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

Recently, an appellate court in Pennsylvania affirmed, on mandamus, the ability of oil and gas producers to record blanket lease assignments.  See Chesapeake Appalachia, LLC v. Golden, Case No. 883 C.D. 2011 (Jan. 27, 2012).  From the decision (among other things):  "Next, the Recorder asserts that Chesapeake is not entitled to mandamus relief because it has available the alternative, adequate remedy of recording individual lease assignments.  However, it goes without saying that filing single lease assignments is not an adequate remedy for a company that has the right to file multiple lease assignments and chooses to do so, but is illegally thwarted in that right."

Apparently, it needed to be said.  Nice.

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We thought you might be interested in the testimony at a recent House Subcommittee hearing on U.S. EPA's hydraulic fracturing research in Pavillion, WY.  For example, from Tom Doll, State Oil & Gas Supervisor, Wyoming Oil & Gas Conservation Commission:  "The Pavillion Draft Report was issued with incomplete data and technically inadequate conclusions.  There was no opportunity to review and verify the data by Wyoming state agencies. The data was not verified by further testing or vetted through a peer review process. Based on a limited sampling and an inconclusive data set from Pavillion Wyoming ground water, EPA’s conclusion is now national and international fodder for the hydraulic fracturing debate. Now the quality of the hydraulic fracturing debate suffers and the EPA’s science itself is questioned."

For more, see here (including video).

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That's the title to an article in BusinessWeek looking at past claims of economic collapse due to exhausted natural resources.  A sample:  "Start with oil. In 1971, the Limits to Growth team forecast that the world’s supply would run out 10 years from today. And yet according to renowned oil analyst Daniel Yergin, technology advances and new discoveries have allowed oil reserves worldwide to keep growing. For every barrel of oil produced in the world from 2007 to 2009, 1.6 barrels of new reserves were added. The World Energy Council reports that global proven recoverable reserves of natural gas liquids and crude oil amounted to 1.2 trillion barrels in 2010. That’s enough to last another 38 years at current usage. Add in shale oil, and that’s an additional 4.8 trillion barrels, or a century and a half’s worth of supply at present usage rates. Tar sands, including some huge Canadian deposits, add perhaps 6 trillion barrels more."

Read the whole thing.

[Update:  (Yes, that was quick ...)  For a similar article written by Peter Orszag, see here.]

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Ohio EPA has issued its final air pollution shale oil and gas well-site general permit.  "This general permit covers all operations involved in an oil and gas well site during the production phase of the well. This includes glycol dehydration units, natural gas and diesel engines, storage tanks, flares, and ancillary equipment."  You can view it and supporting documentation here.

Note:  Ohio EPA's Assistant Chief of Permitting wants to remind you that "if you previously submitted a letter stating that you were going to put a well into production and planned to apply for the general permit when it becomes available, now is the time for you to submit your application."

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Graphically, this says it all (from the Federal Energy Regulatory Commission's Natural Gas Markets: National Overview):

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Remember, it's not a bug - it's a feature:  "FirstEnergy Corp. announced today that its generation subsidiaries will retire six older coal-fired power plants located in Ohio, Pennsylvania and Maryland by September 1, 2012. The decision to close the plants is based on the U.S. Environmental Protection Agency Mercury and Air Toxics Standards (MATS), which were recently finalized, and other environmental regulations."  (FirstEnergy Press Release.)

Yes, U.S. EPA's regulations do have consequences for jobs.

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The WSJ is reporting that the Energy Information Administration (EIA) will soon confirm that oil production in the United States is surging, largely due to increases in shale production:  "The forecast will include new production data from developing oil fields, including the Bakken shale area in North Dakota, which could hold as much of 4.3 billion barrels of recoverable oil. North Dakota's output of oil and related liquids topped 500,000 barrels per day in November, meaning that the state pumped more oil than Ecuador. In fact, U.S. oil production grew faster than in any other country over the last three years and will continue to surge as drillers move away from natural gas due to a growing gas glut, experts say. The glut has sent natural-gas prices to a 10-year low."

Nice.  (Note:  Subscription may be required.)

[Update:  And from the EIA's AEO2012 Early Release:  "Domestic crude oil production is expected to grow by more than 20 percent over the coming decade: Domestic crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in 2010. Over the next 10 years, continued development of tight oil combined with the development of offshore Gulf of Mexico resources are projected to push domestic crude oil production to 6.7 million barrels per day in 2020, a level not seen since 1994."  (Emphasis is ours.)]

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4Hoteliers has an interesting take on the impact of Marcellus drilling in Pennsylvania:  "The 4,374 square-mile region comprising four northeastern Pennsylvania counties—Bradford, Lycoming, Susquehanna and Tioga—experienced a hotel industry RevPAR growth of 37 percent from 2007 to 2010, and grew another 22.2 percent through August of 2011.  That’s not a misprint; rather, this remarkable growth is largely attributable to the exploitation of an old resource through the birth of a new industry: natural gas extraction from the Marcellus Shale."

Read the whole thing.

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The Energy Information Administration (EIA) has an interesting report on natural gas futures prices ... interesting, but not necessarily encouraging if you're an operator:  "Natural gas prices on the New York Mercantile Exchange (NYMEX) settled at $2.488 per million British Thermal Units (MMBtu) on Tuesday, January 17. A near-month contract has not ended daily trading that low since March 5, 2002, nearly 10 years ago."  Graphically:

Read the whole thing.

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That's the title of a report recently published by the Energy Information Administration (EIA):  "Prices at the Henry Hub, a key benchmark location for pricing throughout the United States, fell 9% to about $4 per million British thermal units in 2011, the second lowest annual average price since 2002."  They post an interesting graphic with the report:

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By now you know that the Administration has rejected the proposed Keystone XL oil pipeline (see, e.g., NYT - "The State Department, which has authority over the project because it crosses an international border, said there was not enough time to draw a new route for the pipeline and assess the potential environmental harm to sensitive grasslands and aquifers along its path.").  Some of the commentary has been ... interesting.  See, e.g., this from the Washington Post's Robert Samuelson ("President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity.").  Read the whole thing.

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The Columbus Dispatch is reporting that Governor Kasich wants to impose new impact fees and severance taxes on operators seeking to develop the Utica shale in Ohio:  "Ohio’s oil and gas industry would pay an 'impact fee' for deep-shale wells to cover the cost of infrastructure damage caused by oil and gas extraction, part of a package of taxes and fees for the industry that Gov. John Kasich soon will propose."

A word of caution:  Brings to mind one of Aesop's Fables ...

