used to produce oil from oil sands in Canada. Very interesting.
"When drills unleash danger: Does underground hunt for natural gas put drinking water at risk?" is the title to this special report in the Albany Times Union from ProPublica, a nonprofit New York City newsroom. Similar to other reports by ProPublica challenging energy development in the Marcellus Shale and elsewhere around the country.
Landowners in NY remain concerned that the economy and state regulatory obstacles will encourage producers to move south to Pennsylvania, Ohio and West Virginia, according to this article in pressconnects.com (Greater Binghamton, NY). Interesting article if you're looking to drill in the Marcellus.
The Florida House is prepared to vote on a measure that would allow the governor and Cabinet to approve oil drilling as close as three miles off Florida's coast, according to this article in the Miami Herald. Proponents claim that it could be worth to Florida $6 billion a year and create more than 16,000 jobs.
[Update: The Florida Senate promptly rejected the proposal, according to this article, also from the Miami Herald.]
California has adopted the nation's first low-carbon fuel mandate in an effort to reduce associated greenhouse gas emissions, according to this article from the LA Times. The new rules require a reduction in the carbon content of fuels sold in the state by 10 percent by 2020 (including emissions related to the delivery of fuels to California consumers).
EQT has launched its Big Sandy Pipeline to transport gas from the company's Langley processing plant in Floyd County, KY, to markets in the northeastern United States. For more information, see here.
The Energy Information Administration has released several new publications: Natural Gas Year-In-Review 2008; Natural Gas Market Centers: A 2008 Update; EIA’s Natural Gas Production Data; and Natural Gas Residential Choice. Copies can be found here.
The Department of Energy has issued a primer on modern shale gas development in the U.S. Commissioned through the Ground Water Protection Council, it's full of interesting information on shale gas resources, technology and regulation. A copy can be found here.
This is interesting - The Manhattan Institute has released its second edition of Energy & the Environment: Myths & Facts. It takes a look at public opinion on energy matters, such as the energy resources relied upon in the U.S., the safety of nuclear power, and the promise of renewable energy sources.
Did you know, for example, that Canada is our top foreign supplier of oil, and not Saudi Arabia? (Only 13% of those surveyed answered the question correctly.)
The House Committee on Energy and Commerce is holding hearings on the American Clean Energy and Security Act of 2009 issued for comment late last month. Related documents and videos of the testimony can be found here (including, for example, testimony from the new Administrator of U.S. EPA, the new Secretary of U.S. DOE, representatives of electric power producers and The Heritage Foundation and the American Enterprise Institute). Interesting.
According to this NYT article, small independents are projecting optimism in face of difficult crude oil and natural gas markets. Not a bad discussion of the challenges faced by industry.
The Colorado Supreme Court has upheld a lower court ruling that the withdrawal of groundwater during coalbed methane production is an integral part of the CBM process requiring a permit under state law. A copy of the decision can be found here.
The Public Utility Commission has concluded that effective retail natural gas competition still does not exist in Pennsylvania, according to this report from the Pittsburgh Post-Gazette.
Clean energy isn't cheap, according to this report from USA Today. California, for example, has some of the highest electric rates in the country, in part because it requires twenty-percent of its power to be produced from clean energy sources by 2010.
The Federal Energy Regulatory Commission (FERC) has issued its 2008 State of the Markets Report. Among other things, it notes that the dramatic natural gas price levels and fluctuations seen last year can only be explained in part by market forces. It also discusses how unconventional shale production is altering the nature of natural gas markets. An interesting report (a copy can be found here).
Chesapeake Energy Corp. plans on cutting back natural gas production in the Mid-Continent and Barnett Shale regions due to low energy prices, according to this report from the Fort Worth Business Press.
A federal court has told the Department of the Interior that it must better consider the environmental impacts of the Department's crude oil and natural gas leasing plan for 2007-2012, possibly halting development in the Gulf of Mexico and Alaska, according to this report from CNN.
The PA Department of Environmental Protection has announced new discharge standards for industrial wastewater high in total dissolved solids (TDS), effective January 2011. This could have an impact on energy development in the Marcellus Shale, and is being addressed by the Pennsylvania Oil & Gas Association.
DEP plans to undertake a rulemaking to amend the water quality regulations accordingly some time this summer, allowing interested parties an opportunity for public comment.
The American Petroleum Institute (API) reports that drilling activity has decreased to levels not seen since 2004, according to this report from the Houston Chronicle. A recent Baker Hughes rig report states that the number of natural gas rigs in the U.S. has dropped to 790.
Yesterday, the Public Utilities Commission of Ohio adopted rules for meeting the alternative energy portfolio standards required under S.B. 221. Among other things, the new rules establish incremental percentage requirements that electric utilities must meet to fulfill the renewable portion of the portfolio standard (e.g., its sets a benchmark of 2.5% for renewable energy resources by 2014), which can be met through the use of renewable energy credits (RECs). The new rules also establish requirements for greenhouse gas reporting and carbon dioxide control planning.
For more, see here.
The EIA's Short-Term Energy Outlook for this month has been released. Regarding natural gas, it concludes:
Total consumption of natural gas is projected to fall by nearly 2 percent in 2009, leading to lower natural gas prices. Industrial natural gas consumption is expected to decline by more than 7 percent, as industrial production declines during the current economic downturn. However, natural gas consumption in the electric power sector is projected to increase by almost 1 percent, since the lower natural gas prices will back out some coal consumption in this sector. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to $4.24 per Mcf in 2009, then increase in 2010 to an average of more than $5.80 per Mcf.
A copy of the report can be found here.
This is interesting - The largest refiner in the U.S. Midwest, Marathon Oil Corp., has reported that its margin on a gallon of gasoline was 8-cents last quarter, up from a negative 26-cents a year ago, according to this report in the Houston Chronicle.
We reported earlier on litigation brought by energy producers in PA against the U.S. Forest Service for preventing development in the Allegheny National Forest. A separate lawsuit brought by environmental groups regarding that development was recently settled, according to this article in the Philadelphia Inquirer. According to the Pennsylvania Oil and Gas Association (POGAM), this settlement would require future drilling projects in the Forest to undergo site-specific environmental assessments under NEPA.
POGAM has asked the court for a stay of the settlement. More on this issue can be found here.
This is interesting - "Unconventional sources of natural gas will account for more than half of North American supply by 2020, despite a current industry downturn, according to a new report by a Calgary-based energy consultant." From this article in the NYT. It looks like others - outside the industry - are starting to pay attention.
Retail customers can now terminate their gas contracts with a fee of no more than $50 under a new Illinois law, according to this article in the Chicago Tribune.
President Obama's new science adviser, John Holdren, has indicated that geoengineering the climate - by introducing pollution particles into the atmosphere, for example - is being considered as one method for addressing global warming concerns, according to this article in the Washington Times. The law of unintended consequences suggests, though, that we might want to be very cautious in our conclusions regarding global warming before relying on this technology.
Last year, in a series of orders the Federal Energy Regulatory Commission (FERC) required certain market participants to report limited information on the previous calendar year's natural gas transactions by May 1st of the following year (see here for more information, including forms). At the request of the Independent Petroleum Association of America and others, the deadline for compliance this year has been extended to July 1, 2009.