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As previously reported on this Blog, on December 14, 2011 USEPA a draft research report entitled "Investigation of Ground Water Contamination near Pavilion, Wyoming."  USEPA announced yesterday that it now "invites public nominations of scientific experts to be considered as peer reviewers of the external review" of this draft research report.  See the Federal Register Notice here. 

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The Marietta Times has an interesting article on the job creation potential of the Utica Shale in Ohio.  For example:  "Kvamme [president and interim chief investment officer with JobsOhio] noted chemical industries like local polymer plants will benefit from low energy costs but also from easy access to 'feedstock' gases like ethane, butane, propane and methane used in product processing.  He said the cheaper fuel and access to the feedstock gases could also help bring more companies into the area and that there have already been talks with a large steel company and other manufacturers."

Just thought you might like to know.

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We've reported previously on the Draft Supplemental Generic Environmental Impact Statement (SGEIS) issued by New York (see here, e.g.).  The NYT is reporting that more than 20,000 comments have been received regarding that draft:  "After taking over 20,000 public comments, more than on any issue they have ever faced, New York environmental officials are getting ready for the final phase of work on their proposal to allow hydrofracking of natural gas in the state."  How many are "form" comments sent in by multiple parties ...

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Bloomberg is reporting that a Youngstown steel mill is re-opening its doors due to increased demand for pipe used in the development of shale resources here in the northeast:  "The factory for Vallourec SA’s V&M Star will have 350 workers and produce seamless pipes used in hydraulic fracturing, also known as fracking. It’s part of a development that an oil and gas industry study calculates will mean more than 200,000 jobs and $22 billion in economic output in Ohio by 2015 -- and which has neighboring states looking to get in on the action."

Congratulations!

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The NYT is reporting that transportation fuel companies paid an estimated $6.8 million last year in penalties for failing to blend a special type of biofuel that doesn't even exist:  "Penalizing the fuel suppliers demonstrates what happens when the federal government really, really wants something that technology is not ready to provide. In fact, while it may seem harsh that the Environmental Protection Agency is penalizing them for failing to do the impossible, the agency is being lenient by the standards of the law, the 2007 Energy Independence and Security Act."

That can't be right, can it?

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That's the name of a new article in City Journal reporting on shale development in New York.  A sample:  "With more and more producers in the business, the price of natural gas has dropped steadily, and the U.S. has become the world’s leading producer of natural gas. A new age of clean, cheap shale-gas energy is about to begin—except, perhaps, in New York State, where influential environmental groups seem to be winning their struggle against shale. *** Perhaps what motivates the environmentalists’ attack on shale gas is worry about the survival of their movement. The green movement gave up on hydrocarbons years ago: it has already announced the arrival of “peak oil,” and the imminent demise of petroleum power—despite many recent discoveries of large oil and gas fields around the world—is a fundamental article of green faith. Environmentalists see shale gas as a relapse, a return to destructive habits, an end run around their self-appointed role as judge and jury for energy policy in America."

You might enjoy it ...

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Despite low natural gas prices, the Zanesville Times-Reporter observes that Utica development in Ohio should continue:  "[T]he Utica Shale, a rock formation thousands of feet below the eastern half of the state, is home to not only trillions of cubic feet of natural gas, but billions of barrels of oil and natural gas liquids. The latter is what attracted investment and will keep money flowing into Ohio, said Tim Rezvan, vice president of senior energy analyst at Sterne Agee."

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The Chicago Sun-Times has an interesting article on a growing debate involving the mining of frac sand in the Midwest and the rise of anti-sand mining activists:  "Crispin H. Pierce, an environmental public health professor at the University of Wisconsin-Eau Clare, said more information is needed about the risks of frac sand mining. Fresh silica dust has grains with sharp, jagged particles and is more dangerous than the weathered silica found in dirt, although it weathers quickly, he said."

Anti-sand mining activists ...

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Ohio remains in the running for a natural gas processing plant that Shell plans on constructing in the northeast, according to this report in the Cleveland Plain Dealer:  "Shell Chemical is finalizing plans for a $2 billion complex that is expected to create hundreds of jobs and pull other industries and manufacturers into its orbit. Shell has said only that it plans to build in either West Virginia, Pennsylvania or Ohio, three states that overlay ancient shale beds rich in natural gas."

The site announcement is expected to come in February.  Wish Ohio good luck!

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The WSJ is reporting that opponents to E&P operations in NY are hoping to pass Home Rule legislation that would allow local governments to regulate (read:  ban) oil and gas operations in their jurisdictions:  "New York law does allow municipalities to zone mining activities that have significant surface impacts, such as gravel mines. But in 1981, state law was amended to exempt oil and gas from mining activities subject to local regulations. The home rule bills would remove that exemption."

You saw it coming.  (Note:  Subscription may be required.)

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The Columbus Dispatch is reporting that a limited moratorium has been placed on 5 injection wells (only one of which is active) in northeast Ohio because of concerns related to earthquake activity:  "There are 177 injection wells throughout the state. Zehringer and other officials, speaking on a New Year’s Eve conference call, said the single Youngstown well is the only one of its kind that’s been related to seismic activity since the state started using them in the 1970s. *** Kasich officials also stressed that the months-long shaking in Youngstown is not a result of hydraulic fracking — a procedure used to extract oil and gas out of rock formations such as the Marcellus and Utica shale."

As we've noted before, let's not jump to any conclusions ...

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The Times Leader is reporting that fuel is likely to be the top U.S. export this year:  "according to U.S. Census data going back to 1990. It will also be the first year in more than 60 that America has been a net exporter of these fuels. *** Just how big of a shift is this? A decade ago, fuel wasn't even among the top 25 exports. And for the last five years, America's top export was aircraft."

Interesting.  Read it all.

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We reported earlier this month on a U.S. EPA study purporting to link groundwater contamination in Pavillion, WY to frac operations (see here).  The Star-Tribune has an interesting article noting some of the defects in that study:  "Yet the EPA’s own data —including details not mentioned in the draft report — indicates the agency’s conclusions are partially based on improperly analyzed samples from six private drinking-water wells and two EPA-drilled deep monitoring wells in Pavillion. *** The EPA also found contamination in pure water control samples, didn’t purge the test wells properly before gathering samples and didn’t mention in its report whether it tested water carried by a truck used in well drilling, say officials with the Wyoming Water Development Commission who, because of their expertise on water wells, reviewed the EPA’s publicly available information."

As we noted before, U.S. EPA's record on these types of issues isn't that good ...

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Natural gas prices have reached a 2-year low, according to this article in the WSJ:  "Natural gas for February delivery lost 9.4 cents, or 3%, to settle at $3.027 cents per million British thermal units on the New York Mercantile Exchange, the contract's lowest settlement since September 2009. *** Futures hit an intraday low of $3.001/MMBtu, bringing the front-month price within striking distance of $3, a level that also was last reached in September 2009."

(Note:  Subscription may be required.)

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The Times Leader has an interesting article on a new study done by researchers at Wilkes University on the greenhouse gas footprint of natural gas:  "'The main message is that seven independent studies now agree that shale gas has a lower greenhouse footprint than coal. That conclusion largely contradicts the findings by a team of researchers at Cornell who published a paper last April that argued shale gas has a higher footprint than coal due to inadvertent releases of methane at gas wells,' [Professor] Klemow said."

Seven?  Nice.

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The West Virginia Department of Environmental Protection is gearing up to meet new Marcellus demands on the agency, according to this article in the Charleston Gazette:  "But the boom in the natural gas industry, Huffman said, it's hard for DEP to compete with private sector jobs that can be two or three times as much. Currently, state oil and gas inspectors make and average of $32,000 a year and their supervisors an average of $38,000, Huffman said. The legislation sets a minimum inspector's salary of $35,000 a year and a floor for oil and gas supervising staff of $40,000 annually."

Interesting.  We'll be seeing the same here in Ohio soon.

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The Houston Chronicle is reporting on the potential for power generation to help slumping natural gas demand:  "Technology that allows drillers to access densely buried fossil fuels has launched a drilling frenzy in shale rock regions, pushing the supply of natural gas to a record high and its prices to cavernous lows. But heat-efficient buildings and a mild autumn up North have curbed consumers' desire for the fuel. *** Increasingly, industry watchers say, the most promising cure for the glut isn't natural gas-powered vehicles or manufacturing. It's in the declining popularity of coal, the country's dominant power plant fuel."

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The Dallas Post has an interesting article describing the timeline for citing a Chief Gathering LLC natural gas compressor station.  For example:  "Jan. 21, 2011 - Chief Gathering LLC submits an application for special zoning exceptions to build a 5-acre natural gas compressor station on property owned by Robert Hayes at 49 Hildebrandt Rd. The site, estimated to be 1,150 feet away from the school district property line, would include a metering facility, several tanks, a glycol dehydrator, a building to house compressor engines and a 100-foot radio tower.  *** Jan. 25, 2011 - Protesters take to the Dallas School District campus to distribute flyers in opposition of the proposed compressor station."

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The WSJ has a report on how the interests of large domestic manufacturers and natural gas exporters may diverge:  "U.S. officials will soon weigh in on a fight between companies that want to export some of America's fast-growing supply of natural gas and big manufacturers that oppose the exports because they rely on cheap domestic gas.  *** The Energy Department is looking at whether exports will drain U.S. supplies and inflate domestic prices. The Energy Information Administration, part of the department, is expected to deliver its analysis in a few weeks."

(Note:  Subscription may be required.)

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The Columbus Dispatch is reporting on a new Spectra Energy Corp. pipeline intended to connect Ohio resources to Spectra’s Texas Eastern pipeline system, which runs from Texas to New York.  "The Texas Eastern pipeline already goes through Ohio from east to west. This new addition will create a connection between the pipeline and the northeastern Ohio counties that are expected to have the most shale-gas resources, though the specific path is still being determined, said Wendy Olson, spokeswoman for Houston-based Spectra."

For more, see here (Spectra press release).

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The WSJ has an interesting article on the opportunities for natural gas liquids production from the country's shale resources:  "The boom has turned into a potential profit center for oil-and-gas producers, as well as for the pipeline companies that transport the fuel. Demand for ethane grew to about 933,000 barrels a day during the first half of 2011, up from 812,000 barrels a day in 2009, according to Bentek Energy. But like the other fuels extracted from remote shale deposits, the biggest problem is how to get it to facilities that can process it."  (Note:  Subscription may be required.)

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The Intelligencer has an interesting article on the natural gas processing plant being built by Dominion Transmission in Marshall County, West Virginia:  "Dominion Transmission's natural gas processing facility is the largest piece yet of what local officials hope will be an industrial rebirth for the Ohio Valley. The crown jewel of that rebirth would be an ethane cracker facility along the Ohio River, a multi-billion dollar project that remains in the works as 2012 looms."

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The WSJ is reporting that Governor Earl Ray Tomblin is prepared to sign a new rule package governing Marcellus drilling in West Virginia:  "Large-scale drilling for natural gas in West Virginia's Marcellus shale deposit will require $10,000 and $5,000 permit fees, buffer zones around wells and advance notices to property owners and the public, under a broad regulatory package the Legislature approved Wednesday.  *** Gov. Earl Ray Tomblin heralded the measure at a packed Capitol news conference shortly after the House of Delegates passed it 92-5 and the Senate then voted unanimously to send it to his desk, ending a four-day special session."

For a copy of the legislation, see here.

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The Sacramento Bee is reporting on a new study published by PwC addressing the potential benefits for manufacturers from U.S. shale gas development:  "'An underappreciated part of the shale gas story is the substantial cost benefits that could become available to manufacturers based upon estimates of future natural gas prices as more shale gas is recovered,' said Bob McCutcheon, U.S. industrial products leader, PwC. He continued, 'In fact, the number of U.S. chemicals, metals and industrial manufacturing companies that disclosed shale gas potential and its impact so far in 2011 easily surpassed that of the last three years combined, indicating this is of growing importance in the outlook of U.S. manufacturers. The significant uptick in shale gas commentary among the manufacturing community reflects the positive influence that shale gas is having from investment, operational and demand standpoints.'"

For a copy of the study, see here.

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One of our partners has been named an Environmental MVP by Law360:  "As lead attorney for Hamilton County, Ohio, in a federal crackdown on sewage overflows, Mark Norman of Vorys Sater Seymour & Pease LLP negotiated a consent decree that allowed the county to commit an additional $1.79 billion in infrastructure improvements while protecting the county's finances and ratepayers, earning him a spot among Law360's Environmental MVPs."  (Note:  Subscription may be required.)

Nice job!

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The WSJ is reporting that both Texas and Colorado have now adopted rules requiring disclosure of frac fluid constituents:  "The rules are part of a broader effort by states to show they are serious about regulating the rapidly expanding hydraulic fracturing ahead of possible new federal rules governing chemical disclosure, water disposal, air emissions and well construction."  (Note:  Subscription may be required.)  For more on the Texas program, see here (the Houston Chronicle) and here (for a copy of the rules).  For more on the Colorado program, see here (the Colorado Independent) and here (for a copy of the rules).