Atlas Pipeline Partners, LP, has announced that it has sold its NOARK natural gas gathering and interstate transmission system to Spectra Energy Partners, LP, for $300 million in cash.
We reported previously on Santa Barbara's surprising willingness to encourage drilling offshore for energy development last August. According to this LA Times article, that decision is now being reconsidered.
Department of Interior Secretary, Ken Salazar, is hosting a series of regional public meetings to gather public comment on a comprehensive energy strategy for the Outer Continental Shelf. Videos of his comments and copies of his presentations can be found here.
Columbia University researchers may have found a method for separating natural gas from permafrost, according to this NYT report.
According to this report in the WSJ, higher futures prices relative to near-term prices (contango) may encourage the increased use of supertankers to store crude oil offshore. [Subscription required.]
Williams Cos., Inc., and Atlas Pipeline Partners, L.P., have formed a joint venture - Laurel Mountain Midstream, L.L.C. - to gather and process natural gas produced from the Marcellus Shale, according to this report from the Philadelphia Inquirer.
Here's some good news - U.S. Geological Survey has updated its 1989 assessment of oil shale in-place in the Piceance Basin in western Colorado to 1.525 trillion barrels. You can access a copy of the study here.
Catalyst Energy, Inc., has sued the U.S. Forest Service over its refusal to permit energy development in the Allegheny National Forest despite having the mineral rights to do so, according to this report from the Philadelphia Inquirer.
The EIA's March 2009 Short-Term Energy Outlook is now available. Among other things, it finds that:
The U.S. economic downturn is the principal cause for the decline in domestic natural gas consumption, particularly in the industrial sector—where it is projected to fall by 6 percent in 2009—which in turn has led to lower natural gas prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to about $4.70 per Mcf in 2009, but then increase in 2010 to an average of almost $5.90 per Mcf.
Henry A. Waxman (D Ca.), Chairman of the Energy and Commerce Committee, and Edward J. Markey (D. Mass.), Chairman of the Energy and Environment Subcommittee, released a discussion draft of The American Clean Energy and Security Act of 2009. Among other things, the Act seeks to encourage the development of renewable energy sources and carbon capture and storage technologies. Both a copy of the draft and a summary can be found here.
Legislation has been introduced into the Ohio House of Representatives that would create an oil and gas leasing board having exclusive authority to lease state lands for oil and natural gas development. A copy can be found here.
This report from the NYT discusses the continued investment in oil shale development despite opposition from the Obama Administration. To quote the Vice President for Energy and the Environment at Red Leaf Resources: "There are no silver bullets. We can economically and environmentally produce a number of resources, and oil shale can be a part of that going forward."
U.S. EPA has announced that it is extending the deadline for compliance with recent, substantial amendments to the SPCC Rule until January 14, 2010. EPA will also be asking for comment on whether a further extension of the rule may be warranted for some regulated entities.
The Maryland Public Service Commission has directed several of the state's local natural gas distribution companies to purchase a significant share of their summer injection needs immediately to take advantage of low natural gas prices and protect against future price volatility. A copy of the order to Columbia Gas of Maryland, Inc., and others, for example, can be found here.
[Update: The Maryland PSC has rescinded its earlier orders following an emergency hearing at which LDCs explained that due to a run up in natural gas prices they would not be able to meet the prices set by the PSC. Still, the PSC found that its prior reasoning for directing summer gas injection purchases remained valid, and issued redacted orders appearing to direct the LDCs to procure unstated volumes at unstated prices. (Moved up.)]
This is interesting - There are some NY legislators opposed to a new 5% production tax proposed by Governor Paterson, according to this report from the Long Island Exchange.
This should come as no surprise - Concerns are increasing that reduced investment and low prices may result in lower production and future price shock when the economy picks up, according this article in the NYT. The article discusses a new study by Cambridge Energy Research Associates (CERA) scheduled for release today.
The Colorado legislature has given final approval to controversial new oil and gas drilling regulations, according to this report from the Denver Post. If signed into law by the Governor, they would go into effect next month.
Some Democrats in Congress have warned the Obama Administration that newly proposed fees and taxes on the oil and gas industry could lead to a decrease in domestic production and higher consumer prices, according to this article in the Houston Chronicle.
The PA House Republican Energy Task Force unveiled their Energize PA plan to expand natural gas drilling on state forest lands over the next three years. This is in contrast to the new severance tax proposed by the PA Governor in February. More details can be found here (a press release from PA Rep. Reed's office).
This NYT article takes a look at the impact of increases in liquefied natural gas imports and declining demand on natural gas prices and U.S. production.
Red Adair was famous in the industry for fighting oil fires. He can be heard in an interview on Voices of America radio here. Very cool.
The West Virginia Department of Environmental Protection has released a draft guidance document on appropriate water use and disposal when drilling in the Marcellus Shale. Comments are due April 17, 2009. A copy can be found here, at the Department's website.
Last month, an SMU researcher issued a report concluding that natural gas production in the Barnett Shale released significant volumes of volatile organic compounds. Last week, the Barnett Shale Energy Education Council released a counter-study concluding that natural gas drilling in the Shale released far less air pollution than the SMU estimate, according to this report from the Star Telegram.
The nation's largest independent refiner, Valero Energy, has agreed to buy seven ethanol plants from VeraSun Energy, according to this NYT report. The price tag - $477 million.
This article from the NYT notes the tensions created by President Obama's goals of obtaining sufficient, diverse sources of energy supply for the country while reducing fossil fuel consumption and curbing carbon emissions. As the president of the National Petrochemical and Refiners Association put it, "[T]he new administration 'looks at the oil and refining industry as a piggy bank to fund other energy programs.'”
API officials are meeting with the new Interior Secretary, Ken Salazar, this week to discuss the Administration's proposals to impose new fees and eliminate tax incentives for American energy producers, according to this report from the Houston Chronicle. Among other things, at issue are plans to repeal deductions for intangible drilling costs, prevent oil and natural gas companies from claiming domestic manufacturing deductions and a repeal the percentage depletion for wells.
[Update: The Fort Worth Business Press is reporting that the Natural Gas Council has sent a letter to Congress pointing out the effect of the new Administration's tax proposals on the production industry and, ultimately, prices to the consumer. A similar letter from IPAA can be found here. (Moved up)]
The Interior Department's Inspector General has stated in written testimony to the Energy and Mineral Resources Subcommittee that oil and gas companies holding federal leases "have little obligation to actually produce," according to this report from the NYT. This has prompted the Administration to consider imposing new fees on non-producing Gulf of Mexico leases as part of the Democrats "use it or lose it strategy" for encouraging use of federal leases.
Environmental groups are urging Pennsylvania to adopt a state severance tax, according to this report from the Pittsburgh Post-Gazette. This would be in addition to other fees imposed on producers in the state.
Some natural gas customers are complaining about the contracts they entered into now that gas prices have declined, according to this report from the Columbus Dispatch.
Controversial new rules for drilling in Colorado passed an informal vote in the state House of Representatives, according to this report from the Denver Post. The legislation still needs a formal, recorded vote before moving to the state Senate.
From the NYT - Falling energy prices are leading oil and gas producers to decrease their drilling programs. Of course, "That means a glut could rapidly turn to scarcity, sending energy prices soaring again."