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The NYT is reporting on a recent study by U.S. EPA regarding complaints of water contamination in Pavillion, Wyoming:  "Chemicals used to hydraulically fracture rocks in drilling for natural gas in a remote valley in central Wyoming are the likely cause of contaminated local water supplies, federal regulators said Thursday."  For more, including a copy of the EPA report, see here.

A note of caution, however:  U.S. EPA's record on these issues isn't good so far.  See also here.

[Update:  For Encana's response to the report, see here (E.g., "Several of the man-made chemicals detected in the EPA deep wells have never been detected in any of the other wells sampled. They were, however, detected in many of the quality control (blank) samples - which are ultra purified water samples commonly used in testing to ensure no contamination from field sampling procedures."  Hmmm ...).  (Bumped.)]

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The Charleston Daily Mail is reporting that unions are prepared to wage a multi-front battle against those in the oil patch to make sure its members are the ones getting the jobs:  "Union leaders are prepared to wage a multi-front battle against major natural gas-related projects that do not employ local workers. *** The West Virginia Affiliated Construction Trades Foundation is already airing TV ads targeting a $500 million gas processing plant Dominion is building in the Northern Panhandle. *** But unions are unlikely to stop at advertising campaigns. ACT might start to challenge environmental and export permits, among other things, a top union official said this week."

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The WSJ has an interesting report on a new study issued by ExxonMobil:  "Natural gas will replace coal as the leading fuel for generating electricity in the U.S. by 2025, when it will also become the world's No. 2 overall fuel source thanks to its abundance and a drive for cleaner-burning energy, according to the latest long-term outlook from Exxon Mobil Corp."  (Note:  Subscription may be required.)

From the related ExxonMobil press release:  "Demand for energy will rise through 2040 as global economic output doubles and prosperity expands across a world where population will grow to nearly 9 billion people, Exxon Mobil Corporation states in its The Outlook for Energy: A View to 2040, issued today. Extending its annual long-term energy forecast to 2040 for the first time, ExxonMobil said this year's Outlook reveals several trends that will influence how the world uses energy over the coming decades."  For a copy of the outlook, see here.

Very interesting.

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We've reported previously on air emissions studies done in Pennsylvania (see here, e.g.).  The Pennsylvania Department of Environmental Protection (PA DEP) is now requiring certain E&P companies to submit air emissions data regarding their facilities for 2011 by March 1, 2012:  "'The use of natural gas for fuel will have very beneficial impacts on air quality, and we want to ensure we are protecting the quality of Pennsylvania’s air as we access and bring to market this abundant, domestic fuel source,' DEP Secretary Mike Krancer said. *** This week, the agency is initially asking 99 operators identified as being involved in natural gas development, production, transmission, processing and related activities to respond with the necessary data."  (From this press release.)

For more, see here.

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The Colorado Independent is reporting on new frac fluid disclosure rules being considered by the Colorado Oil and Gas Conservation Commission (COGCC):  The commission "will take at least another week to decide on the issue after hearing more than 11 hours of testimony from Colorado residents, elected officials, oil and gas industry representatives and drilling regulators in Denver."  Notably, one COGCC director defended various staff positions preserving trade secret protections according to the article.

Interesting.

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The Houston Chronicle is reporting:  "A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a new industry study released Tuesday."  From the President and CEO of ANGA (America's Natural Gas Alliance), which commissioned the study:  "At a time when our nation's economy is still suffering from a downturn and jobs are top-of-mind for many Americans, the impact of shale gas on employment is invaluable. Last year, shale plays supported 600,000 jobs, and by 2035, the study projects that shale gas will support more than 1.6 million jobs."

For a copy of the study (including video statements by local business owners), see here.

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MedPage Today has an interesting article on the claimed health impacts of increased Marcellus exploration in Pennsylvania.  The take-away conclusions:  "A few people have had clearly documented health problems related to the Marcellus gas boom, but these were occupational exposures in rig workers.  Some aspects of gas drilling and production release toxins into the environment, but the level of exposure to the public is uncertain and no links to specific instances of disease have been confirmed, and may never be."  (Emphasis is ours.)  And regarding groundwater contamination due to frac operations in particular:  "But in that scenario the fracking chemicals would presumably be highly diluted. Rob Jackson, PhD, of Duke University, said preliminary results from a study he and his colleagues conducted in northeastern Pennsylvania showed no evidence of fracking fluids or brine in well water sampled from more than 200 sites."  (Emphasis is also ours.)

Read the whole thing.

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The Intelligencer has another interesting article looking at the fee legislation proposed in West Virginia.  "Now, the fee is $650, but would increase to $10,000 for the first well and $5,000 for each additional well on the drilling pad, if the legislation is ultimately signed into law by Gov. Earl Ray Tomblin."  The bargaining chip?  Well, at least for one legislator - it looks like hiring more WV organized labor:  "State Sen. Orphy Klempa is prepared to push for a higher natural gas severance tax if drilling companies do not prove to him that they plan to hire more West Virginia workers.  *** Klempa, D-Ohio, is affiliated with organized labor as co-chairman of Project BEST. He is a member of the Legislature's Joint Select Committee on Marcellus Shale, which passed a bill for the full Legislature's consideration that, among many changes, would increase the permit fee to drill a Marcellus well in West Virginia substantially."

Come to Ohio!

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We've reported previously on the NYT's efforts to find environmental and economic issues in the oil patch (see here, e.g.).  Now it seems that they want to complain about oil and gas leases:  "Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print."

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We reported previously on a study done by Penn State researchers reporting that "[t]ests of water wells near gas drilling sites generally didn't find detrimental changes in water quality."  See here.  The WSJ is reporting that the researchers found an error in the report resulting in "far less evidence of well contamination by bromides, salty mineral compounds that can combine with other elements to cause health problems, than first suggested."  (Emphasis is ours.)  (The error stemmed from an independent lab analysis.)

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Columbus Business First has an interesting article on a Federal Reserve report on the Midwest that finds (among other things):  "Expanding activity in the pursuit of oil and natural gas in Ohio’s underground shale fields. Production in wells that already have been drilled in the state has been 'good,' according to the report."

Read the whole thing (it's short, but with links to core documents).

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For pipeline affiliates bidding on capacity (from the summary):  "In this Final Rule, the Federal Energy Regulatory Commission revises its regulations governing interstate natural gas pipelines to prohibit multiple affiliates of the same entity from bidding in an open season for pipeline capacity in which the pipeline may allocate capacity on a pro rata basis, unless each affiliate has an independent business reason for submitting a bid. The Commission does not find it necessary to adopt its proposal in the Notice of Proposed Rulemaking that if more than one affiliate of the same entity participates in such an open season, then none of those affiliates may release any capacity obtained in that open season pursuant to a pro rata allocation to any affiliate, or otherwise allow any affiliate to obtain the use of the allowed capacity."  For a copy of the rule, see here.

Effective date:  December 23, 2011.

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The WSJ is reporting that the U.S. is close to becoming a net exporter of petroleum products:  "As recently as 2005, the U.S. imported nearly 900 million barrels more of petroleum products than it exported. Since then the deficit has been steadily shrinking until finally disappearing last fall, and analysts say the country will not lose its 'net exporter' tag anytime soon."

Very interesting.  Read the whole thing.

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The Ohio Department of Natural Resources announced today that Rick Simmers has been appointed the new Chief of the Division of Oil and Gas Resources Management.  From the news release:  "'Rick’s extensive experience in field enforcement issues and previous management roles are going to be invaluable to him as chief of the newly created Division of Oil and Gas Resources Management,' said Zehringer [Director of ODNR]. 'I am confident that he will be a great leader for his staff and provide strong oversight of Ohio’s oil and gas industry.'"

Congratulations!

[Update:  For a copy of that release, see here.]

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The WSJ has a good article on job growth in Ohio due to the anticipated growth in Ohio's E&P industry.  It begins:  "A rare sight in hard-luck Youngstown, a new industrial plant, has generated hope that a surge in oil and natural gas drilling across a multistate region might jump-start a revival in Rust Belt manufacturing."

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The Director of North Dakota's Department of Mineral Resources appears concerned over U.S. EPA's efforts to regulate hydraulic fracturing, according to this article in the Bismarck Tribune.  The consequence of federal instead of state regulation:  "Thousands of workers unemployed overnight, housing starts abandoned, businesses shuttered and bustling oil towns from Williston to Belfield emptying out instead of filling up are all part of a future few would prefer — even if they despair of the changes to land and lifestyle wrought by the upswing of oil."

Read it all.

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The Ohio Division of Oil and Gas Resources Management (Division) has posted for comment proposed rule amendments:  "The Division *** is requesting comments on proposed amendments to 22 of its existing rules, which have been drafted pursuant to Senate Bill 165, effective June 30, 2010 and to complete the required five-year review of these rules. In addition, the division proposes to rescind seven of its exising [sic] rules and to continue 14 of its existing rules with no changes. These changes are in addition to the well construction rules that have recently been put out for comment."  Comments are due December 23, 2011.

For more, including a copy of the proposed changes, see here.

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The WSJ has an interesting article on the growing support in Canada for infrastructure to move oil for export to Asia:  "While Canadian government officials and TransCanada executives expect the U.S. to eventually approve Keystone, the delay underscored the importance in Ottawa of not having 'all our eggs in one basket,' Canadian Energy Minister Joe Oliver said last week in a speech to energy executives in Toronto. *** 'We favor the construction of infrastructure that will move resources to markets that want them,' in particular China and Asia, he said in a subsequent interview."

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The Energy Information Administration (EIA) has some items you may find of interest:

• Trends in Eagle Ford drilling, including animation:  "The animated map shows that the Eagle Ford shale comprises three 'windows' (roughly parallel acreage swaths). Production from these windows is increasingly liquids-rich moving generally from south to north. The circular yellow and green producing well markers signify the more 'oily' wells, with the red markers representing wells that produce mostly natural gas."
• Pennsylvania production driving NE natural gas growth:  "According to Bentek Energy, LLC estimates, natural gas production in West Virginia and Pennsylvania now averages almost 4 billion cubic feet per day (Bcf/d), more than five times as much as the average from 2004 through 2008. It accounts for over 85% of total Northeastern natural gas production."
• Corresponding use of PA natural gas for power generation:  "The growth in natural gas-fired generation is reflected in the composition of electric generation in Pennsylvania. In 2001, coal accounted for 57% of Pennsylvania's total generation compared to just 2% for natural gas (see chart below). In contrast, during the first half of 2011, coal made up about 46% of total generation while natural gas generation grew to 17% of total generation."

Lots of good information there.

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As you know, we like to keep you posted on the economic impact studies done about the E&P industry (see here, for example, regarding an Ohio study).  The Durango Herald has a nice discussion on the potential impacts of increased oil estimates in Colorado:  "A dramatic increase in estimated oil in Colorado's northern Front Range is likely to produce at least $50 million a year in new severance taxes for budget-strapped state and local governments. *** While direct employment from new drilling won't be staggering, spinoff job creation will produce millions more in economic impact."

While "staggering" would be nice, it's not necessary ... really ...

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The WSJ has a good update on what's going on with the price differential between WTI and Brent.  For example:  "Though Brent and WTI represent two similar types of oil, they are subject to different regional forces. Before the start of the year, Cushing already was facing price pressures caused by a glut of oil. At the same time, Brent crude, the European benchmark, was buffeted by supply disruptions due to unrest in the Middle East. When the uprising against Moammar Gadhafi caused oil production to grind to a halt, Brent crude prices rose."

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The Washington Examiner is reporting that the lease auction for the Wayne National Forest in Ohio has been canceled:  "President Obama's United States Department of Agriculture has delayed shale gas drilling in Ohio for up to six months by cancelling a mineral lease auction for Wayne National Forest (WNF). The move was taken in deference to environmentalists, on the pretext of studying the effects of hydraulic fracturing."

For a copy of the announcement, see here.

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The Delaware River Basin Commission (DRBC) has issued revised draft regulations regarding the construction and operation of natural gas development projects (for previous entries, see here and here, e.g.).  According to the WSJ:  "Energy companies collectively would be permitted to drill a maximum of 300 natural gas wells after receiving initial approval to explore the Delaware River basin under draft rules released Tuesday by the agency that monitors the drinking-water supply of 15 million people."  (Emphasis is ours.)  (Subscription may be required.)

A hearing to consider the rules has been scheduled for November 21, 2011.  For more, including a copy of the revised regulations, see here.

[Update:  The hearing has been postponed because a couple of the commissioners opposed the proposal.  See here. (Moved up.)]

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We've mentioned before U.S. EPA's efforts to incorporate concepts of "environmental justice" into its administration of the country's environmental laws (see here, e.g.).  Recently, EPA released Plan EJ 2014, described by the Administrator as offering "a road map that will enable us to better integrate environmental justice and civil rights into our programs, policies and daily work."  For more, see here (U.S. EPA site).