Cabot Oil and Gas Company has been charged with violations of Pennsylvania water law in connection with drilling certain natural gas wells in Susquehanna County, according to this report from News Channel 34. A more detailed report can be found here from the Wayne Independent.
While power use could increase more than 20% over the next two decades, companies are reconsidering new coal-fired power plant construction over uncertainty regarding greenhouse gas regulation, according to this USA Today report.
Legislation has been proposed in Kentucky to authorize the leasing of state lands for oil and gas development, according to this report from the Lexington Herald-Leader.
Oklahoma's Attorney General is investigating whether Canadian oil imports are being used to drive down Oklahoma oil prices, according to this report from MSNBC.
An article from U.S. News and World Report argues that we need to be careful to avoid simply replacing our dependence on foreign oil with a dependence on foreign natural gas. This is particularly true where major foreign producers might be tempted to use that dependence as a political weapon, like Russia did only recently to the Ukraine.
In USA Today: Cutbacks in drilling projects and capital investments are likely to lead to future crude oil price increases faster than many analysts expect. This follows a potential 9% decline in daily crude oil production in 5 years if current trends persist. An interesting article.
A new study released by Informa Economics finds that it is impossible to assign a cause to the increased volatility experienced by commodity markets over the past several years. "Perhaps increased participation by these groups [e.g., index traders and money managers] resulted in increased volatility. Alternatively, higher volatility may have attracted money from these groups into these markets." A copy of the study can be found here.
Interestingly, it notes that natural gas and crude oil markets showed much less evidence of increased volatility than grain contracts.
Chesapeake Energy Corporation announced yesterday that it plans to reorganize its Charleston, West Virginia office from a regional corporate headquarters to a regional field office. It plans on moving to Oklahoma City or eliminating approximately 215 of the 255 Charleston-based positions, leaving only 40 positions in Charleston. A copy of the press release can be found here.
NiSource Gas Transmission & Storage (NGT&S) announced today that it would be cutting approximately 370 to 380 positions in 2009. A copy of the press release can be found here.
NGT&S companies include Columbia Gas Transmission, LLC, Columbia Gulf Transmission Co., and Crossroads Pipeline.
According to this article in the Register-Guard, a Florida contractor has been ordered to pay $1.5 million in penalties due to violations of the Clean Water Act while constructing a 60-mile natural gas pipeline in 2003. It goes on to note that penalties were imposed for dirt and sediment discharges to streams and wetlands and despite little evidence of serious environmental harm. A cautionary tale.
The Washington Post is reporting that Interior Secretary, Ken Salazar, has decided to scrap oil-shale development leases on federal land in Colorado, Utah and Wyoming. Good thing oil prices are down.
Something to watch for - The Governor of West Virginia has proposed tax changes of fairly limited benefit for the oil and natural gas industry according to this report from MSN.
This report from the Houston Chronicle discusses how major oil and gas company executives are lobbying Congress and the Obama administration to expand offshore drilling even as renewable and alternative energy sources are being encouraged.
From the NYT: "Despite appearances to the contrary, the economic stimulus bill does not require states to 'decouple' utility revenues from energy consumption, a key House Democrat said today." The article goes on to explain that decoupling is a utility rate-making mechanism that separates revenues from consumption to give utilities an incentive to support energy efficiency programs. It also describes legislation recently introduced into Congress that would create an energy efficiency standard for electricity and natural gas savings to be achieved through utility efficiency programs, building codes, and other measures.
According to MSNBC, a report released today by PricewaterhouseCoopers, LLP, finds that global oil and gas deal values declined dramatically in 2008 as the financial crisis intensified and economic conditions deteriorated.
Good news for the PA DEP. The potential economic benefits from natural gas drilling in the Marcellus Shale apparently outweigh the hiring freeze imposed by the Governor on state agencies that he oversees, according to this article from The Patriot-News. Looks like the Department of Environmental Protection may hire 31 workers and open an oil and gas management office in Williamsport to address increased drilling activity in the shale.
Interior Secretary, Ken Salazar, recently said that the new Administration will push an energy plan that includes a wide range of energy resources, including solar, wind, geothermal, oil and gas, and potentially oil shale, according to this report from the Salt Lake Tribune. Good to keep all options on the table.
According to this press release, Senator Carl Levin (D-MI) introduced legislation today to address speculation and price manipulation in U.S. energy and agricultural markets. Similar to legislation introduced last year, under the new Administration and Congress it may stand a better chance of becoming law.
At a meeting between President Obama and Prime Minister Harper of Canada, cooperation on research and development of carbon capture and storage technology was discussed as a means of addressing, in part, greenhouse gas problems long-associated with Canada's oil sands industry according to this NYT report.
A series of bills are being introduced into the Texas legislature to tighten regulations on natural gas drilling in the Barnett Shale, according to this article from the Star-Telegram. The issues appear wide-ranging (e.g., including pipeline condemnations), and - as you might expect - controversial.
This is interesting. CNNMoney.com reports that El Paso closed on the sale of two non-core natural gas producing properties for a total of approximately $74 million. Located in the San Juan Basin, together the properties were producing about 15 million cubic feet of gas equivalent per day at year's end.
EPA has decided that greenhouse gas output cannot be considered by officials reviewing federal applications to build new coal-fired power plants, according to this article from the NYT. This is in response to a decision by EPA's Environmental Appeals Board last month, Deseret Power Electric Cooperative. A complete copy of the interpretive memorandum can be found here.
[Update: U.S. EPA published a notice of the interpretive memorandum in the Federal Register indicating that challenges to the interpretation must be brought in the U.S. Court of Appeals for the D.C. Circuit by March 2, 2009. (Moved up.)]
[Update: U.S. EPA reconsidering its interpretation: "EPA today granted a petition for reconsideration of a Bush Administration memo regarding the scope of the Clean Air Act. The interpretive memo, put forward by then-EPA Administrator Stephen Johnson in December 2008, addresses when the Prevention of Significant Deterioration program applies to carbon dioxide, a chief greenhouse gas." (Moved up).]
The yo-yo effect. CNNMoney.com reports that the International Energy Agency is warning that there could be an oil supply crunch in 2010 once global demand recovers due to the impact of delayed investment in future supplies.
This report from the Houston Chronicle discusses the disconnect between crude oil and gasoline prices, and how it has more to do with today's upside-down energy market than a conspiracy to defraud. Provides a good background explanation on how there can be this disconnect because of the sources of supply.
From CNNMoney.com: Leaders in the domestic natural gas industry are concluding their bleakest winter in years, and the future is clouded by oversupply, icy credit markets and a global recession. Not a bad summary of the difficulties faced by the energy industry.
The Houston Chronicle reports that Chesapeake Energy Chief Executive Aubrey McClendon has told reporters that Chesapeake only needs gas prices to be "good" for three to six months every two-year period.
While the Interior Department may be putting the brakes on the prior administration's plans to open up the Atlantic and Pacific coasts for offshore drilling, the Atlanta Journal-Constitution reports that is not the case for alternative energy development - particularly offshore wind projects.
[Update. In related news, the Houston Chronicle reports that a leading Democrat has suggested that Congress is unlikely to restore an offshore oil and gas drilling ban despite pressure from environmental advocates and fishermen. (Moved up).]