For the first of a three-part commentary series that you might enjoy on this topic, see here (Power Line).  Very nice.

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Frequent readers of this blog know that we follow closely E&P developments in Ohio and around the country.  Linked here are a couple of articles we wrote for the November / December 2011 Ohio Lawyer:

The current focus in Ohio is on a formation known as the Utica Shale. Geologists believe that the Utica, which ranges from 6,000-9,000 feet in depth, may have served as the source of much of Ohio’s historical production. Operators are looking at the Utica because of the possibility that it may contain not only natural gas but also crude oil and natural gas liquids (NGLs). The added value of crude oil and NGLs improves the overall economic value of the operations. These additional revenue streams are significant in today’s environment of relatively low natural gas prices and the substantial costs involved in drilling a horizontal well—ranging from $2-$10 million a well.

We hope you find them both interesting and useful.

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A Tennessee Gas Pipeline Co. transmission pipeline ruptured yesterday in Morgan County, Ohio:  "Spokesman Richard Wheatley said the Houston-based pipeline company immediately sent workers to the area of the explosion to shut off the gas. Natural gas that would have flowed through the damaged portion was routed to the company’s other pipelines in the area to preserve the flow to customers, he said, adding that it is too early to speculate on the cause of the blast."  (Columbus Dispatch).

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The Houston Chronicle is reporting on the hiring challenges faced by the oil and gas industry, fueled by increased shale development in the U.S.:  "While the job picture remains stagnant nationwide, the boom in domestic shale drilling has pushed hiring to a feverish pace in North American oil fields. *** A staffing crunch has caused the industry's salaries to surge and recruiters to embrace new tactics in search of the narrow pool of candidates who have the skills to work and manage the technical and gritty world of oil field services."

Read it all.

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The Buffalo News has an article pointing out the opposing views of environmentalists and New York landowners over the development of the landowners' mineral interests:  "'The extreme environmentalists have misinformed and panicked people,' said Dan Fitzsimmons, president of the Joint Landowners Coalition of New York, which represents people who have leased their lands to gas companies for potential drilling. *** Still, the environmentalists have one other argument on their side: fear of the unknown."

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The Pittsburgh Post-Gazette is reporting that a Pennsylvania Senate committee has re-inserted into pending legislation a substantial annual fee on natural gas producers:  "The new impact fee proposal would assess an initial base cost of $50,000 per well, which would decrease annually until years 11 through 20 that a well is producing, with a cost then of $10,000 per well. That price tag would increase if natural gas prices rise."

Come to Ohio!

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This article in The Intelligencer looks at the prospects for Ohio refineries:  "Marathon now refines 78,000 barrels of oil per day at the Canton plant. Khiery [sic] said the company gets 61 percent of its oil for refining from domestic sources such as Light Louisiana Sweet crude, 10 percent from Canada and 29 percent from 'other foreign sources.' *** Marathon spokesman Jamal Kheiry said the company sees promise in the Utica Shale's oil reserves once they become commercially viable."

Interesting.

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The Energy Information Administration (EIA) has issued its Short-Term Energy Outlook for November (see here).  Among other things, it finds:  "Natural gas working inventories ended October 2011 at an estimated 3.8 trillion cubic feet (Tcf), about 1 percent below the same time last year. The projected Henry Hub natural gas spot price averages $4.09 per million British thermal units (MMBtu) in 2011, $0.30 per MMBtu lower than the 2010 average, and $4.13 per MMBtu in 2012."

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The Ground Water Protection Council (GWPC) has issued a report on agency groundwater investigation findings in two states, Ohio and Texas.  It has interesting things to say regarding alleged groundwater contamination from well stimulation activities.  From the Executive Summary, for example:

Neither state has documented a single occurrence of groundwater pollution during the site preparation or well stimulation phase of operations. Despite this, Ohio has implemented more detailed notification, inspection, record keeping, and reporting requirements in response to the national debate on the process of hydraulic fracturing. Texas is currently placing summary data online for new completions, has implemented new disposal well requirements in the Barnett Shale play, and recently enacted statutes requiring public disclosure of hydraulic fracturing chemicals.  (Emphasis is ours.)

For a copy of the report, see here (generally) and here (a copy of the report).

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We've noted before that Ohio will not allow POTWs to be used for the disposal of wastewater (see here, e.g.).  You might be interested to know that Ohio EPA has asked the Environmental Appeals Review Commission to vacate as unlawful the permits issued to the city of Warren, Ohio, and Patriot Water Treatment, LLC, to allow such disposal:

Revised Code 1509.22(C) specifically states that brine may only be disposed of by one of the following three methods:  (1) underground injection; (2) surface application on roads for dust control and ice; or (3) any other method approved by the Chief of the Division of Oil and Gas Resources Management ***.  Disposal of brine wastewater through a wastewater treatment plant and discharge to waters of the state is not an authorized method of disposal under R.C. 1509.22(C), unless and until the Chief *** approves this technology.  At this time, no such approval has been given.  (Emphasis in original.)

For the filing, see here.

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The Akron Beacon Journal has an interesting article on the potential for Ohio's E&P industry:  "A state official estimated Tuesday that as much as 5 billion barrels of oil and 15 trillion cubic feet of natural gas could be underground in eastern Ohio. *** The oil and natural gas is in the Utica shale that is 100 to 300 feet thick under the eastern half of the state, said Lawrence Wickstrom, state geologist and head of the Ohio Department of Natural Resource’s Division of Geological Survey.  *** And this, he said, is 'a very conservative estimate' of the Utica potential. No dollar figure was attached to the numbers, but others have said the Utica shale will produce tens of billions of dollars in Ohio."

Read the whole thing.

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The WSJ has a good article on the increased use of railroads to move production from the Bakken (which we've reported on previously):  "North Dakota's output has grown in the last three years from a trickle to nearly 450,000 barrels a day—trailing only Texas, Alaska and California—and could double by the middle of the decade, according to analyst and industry projections. But pipelines in the region already are operating at capacity, and major new lines aren't expected to start going into service until 2013. *** In response, companies are building rail terminals. Rail terminals can be developed quickly, giving them an advantage for now over pipelines. The North Dakota Pipeline Authority estimates a doubling in rail-terminal capacity next year alone to more than 700,000 barrels a day."