This article from the NYT reports that international oil executives are eager to work with the new Administration to fashion policies to address global warming.
This article from the Houston Business Journal reports that the energy industry will face significant challenges even as credit markets unthaw and the recession begins to fade, including not only price and cash flow issues, but a potential failure to invest in capital projects that will be needed in the future.
From the NYT: The goals set by Congress for the ethanol industry are in jeopardy barely a year after it enacted legislation meant to encourage a national industry capable of converting plants and agricultural wastes into automotive fuel.
EIA has issued its Short-Term Energy Outlook for February 2009: "The expectation of limited weather-driven consumption growth in the residential and commercial sectors in 2009 is outweighed by the implications of continued economic weakness in the industrial and electric power sectors. Consumption in the industrial and electric power sectors is expected to decline by 5.1 and 1.0 percent, respectively, in 2009."
The Vermont Supreme Court has upheld a decision by the state Public Service Board issuing a certificate of public good for a 16-turbine wind project, according to this article in the Times Argus.
Natural gas retail suppliers and one customer sued Ohio's Tax Commissioner alleging that Ohio's tax scheme is discriminatory because local distribution companies benefit from certain tax exemptions and exclusions that the suppliers do not. The U.S. Court of Appeals for the Sixth Circuit recently held that general principles of comity and federalism did not bar the suit, reversing an earlier lower court decision dismissing the suit for lack of subject matter jurisdiction.
A copy of the decision can be found here.
There's been a lot of interest recently in the development of natural gas from Marcellus Shale. If you have such an interest, you might find the following websites helpful: This one, from the Marcellus Shale Committee; this one, from the NY Department of Environmental Conservation; and this one, from the PA Department of Environmental Protection.
[Updated: Here's another website, from the Cornell Cooperative Extension of Tioga County. (Moved up.)]
Nearly 67,000 acres of National Forest land in southwestern Colorado have been withdrawn from auction by the U.S. Forest Service, according to this article from MSNBC.
According to this article in the WSJ, Alan Greenspan appeared before Congress in 2003 to testify that the U.S. needed to become a major importer of LNG to address recent price spikes in the natural gas market. He - and others sharing this view - could not have been more wrong. While the list of proposed LNG facilities grew to over 50, today only six have been built, and most of those are idle, indicative of more-than-sufficient natural gas supplies.
[Very interesting article. Subscription required.]
This is interesting: In 2008, the U.S. became the world leader for total wind production, overtaking Germany (the leader for 2007), according to this Daily Tech article. It goes on to note that some time this year the U.S. is expected to become the world leader in installed solar power as well.
Not surprising. The Interior Department has canceled oil and natural gas leases on 130,000 acres of federal lands in Utah, according to this article in the Washington Post. The lease sale had previously been blocked through a lawsuit filed by the NRDC and others.
Many producers have announced significant cuts in capital expenditures for the next year given the economy and limited access to capital. Devon Energy now has made the same announcement: "Nichols also told analysts that Devon is slashing its capital spending by more than half this year in accordance with the most severe recession in decades. He said Devon is budgeting $3.5 billion to $4.1 billion, compared to $9 billion spent last year."
From the Houston Chronicle: Anadarko announced a discovery today at its Heidelberg prospect in the Gulf of Mexico. The article goes on to report that the discovery equates to a discovery of 100 million barrels of oil equivalent.
From an Ultra Petroleum press release: "Ultra Petroleum Corp. today announces additional 2009 and 2010 natural gas hedges. The total net volume hedged for 2009 currently is 93.0 Bcf at an average realized price of $5.81 per Mcf, and in 2010 the total net volume hedged currently is 6.8 Bcf at an average realized price of $5.50 per Mcf."
Brigham Exploration Company has completed its Olson 10-15 #1H well in the Bakken field at a rate of approximately 1,200 barrels of oil and 1.4 MMcf of natural gas per day, according to this article from CNNMoney. Very nice.
According to this article from the Austin American-Statesman, some refineries may shut down in the event of a strike by refinery workers, while others may look to non-union workers. Fortunately, a strike was averted on Saturday when both sides agreed to continue contract negotiations.
[Update. From the Houston Chronicle: It appears that the parties reached an agreement giving refinery and chemical plant workers a 3 percent raise each year for the next three years along with a $2,500 contract ratification bonus.]
Gov. Ed Rendell is expected to propose this week the state's first severance tax on natural gas production to address, in part, Pennsylvania's worst fiscal crisis in 20 years, according to this article from the Republican Herald. No one seems to remember the story of the golden goose these days.
Worldwide LNG capacity is expected to expand by 20 percent this year due to as many as seven LNG export terminals starting overseas operations, according to this article from the Houston Chronicle.
The Energy Information Administration has recently published a report looking at trends in the U.S.-international natural gas trade through 2007. A summary graph shows for 2007:
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A copy of the full report can be found here.
The CA State Lands Commission is expected to vote on a proposal that could lead to the first new oil drilling project off the California coast in 40 years, according to this article in the Mercury News. The proposal was announced last year and involved an alliance between anti-oil environmentalists and the oil company, supported by billions in revenue for the state and a commitment to end local drilling by 2022.
Of course, the Commission could vote against the proposal . . .
[Update: The Commission rejected the proposal. From the LA Times: "Lt. Gov. John Garamendi, one of three members of the lands panel, said allowing any new drilling in state waters would suggest the state welcomes offshore drilling and send a come-hither message to other oil companies."]
Annual oil company profits soared due to triple-digit commodity prices through most of 2008, but the price crash in the last three months is likely to cut quarterly profits by more than half according to this article from the Houston Chronicle.
From the NYT - geography may impact climate legislation: "'There’s a bias in our Congress and government against manufacturing, or at least indifference to us, especially on the coasts,' said Senator Sherrod Brown, Democrat of Ohio. 'It’s up to those of us in the Midwest to show how important manufacturing is. If we pass a climate bill the wrong way, it will hurt American jobs and the American economy, as more and more production jobs go to places like China, where it’s cheaper.'"
Not surprising that the new Administration might reconsider the issue. According to this article from the AP, Interior Department Secretary Ken Salazar has indicated that offshore oil drilling should be worked out with Congress as part of a broader energy policy and not by independent action at Interior. The 5-year drilling plan left by the Bush administration? All but dead, according to Salazar.
We noted recently the energy security issues highlighted by Russia's restrictions of natural gas supplies to the Ukraine. One possible response - greater reliance on LNG (see this article from the Guardian).
The Act proposes, among other things, to increase the percentage depletion rate for marginal wells from 15 percent to 27.5 percent; eliminate the net income limitation on percentage depletion; and define produced water tanks as water treatment facilities to the same extent as similar facilities in other industrial sectors (relieving marginal wells of certain regulatory burdens). Introduced by Senator Inhofe (R-Okla.) and Rep. Boren (D-Okla.), a copy of the legislation can be found here.
At the FERC: "President Barack Obama has named Jon Wellinghoff Acting Chairman of the Federal Energy Regulatory Commission."
The PA Department of Environmental Protection has concluded that several wells near gas-drilling operations in Susquehanna County have become contaminated with methane, but have not identified the source, according to this article in the Times Leader.
In late 2008, Ohio Governor Ted Strickland announced the establishment of the Advanced Energy Job Stimulus Program, which will provide financial incentives in the form of low-interest loans and grants to support certain clean coal and other advanced energy projects. A total of $150 million in total funding is available. The Advanced Energy Job Stimulus Program is described in greater detail here.
The leases on tens of thousands of acres of federal land in Utah have been blocked by a federal judge because the Interior Department had not done a sufficient environmental impact analysis, according to this article from the NYT.
Another obstacle overcome. According to this article from EnergyCurrent, the Minerals Management Service (MMS) has issued a final EIS for the Cape Wind Offshore Energy Project, a 130-turbine wind farm to be located 4.7 miles offshore of Cape Cod, Mass. You can find a copy of the EIS here.
Interesting, but not surprising. According to this article from the AP, a recent report from API shows that U.S. demand for petroleum fell 6 percent to 19.4 million barrels a day.
XTO Energy has settled some of its 2009 hedges in advance to reduce outstanding debt by about $900 million, according to this article in the Star Telegram. Not a bad explanation for one use of a natural gas hedge.
Interesting. Efforts to address California's significant budget shortfall are being opposed because they involve - at least for now - a waiver of certain environmental protections for 10 big highway projects, according to this article in the LA Times.
The Short-Term Energy Outlook for January projects a 36% drop in natural gas prices for 2009: "The U.S. economic downturn is also contributing to lower natural gas prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per Mcf in 2008 to $5.78 per Mcf in 2009, but then increase in 2010 to an average of $6.63 per Mcf."
Graphically:
The U.S. Court of Appeals for the Fifth Circuit recently upheld a lower court decision finding that the federal government could not collect royalties on certain deepwater leases held by Anadarko in the Gulf of Mexico. The issue involved whether the Department of Interior had the authority to suspend royalty relief established by Congress under the Outer Continental Shelf Deep Water Royalty Relief Act for production volumes that were less than the volume thresholds established in the Act itself. The court held that it did not.
A copy of the court's decision can be found here.
Increased wastewater volumes from Marcellus Shale drilling activities have led to an interesting partnership. According to this press release, "The Department of Environmental Protection and the natural gas drilling industry have launched a partnership to explore innovative methods to treat wastewater generated from oil and gas well drilling operations in the commonwealth. Working with the partnership, the department will develop a technology-based standard for total dissolved solids in oil and gas wastewater."
U.S. EPA has recognized several landfill methane capture projects for reducing greenhouse gas emissions: "The 2008 LFG award winning energy projects employed unique project structures and took creative approaches to use LFG from municipal solid waste landfills, creating a new source of renewable energy to benefit the local community." Congratulations to all, including the Green Energy Center, High Btu Landfill Gas Energy Project, located in Grove City, Ohio.
Were speculators driving oil market prices last year? Many believe so. From CBS News (60 Minutes): "So what happened? It's a complicated question, and there are lots of theories. But as correspondent Steve Kroft reports, many people believe it was a speculative bubble, not unlike the one that caused the housing crisis, and that it had more to do with traders and speculators on Wall Street than with oil company executives or sheiks in Saudi Arabia." The report ends by noting that the Obama administration has promised to address the issue.
At a recent auction for the rights to drill on 149,000 acres of federal land at the Bureau of Land Management office in Salt Lake City, an anti-development activist won leases on 22,000 acres for $1.8 million that he did not have, according to this article in the Washington Post.
Chesapeake Energy has agreed to a five-year contract with its CEO, Aubrey McClendon, that includes a one-time $75 million 'incentive award. Annual salary was capped at $975,000 with annual bonuses limited to $1.95 million. Not too bad.
Unwanted by some. This article from the NYT observes that many activists single out production from oil sands when it comes to environmental impact, noting that a recent RAND Corporation study estimated that oil from the oil sands generates about 10 to 30 percent more greenhouse gases than conventional crude. Still, as the article points out, however, there are energy security benefits.
[Update: There are similar issues raised in the U.S. regarding oil shale development on public land in Colorado, Utah and Wyoming, according to this article from the AP.]
Energy security. According to this article from the AP, several European countries and Turkey are facing a shutoff of natural gas out of Russia and the Ukraine.
[Update: For more, see this NYT article noting that the shutoff was hitting the European economy as Suzuki's Hungarian unit said it was halting production because of restrictions on industrial gas usage.]
According to this press release, Chesapeake has raised $412 million through a volumetric production payment transaction (VPP) with Argonaut Private Equity, financed by Goldman Sachs Group's GS Loan partners. It involves assets in the Anadarko and Arkoma basins with proved reserves of approximately 98 billion cubic feet equivalent and current net production of approximately 60 million cfe per day.
Argonaut is controlled by Oklahoma billionaire George B. Kaiser, who also recently bought $50 million of shares in another gas producer, Sand-Ridge Energy Inc. See here (WSJ, subscription needed).
This article from the Fort Worth Business Press notes the connection between higher crude oil and natural gas prices during the first half of 2008 and record drilling activity resulting in an increase in worldwide crude oil and natural gas reserves.
This article from the Plain Dealer speculates on how the global recession and global warming is likely to affect energy prices in 2009 and into the future. It also comments on how Ohio-specific issues could spike power prices and make the state even less competitive.
We've had several recent posts on the Haynesville Shale. For more, see this article from the Shreveport Times discussing the impact the economy is having on leasing.
And for a similar article on the Barnett Shale, see here.
In Devon Energy Corp. v. Kempthorne, Devon challenged an order of the Department of the Interior requiring it to retroactively recalculate royalties owed to the United States under a coalbed methane lease in Wyoming's Powder River Basin. At issue were certain deductions taken by Devon for compression and dehydration-related costs when calculating royalties under the agency's marketable condition rule, which requires a federal lessee to put production into a marketable condition at no cost to the United States. Interior had found that the marketable condition rule precluded those deductions where compression and dehydration were necessary to meet the transporting pipeline's gas quality specifications (and thus make the gas deliverable to the purchaser).
Continue Reading...Adopted by the PA Environmental Quality Board: "The new fee structure sets a base permit cost of $900 for all Marcellus Shale wells up to 1,500 feet deep, and imposes an additional cost of $100 for every 500 feet of depth past 1,500 feet. The increased fees will take effect in early spring." The average permit fee for a Marcellus Shale well, according to this article from the Tribune Review, could - according to the PA Department of Environmental Protection - increase to $2,600. (Link has been corrected.)
[Update: Following Pennsylvania's lead, New York is considering a similar increase. (Moved up.)]
The SEC has announced new oil and gas company reporting requirements: "The new disclosure requirements approved by the Commission include provisions that permit the use of new technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes." The new rules will also allow companies to disclose their probable and possible reserves to investors (rather than only proved reserves) and the reporting of oil and gas reserves using a 12-month average price rather than year-end prices.
This year was a good year for shale. According to this report from the Fort Worth Business Press, the technology pioneered in North Texas’ Barnett Shale over the past several years is now being used to develop shale reservoirs in New York, Louisiana and Wyoming.
There have been several articles recently on alternative energy possibilities in Ohio. From one such article from the Dayton Daily News: "Gov. Ted Strickland has targeted advanced energy as a key to reviving Ohio. Studies say the state is positioned to play a heavy role in the manufacturing chain to produce renewable power-generating equipment. That could mean jobs and money for the Dayton region's high- and low-tech industries." See here for another. And another.