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The Federal Energy Regulatory Commission (FERC) has issued its assessment for the upcoming winter season (see here).  There are a number of interesting charts, including this one on regional spot prices:

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We've noted previously the problems North Dakota was having finding trained workers - a problem other states wish they had (see here, e.g.).  Both the WSJ and the Philadelphia Inquirer have similar articles mentioning the need in other areas with active production (see here and here).  From the Inquirer:  "Run - don't walk, run - to Marcellus Shale natural gas drilling areas if you are a welder or pipe fitter or engineer or a company that can deliver such people to companies already operating in the fields."

Energy = Jobs.

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With all of the claims regarding freshwater impacts from shale drilling, we thought you might find this of interest (from Essential Public Radio 90.5):  "Tests of water wells near gas drilling sites generally didn't find detrimental changes in water quality, according to a new report issued by The Center for Rural Pennsylvania at Penn State University. However, scientists said more research is needed on the sources of methane in water wells. ***  According to the report, many of the problems had existed before drilling even started. About 40 percent of the wells failed at least one water quality test before gas drilling started. Most of the failing grades were due to higher than accepted levels of coliform bacteria and turbidity, or cloudiness. Some wells also showed methane before drilling."  (Emphasis is ours.)

Not a surprise for many in PA who have been following this issue ...

For a copy of the study itself, see here.

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We thought some of you (particularly in PA) might be interested in this:  "Since Oct. 11, the existing 60,000 Mcf-per-day capacity line has collected gas from Citrus Energy Appalachia, LLC, wells in Wyoming County, connecting them to the Tennessee Gas Pipeline in Susquehanna County. The proposed 30-mile addition would extend the line from Washington Twp. in Wyoming County to Luzerne County, where it will connect with Transcontinental Gas Pipeline. UGI Energy expects the extension to move between 200,000 to 500,000 Mcf per day of gas by 2013, serving Citrus and other producers, UGI Energy spokesman Peter Terranova said."  (From the Scranton Times Tribune.)

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The Star Telegram has an interesting article on rig counts:  "Those 'oily' plays are sending the U.S. and Texas drilling rig counts soaring. Oil production nationally and in the Lone Star State is increasing, a phenomenon that many industry veterans thought they might never again see after a steep decline in oil output that has been nearly 40 years in the making.  *** Amid the new craze for crude, the Barnett Shale rig count plummeted to 53 active rigs Oct. 14, the fewest since June 11, 2004, according to information compiled by RigData."

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The WSJ has an interesting article on how shale operations are impacting the industry:  "Shale discoveries have reinvigorated U.S. oil and gas production that just half a dozen years ago was widely seen as in terminal decline. Today, there is a glut of cheap natural gas, and domestic oil production is rising for the first time in decades. Shale development is even spreading to other countries, such as Poland and Argentina."

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Marshall University has made a comparison of taxes imposed on the natural gas industry in West Virginia and other Appalachian Basin states:  "The study’s authors, a team led by MU Vice President for Business and Economic Research Calvin Kent, looked at real and personal property taxes, severance taxes, corporate income taxes and sales and use taxes as well as permits, bonds and other environmental taxes or fees."  (From WOWK.)  The conclusion - ... not favorable for West Virginia ...

For a copy of the study itself, see here.

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This article is particularly interesting for those of us in Ohio:  "Conservationist and TV personality Jack Hanna said he supports natural gas drilling and he's going to talk about the issue at his conservation center."

Go Jack!

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You may be interested in this article from the WSJ:  "May snapped up the opportunity through his local community college, Zane State, to take a two-week, 80-hour shale exploration certification course developed by the private company Retrain America. When he graduated, he'd interviewed for three jobs and taken a position cementing wells for Halliburton that will pay $60,000 to $70,000 a year."  (Emphasis is ours.)

Very nice.

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Very interesting:  "Kinder Morgan agreed on Sunday to buy the El Paso Corporation for about $21.1 billion in cash and stock, striking one of the biggest energy deals in history, to tap into a boom in natural gas drilling and production."  (From the NYT).

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Ohio EPA has published for comment its draft air pollution oil and gas well site general permit (see here for copies of the terms and qualifying criteria documents).  It is intended to cover the equipment used during the production phase of a Marcellus or Utica/Point Pleasant shale well - drilling and completion activities are currently exempt (according to Ohio EPA).

Comments are due by November 28, 2011.

Note:  Ohio EPA has also notified producers making inquiries about air permits about an additional permitting option associated with Ohio's air pollution control program - stating, "Because Ohio EPA has only recently determined that an air permit is necessary and believes that the final general permit will be available before any case-by-case permit could be issued, Ohio EPA is exercising its discretion not to penalize a company for failing to obtain an air permit before installing an oil and gas well as long as the company applies for the general permit within thirty (30) days of the general permit becoming available."

They have asked for notification and even prepared a sample letter to use.  Nice.

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We've noted previously the NYT's "environmental reporting" on the E&P industry (see here and here, e.g.).  Now, a different strategy:  "But the boom — brought on by an advanced drilling technique called hydraulic fracturing, known as fracking — has brought problems too. While the gas companies have created numerous high-paying drilling jobs, many residents lack the skills for them. Some people’s drinking water has been contaminated. Narrow country roads are crumbling under the weight of heavy trucks. With housing scarce and expensive, more residents are becoming homeless. Local services and infrastructure are strained."

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Yesterday, we noted for you several recent articles regarding local production in the Basin.  We thought, therefore, we would note a couple for you on production outside the Basin - and in particular in North Dakota:

• North Dakota Likely to Overtake California Oil Production.  "North Dakota will likely leapfrog California and may even overtake Alaska in the next year—far outpacing earlier industry predictions—to become one of the nation's three biggest oil-producing states, a government regulator said." (From San Jose Mercury News.)
• Oil Boom Too Much of a Good Thing?  "New drilling technology has freed up vast reserves of oil in the Williston Basin of western North Dakota, fueling an economic bonanza that has become a flat-out gold rush. As the rest of the country desperately tries to skirt a double-dip recession, North Dakota boasts a $1 billion budget surplus and the nation's lowest unemployment rate. ***. Schools are rushing to hire more teachers. Towns are adding more cops. ***  But so many workers have flooded the oil patch that many long-time residents and officials are beginning to complain about something most places in the country could barely comprehend: Too much prosperity; too much rapid growth."  (From the Star Tribune.)