Per a recent article in the WSJ, many American natural-gas producers have drilled themselves into a financial hole. Production increases have left the market oversupplied by four or five billion cubic feet per day. This has led to declining prices at the same time that many producers have stretched their credit limits to fund new drilling projects.
The potential white knight (according to the article) - new environmental legislation designed to curb carbon dioxide emissions. (Subscription required.)
The 30-inch, 182-mile long natural gas pipeline from Corning to Ramapo, NY, took $1 billion and 18-months to build, according to this article from LoHud.com (New York's Lower Hudson Valley). And there's still more work to be done.
Pipeline infrastructure is a hot topic - both within and outside the energy industry. One particularly challenging issue is the use of eminent domain by interstate natural gas pipeline companies to construct and expand their pipeline transmission systems. Last week, the U.S. Court of Appeals for the Ninth Circuit in Transwestern Pipeline Co. v. 17.19 Acres of Property refused to enhance the ability of these companies to condemn private property. The court held that until an order of condemnation issues under Section 717f(h) of the Natural Gas Act, a pipeline has no substantive right of possession - rejecting a claim for a "quick take" of the property. A copy of the court's decision can be found here.
[Update: It's not just an issue for pipeline construction; the use of eminent domain by interstate pipeline companies to acquire storage facilities is also a hot topic according to this article from the Altoona Mirror. (Moved up.)]
From the Houston Chronicle: "In contango, long-term futures contracts are priced higher than short-term ones. In other words, traders are betting that prices will rise during the next couple of years. * * * For example, crude for January delivery closed Friday at $33.87 a barrel on the New York Mercantile Exchange. For June delivery, the price was $50.05, and the price increases for later months. It was $55.97 for January 2010 and $62.63 for January 2011.”
The article points out that it may help smooth volatility as the price rises in the future.
Ever wonder how shale can be used to produce natural gas? The Natural Gas Supply Association (NGSA) has an explanation.
Regarding natural gas prices: "The Henry Hub spot price averaged $6.87 per Mcf in November. Natural gas prices, which have declined from a monthly average of $13.06 per Mcf in June, reflect the impact of increased domestic production, the weak economy, and lower oil prices. * * * On an annual basis, the Henry Hub spot price is expected to average $9.17 per Mcf in 2008 and $6.25 per Mcf in 2009, compared with $7.17 per Mcf in 2007."
Parcels totaling 164,000 acres went up for auction in Utah on Friday by the U.S. Bureau of Land Management. Not everyone is happy about it, however. According to this article at MSNBC.com, the auction has been called a "fire sale" by opponents because of the shortened time frame from announcement to sale.
According to this article in the Houston Chronicle, OPEC has agreed to cut 2.2 million barrels from its daily production while Russia and Azerbaijan have announced their own cutbacks as well (in the range of hundreds of thousands of barrels). Attempted price manipulation? You bet.
We have noted in previous posts the challenges presented in New York for producers looking at the Marcellus Shale. One involves the possible use of a Supplement to the Generic Environmental Impact Statement (GEIS) applicable to natural gas and oil drilling issued by the NY Department of Environmental Conservation. A draft of the Supplemental GEIS was published for public comment in October of this year, and included topics such as the use of water from surface and groundwater sources; and the removal and proper disposal of spent fracture fluids from the well site. The public comment period closed this past Monday, December 15, 2008.
At least one congressman has urged the Department to delay issuing any new gas drilling permits in the shale until after completion of the Supplemental GEIS, according to this article in the Hudson Valley Press Online. He has also introduced legislation to eliminate the exemption for hydraulic fracturing in the Safe Water Drinking Act.
Central City, Ky., may be the site of a new coal-to-natural-gas facility to be constructed by ConocoPhillips and Peabody Energy Corp., according to this article in the Houston Business Journal. Designated Kentucky NewGas, the facility is expected to adopt low-emissions design criteria that will result in less than 5 percent of the emissions of a similarly sized traditional coal plant.
According to this article in the NYT, dozens of major oil and gas projects have been suspended or canceled in recent weeks both in the U.S. and worldwide as companies adjust to the new energy markets. Not unexpected given this year's volatility.
The Susquehanna River Basin Commission has adopted several amendments to its regulations governing approval of E&P projects targeting the Marcellus and Utical shale formations and involving the withdrawal, diversion or consumptive use of waters of the Susequehanna River Basin. Effective January 1, 2009, the new rules require - among other things - use of the approval-by-rule process for consumptive water uses associated with these projects. For more, see a copy of the final rules here.
Both the economy and tougher access to credit are having an impact on contract negotiations. According to this article in the Houston Chronicle, electric power retailers are more concerned today about customer defaults. As a consequence, rates for business customers may include risk premiums of $5 to $10 per megawatt hour, or as much as 1 cent per kilowatt hour. Retailers are also seeking address default risk by requiring larger deposits and using more limited term agreements.
Ever wonder whether storage can hold a lease's production rights? Recently the U.S. Court of Appeals for the Third Circuit confirmed that it could. In Penneco Pipeline Co. v. Dominion Transmission, Inc., the court upheld a lower court determination preserving numerous "dual-purpose" oil and gas leases held by Dominion in the South Bend and Oakford Storage Fields, including the production rights set forth in the leases.
The facts were straightforward: Dominion had acquired numerous oil and gas leases in Armstrong and Indiana Counties, Pennsylvania, and relied on those leases to develop and operate its South Bend and Oakford Storage Fields. While the original leases did not provide for the underground storage of gas, that right was added in the 1940s through the 1960s through either lease modifications or the execution of new leases. This resulted in combined production and storage leases, commonly referred to as "dual purposes" leases.
The related landowners and Penneco Pipeline, which had been given top leases on the properties, sued for a declaration that the oil and gas production rights contained in the leases had terminated. The reason: Lack of production during Dominion's tenure on the property.
Continue Reading...This week the Colorado Oil and Gas Conservation Commission adopted new rules to regulate oil and gas development in the state. There are concerns, however: The Colorado Oil and Gas Association has characterized them as some of the most expensive, burdensome in the country.
In Order No. 712, the FERC revised Commission regulations governing the release of interstate capacity in light of changes in the market for short-term pipeline transportation services. Among other things, it addressed market-based pricing for asset management agreements and the prohibition against tying and bidding requirements for capacity releases associated with state-approved open access programs. The FERC recently denied rehearing generally of that order in Order No. 712-A, but also clarified several issues raised by marketers and others with respect to asset management agreements and state open access programs.
President-elect Obama appears likely to name the current director of the Lawrence Berkeley National Laboratory, Steven Chu, as his Energy Secretary; and Carol M. Browner, the former U.S. EPA Administrator, as the top White House official on climate and energy policy. Officials state that he is also likely to name Lisa P. Jackson, New Jersey’s commissioner of environmental protection, as the new head of U.S. EPA. From the NYT: "[T]hey will have the task of carrying out Mr. Obama’s stated intent to curb global warming emissions drastically while fashioning a more efficient national energy system. And they will be able to work with strong allies in Congress who are interested in developing climate-change legislation, despite fierce economic headwinds that will amplify objections from manufacturers and energy producers."
No mention in the article of likely costs to the economy, however.
[Update: Appointments were formally announced here.]
The American Gas Foundation: "The continued success of the utility sector to deliver natural gas safely and reliably depends on a strong and viable infrastructure that will meet growing local distribution company (LDC) customer demands. The infrastructure development needed to address new and aging infrastructure relies heavily upon the ability of the industry to attract strong capital investment." A report commissioned by the Foundation concludes, in part, that financial markets view allowed returns on equity below 10-percent as a "red flag" that could turn away investment. A copy of the full report can be found here.
Local regulation of E&P activities is a hot topic around the country. In the context of a preliminary injunction request, the U.S. District Court for the Northern District of Texas recently held that the federal Pipeline Safety Act did not preempt (in large part) a local government's zoning requirements because they regulated the aesthetics of a natural gas compressor station, and not its safety. See Texas Midstream Gas Services, LLC v. City of Grand Prairie.
Possibly. According to this Bloomberg article, natural gas futures fell to a 15-month low right after Dow Chemical Co., the largest U.S. chemical maker, reported that it intended plant closures and job cuts due to declining sales.
Not everyone is against development. Last summer, NY imposed a moratorium on horizontal drilling in order to study its environmental impacts. The NY Chemung County Chamber of Commerce is encouraging Albany to finish the study and begin drilling, according to this report on WENY-TV. Lost revenue and jobs is the concern - measured potentially in the billions of dollars.
[Update: Is it driving development to Pennsylvania? According to this article from Pressconnects.com, Fortuna is looking south to PA because of the regulatory matters in NY. (Moved up from an earlier post.)]
In earlier posts we have noted concerns regarding the hydraulic fracturing of natural gas wells and the potential for its regulation. Legislation has been introduced in Congress to repeal the exemption for hydraulic fracturing under the SWDA, and referred to the House Committee on Energy and Commerce. More from the Star-Telegram: "A study by the Environmental Protection Agency determined that hydraulic fracturing posed little risk to water. Environmentalists say that the study is flawed and that the exemption poses health risks." Not a bad article overall.
With an eye toward the Marcellus Shale, PA county commissioners are looking once again to assess oil and natural gas inventories for property tax purposes, according to this article in the Susquehanna Independent Weekender.
Ohio has its own facility to train firefighters and others to understand and implement effective emergency response practices at typical oilfield drilling sites and production sites (developed by the Ohio Oil & Gas Energy Education Program). Recently, from the Akron Beacon Journal: "The Ohio fire-training program, which was started in 2001, was reportedly the first of its kind in the United States. To date, more than 350 fire departments from 33 Ohio counties and seven other states have participated in the program, which is funded by the state's gas and oil industry." Nice.
According to this article in the AP, access to credit and capital needed for E&P operations are the biggest obstacles facing oil companies in 2009 (as per a new survey).
According to this article in the Guardian, President-elect Obama is no longer planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel. Well, that's good news (if it holds).
The FERC recently issued two enforcement orders approving stipulations between the Office of Enforcement and natural gas marketing and asset management companies that resolve self-reported violations of the FERC's shipper-must-have-title requirements. NorthWestern Corporation and NorthWestern Services, LLC, agreed to a civil penalty of $450,000. Cornerstone Energy, Inc., agreed to a civil penalty of $325,000.
Among other things, residents are concerned about the use of local lake and ground water by drilling companies, according to this article in the Shreveport Times. This isn't the only basin that shale production raises issues over water with local citizens.
Indiana Gasification, LLC, has withdrawn its plans to build a coal gasification plant in Rockport, Indiana, due to regulatory uncertainty, according to this article in the Chicago Tribune. The withdrawal followed a decision by Vectren Corp. that there was too much uncertainty over possible federal carbon regulations to commit to a 30-year gas purchase arrangement.
According to this news release, Chesapeake has sold a 32.5% interest in its Marcellus Shale assets for $3.375 to StatoilHydro, including approximately 1.8 million net acres of leasehold (StatoilHydro now owns approximately 0.6 million net acres and Chesapeake owns approximately 1.2 million net acres). It received $1.25 billion in cash at the closing and will receive the remainder through funding of its share of drilling and completion expenditures.
The downturn in the natural gas market, and the economy more generally, has dampened the zeal of natural gas drillers in Pennsylvania for exploring the Marcellus shale, according to this article in the Tribune Democrat. Only months ago, local residents viewed it as a madhouse.
Concerns over the impact of hydraulic fracturing have been raised with increasing frequency over the last several years. This article from Scientific American is just one example of the kind of reporting we are seeing, challenging the exemption for frac water contained in the SWDA and a producer's community-right-to-know obligations.
The FERC has issued a Notice of Inquiry seeking comments on whether "the Commission should impose additional reporting requirements on (1) intrastate pipelines providing interstate services pursuant to section 311 of the Natural Gas Policy Act of 1978 (NGPA) and (2) Hinshaw pipelines providing interstate services subject to the Commission's Natural Gas Act (NGA) jurisdiction pursuant to blanket certificates issued under s. 284.224 of the Commission's regulations." More specifically, the Commission is asking whether it should require section 311 and Hinshaw pipelines to post shipper transaction details in a manner similar to that required of interstate lines under the Commission's regulations.
Comments are due 60 days from the date the NOI is published in the Federal Register.
Natural gas pipeline capacity and related constraints are a "hot topic" right now, particularly in the Appalachian Basin. The Department of Energy's Energy Information Administration (EIA) has put together a presentation to illustrate graphically major areas of transmission pipeline growth between 1998 and 2008. An example:
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The Natural Gas Supply Association has calculated that 25 percent of U.S. natural gas demand could be met by shales located in Appalachia, the Barnett Permian Basin of Texas and elsewhere in the U.S. A copy of the statement can be found here.
Permitting delays are a significant source of aggravation for producers, according to this article at CNNMoney.com. One possible solution proposed by the PA DEP - increased fees to pay for additional staff to process applications and inspect wells!
This isn't the only state to propose fee increases to address agency staffing issues.
[Update: For more on regulatory obstacles to development of the Marcellus, see this article in the Wayne Independent. According to a University of North Texas professor, PA is a "disjoined jungle of agencies, boards, counsels, and regulatory bodies" with tremendous uncertainty that presents significant challenges to Marcellus Shale production.] (moved up)
Late last year, the FERC issued a Notice of Inquiry (NOI) seeking comments on whether it should change its current policy on the in-kind recovery of fuel and lost-and-unaccounted-for gas by interstate pipelines. That policy, in general, allowed pipelines two options - One, to establish a fixed fuel retention percentage that would remain unchanged until the pipeline filed a subsequent NGA Section 4 rate case. Two, to establish a tariff mechanism that allowed for periodic adjustments to the fuel retention percentage outside of a general NGA Section 4 rate case, but which included a true-up mechanism for over- and under-recoveries of fuel. The NOI asked whether the Commission should change it policy for the purpose of minimizing over-recoveries and provide greater incentives to reduce fuel loss.
Continue Reading...On July 17, 2002, U.S. EPA unexpectedly amended the Oil Pollution Prevention Regulation (40 C.F.R. Part 112), substantially increasing the demands imposed on producers when preparing and implementing their spill prevention, control and countermeasure (SPCC) plans. Recognizing the increased burdens placed on producers, EPA extended the deadline for compliance several times to review and address the issues created by its regulatory amendments.
Yesterday, EPA announced new, final SPCC rule amendments designed "to provide clarity, tailor requirements to particular industry sectors, and streamline certain requirements while maintaining protection of human health and the environment." Among other things, EPA states that the revised rule will exempt intra-facility gathering lines already regulated by U.S. DOT; and "[p]roduced water containers that do not contain oil in harmful quantities." It will also contain requirements tailored for marginal production facilities and compliance alternatives for produced water containers that are not otherwise exempt.
An update will be provided once the revised rule is posted.
[Update: A pre-publication copy of the rule can be found here.]
[Update: U.S. EPA is proposing to extend the deadlines for compliance for certain facilities, including certain oil production facilities. Comments are due December 26, 2008.]
We can expect a more aggressive stand on environmental issues. According to this article from MSNBC, Rep. H. Waxman (D-CA) has replaced Rep. John Dingell (D-MI) as chairman of the House Energy and Commerce committee on a vote of 137-122 in the Democratic Party caucus. The energy sector can expect significant, proposed changes as a result, particularly with respect to issues of global warming and water quality.
EIA has issued its short-term energy outlook for November, 2008. Among other things, it projects an annual average Henry Hub spot price for natural gas of $6.82 per Mcf for 2009. A copy of the full report can be found here.
In addition to landfill gas, Muskegon County, MI, is exploring the use of algae from the huge wastewater holding ponds and grease trucked in from local restaurants as a marketable energy source according to this article in the Muskegon Chronicle. If it works, it can convert a problem for wastewater systems into an energy solution. Very interesting.
The Bureau of Land Management has finalized new regulations governing oil shale development on public lands in the West. According to the BLM: "Commercial development of oil shale will not begin until it is technologically viable, which is not expected for several years. The regulations will provide a basis for decisions, as 'rules of the road' for the large investment that will be necessary for industry to develop technologies to extract the resource in an environmentally sound manner." A copy of the rules can be found here.
According to this article in the WSJ, the market for batteries is potentially huge due to the push to use alternative energy and avoid fossil fuels. Lux Research Inc., which tracks emerging technologies, reports that the battery market could be as $50 billion if only 10% of wind-power plants installed them. It predicts, however, that the actual market will be much smaller because of the long planning cycles and risk-aversion of utilities. This isn't surprising given how expensive the batteries can be - e.g., on the order of $10 million for a relatively small one.
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It appears that the Bradford County commissioners received favorable bonus payment and royalty terms following weeks of negotiations with EOG Resources Inc. (according to this article in the Daily Gazette). EOG will pay the county $2.4 million to lease the gas rights on the 939 acres of land owned by the county and a 17.5% royalty. Not bad at all.
MMS has announced that it would begin the process to issue more leases at a site at least 50 miles off the coast of Virginia, according to this article in the LA Times. The comment period ends December 29th. You can find a copy of the notice here.
According to this article in Globe and Mail, although Henry Groppe may skeptical that worldwide oil consumption in transportation can be significantly reduced over the next decade by using alternative fuels, he believes that fuel substitutions already happening among industrial users will offset declining global oil production.
A new U.S. Geological Survey study released by the Interior Department estimates that there is 85.4 trillion cubic feet of undiscovered, technically recoverable natural gas frozen in Alaska's North Slope region, according to this article from CNN. Natural gas hydrates recoverable with current technologies? Cool.
[Update: You can find a copy of the assessment here, and even a podcast discussing it here.]
According to this article in the NYT, President-elect Barack Obama choice of Rahm Emanuel to be his chief of staff may be good for proponents of compressed natural gas cars.
From the WSJ: Statoil has agreed to pay Chesapeake $1.25 billion in cash for a 32.5% interest in its assets in the Marcellus Shale; and spend an additional $2.13 billion over four years as part of Chesapeake's drilling costs.
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From the National Regulatory Research Institute: "Speculation in itself is not a bad thing. Good speculation provides a valuable market function. It helps local gas distribution companies and other large gas consumers, for example, to hedge against rising prices, and so to reduce risk - a significant benefit amid highly volatile gas prices and the current economic situation. By the same token, good speculation provides natural gas producers with more predictable future revenues, allowing them to expand with less uncertainty and borrowing costs. That trend, in turn, should help to lower the price of natural gas in the long run. Any attempt to curtail good speculation, therefore, is likely to make life harder for firms and raise natural gas prices." A copy of the report can be found here (entitled, Speculation in the Natural Gas Market: What It Is and What It Isn’t; When It’s Good and When It’s Bad).
The Texas Railroad Commission has held that more than two dozen east Fort Worth landowners who didn’t sign a mineral-rights lease nonetheless may be forced to join a drilling unit, according to this article in the Star-Telegram.
Uncertainty remains regarding how quickly the new administration will move on energy-related issues, according to this article in the Columbus Dispatch. President-elect Obama has stated that his first priority would be an economic recovery program, but advisers said that the real issue was whether the new Administration could tackle health care, climate change and energy independence at the same time, or would the new initiatives need to be staggered.
The Public Utilities Commission of Ohio has adopted new regulations for electric line extensions and minimum service and safety standards. A copy of the entry and new rules can be found here.
Looks like most independents may drill what they have rather than try to acquire new locations, according to this article in the Star-Telegram. According to the Director of Research for SMH Capital: "'When you [i.e., production companies] retrench, the first thing that gets cut is money for new acreage or exploration.' * * * 'What does get spent is money for production projects,' which offer the fastest return of capital and best chance to pad cash flow."
California Governor Arnold Schwarzenegger has called for a 9.9% tax on every barrel of crude oil produced in the state, according to this article from the LA Times. This would make CA producers the most heavily taxed in the country.
We're seeing a lot of articles like this: "Oil prices last week hovered just over $60 a barrel after peaking around $140 this summer. Will today’s falling oil prices also bury fledgling efforts to convert the US auto fleet from gas guzzling SUVs into fuel-sipping hybrids? Will investors still want to invest in advanced biofuels? Will the new president slow the push for energy security?" (From the Christian Science Monitor.) It depends in large part on whether you believe - or investors believe - that lower prices are here to stay.
Federal regulators have been asked for permission by a unit of Dominion Resources to build a $40.6 million natural gas pipeline to transport gas through western Pennsylvania to retail markets. Looks like the throughput will be 57 MMcfd.
Not surprising with increasing use of gas for generation: The sharp drop in natural gas prices is leading to a similar drop in electric rates in the country.
In September, the Ohio Oil and Gas Association hosted both its annual Fall Technical Conference and the 2008 Appalachian Producers Issues Seminar. Copies of many of the presentations can be found here.
This is a large increase: A Penn State University geoscientist estimates that there may be more than 360 Tcf of natural gas recoverable in the Marcellus Shale. This is seven times greater than his earlier estimate.
There are there are few signs of environmental damage from the Cosco Busan oil spill in San Francisco Bay from only one year ago. A complete recovery is estimated to take several years.
Difficult times for another biofuel producer: VerSun Energy Corp. has filed for bankruptcy protection as a result of entering into certain hedges on corn.
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