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We thought you might be interested in the following articles on local production here in the Basin:

• PA Infrastructure Incentives.  "Gov. Tom Corbett says Pennsylvania's natural gas infrastructure needs a boost if the demand for the fuel is going to grow."
• PA Marcellus Gas Case Heads to High Court:  "A case raising doubts about whether Pennsylvania's booming natural gas industry has the right to extract the methane from the thick shale more than a mile beneath countless properties is being appealed to the state's high court."  (From Forbes.)
• Steel Industry Benefits from Local Drilling.  "A natural gas drilling boom in Pennsylvania is helping the economies of Rust Belt cities long accustomed to bad news. Drilling requires steel — lots of it — and that has manufacturers expanding and hiring new workers."  (From NPR.)
• Land Rush a Boon for Eastern Ohio.  "While drilling in the Utica is in its infancy, the land rush has been an economic boon. Mary Catherine Nixon is the recorder in Ohio's Belmont County, just 10 miles from Wheeling, W.Va. On a given day, Nixon says she's collecting $1,400 in copying fees alone from the two to three dozen mineral rights researchers who have camped out in her offices for months."  (From NPR.)

 

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The WSJ has an interesting article on Dominion Resources, Inc.'s efforts to export LNG from its Cove Point facility:  "The terminal, Dominion Cove Point on the Chesapeake Bay in Lusby, Md., is well-situated to export gas from the prolific Marcellus Shale and the promising Utica Shale formations, Dominion's chairman and CEO, Thomas Farrell II, said in a statement."

[Note:  Subscription may be required.]

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Wayne National Forest auction coming to Ohio:  "The U.S. Bureau of Land Management plans to lease out 3,302 acres in the Wayne, most of it near Nelsonville in Athens County, to the highest bidders during a Dec. 7 mineral-rights auction."  (Columbus Dispatch article).  And naturally the skeptics are coming too:  "Nathan Johnson, attorney for the Buckeye Forest Council, said a drilling technique called hydraulic fracturing, or fracking, poses a threat to the forest and its wildlife."

We'll see ...

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Given our last post regarding North Dakota and the Bakken, we thought we'd point you to this article on the Eagle Ford from the Corpus Christi Caller-Times:  "All the talk about Eagle Ford being big is an understatement. *** Since Petrohawk Energy Corp. drilled the first significant well into the formation in La Salle County in 2008, the rush of drilling companies to stake their claims across the 400-mile-long, 50-mile-wide strip of southern and central Texas has brought investment and jobs."

Not bad.

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Pennsylvania is considering some significant fees on drilling in the state according to this article in the WSJ:  "Pennsylvania Gov. Tom Corbett proposed a fee on natural-gas drilling of as much as $160,000 a well in an effort to find a middle ground between public support for assessing drillers in the booming Marcellus Shale basin and a campaign pledge not to impose taxes."  (Emphasis is ours.)  It seems as if everyone is looking for a piece of the pie these days ...

See also this article in the Philadelphia Inquirer.

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The Columbus Dispatch has a good article on the potential growth for the chemical industry in Ohio due to the Utica:  "New natural-gas discoveries in Ohio could spell more jobs in spinoff industries from large-scale industrial chemical plants that could feed and foster additional manufacturing, industry representatives say."

Nice.

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The WSJ has an interesting article on how North Dakota is ahead of the economic curve due to its energy industry:  "Mr. Hamm [founder and CEO of Continental Resources] believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: 'We can't find any unemployed people up there. The state has 18,000 unfilled jobs,' Mr. Hamm insists. 'And these are jobs that pay $60,000 to $80,000 a year.' The economy is expanding so fast that North Dakota has a housing shortage. Thanks to the oil boom—Continental pays more than $50 million in state taxes a year—the state has a budget surplus and is considering ending income and property taxes."

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The New York Department of Environmental Conservation (NYSDEC) has proposed new regulations related to the use of high-volume hydraulic fracturing as part of a State Pollutant Discharge Elimination System (SPDES) general permit.  From the NYSDEC website:

NYSDEC has made a tentative decision to issue a SPDES general permit that will authorize point source discharges from high volume hydraulic fracturing (HVHF) operations to, in or over waters of the State. The SPDES general permit requires a Notice of Intent submittal to NYSDEC in order to discharge under this general permit. Permittees must develop a comprehensive Stormwater Pollution Prevention Plan (SWPPP) and implement control measures that minimize the discharge of pollutants to waters of the State. The NYSDEC reserves the right to require any applicant seeking coverage under this General Permit to apply for an individual SPDES permit. The General Permit has five year permit.

Public comments are due December 12, 2011.

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We've noted previously a U.S. EPA rulemaking proposal designed to to reduce air emissions from oil and gas operations.  Here is an article from Forbes.com on the public hearing recently held in Texas on the issue:  "The agency is proposing standards to curb hydraulic fracturing, or 'fracking,' by requiring operators to capture and sell natural gas that now escapes into the air. Thursday's EPA hearing was held in a region with a vast area of urban drilling atop the natural gas-rich Barnett Shale. The EPA's proposal would apply new pollution control standards to about 25,000 gas wells that are hydraulically fractured each year. *** While industry representatives touted the jobs and prosperity that drilling brings, critics argued it's not worth the environmental risk of toxic spills, scattered drill site explosions, tainted drinking water and polluted air."

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At the end of September, Ohio Governor John R. Kasich held an Ohio Energy Summit to lay the foundation for a comprehensive state Energy and Economic Development Policy.  Since that time, there have been a number of related articles that you might find of interest:

• Oil and gas energy's pay day: $500 billion (the Times-Reporter);
• Drillers snapping up rights leases in Ohio (part of a three-day series run by the Columbus Dispatch);
• Buckeye Oil Billions Will Unleash an Ohio Manufacturing Tech Boom (Forbes).  The article here begins well:  "A prediction. The Ohio Valley is on track to become a hotbed of innovation. And one which will almost certainly focus on 21st century manufacturing. The catalyst for this seemingly counter-intuitive claim? Money. Black gold. Ohio is about to be awash in both."  Let's hope the author is right!

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We reported previously on a district court decision enjoining the implementation of a settlement reached between the U.S. Forest Service and the Sierra Club that required 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 (see here).

That decision was recently upheld by the United States Court of Appeals for the Third Circuit.  For a copy of the Court of Appeals' decision, see here (Case Nos. 10-1265 and 2332).

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The Heritage Foundation has an interesting report on proposed domestic natural gas policy.  From the abstract:  "Natural gas is a plentiful domestic resource with tremendous potential to increase the U.S. energy supply. Tapping this resource will create jobs and boost an ailing economy. More affordable energy will support additional business formation and growth. The role of the government is to regulate—not over-regulate and hamper—natural gas production. Hydraulic fracturing (fracking)—which has never been shown to cause environmental damage—should not be held hostage to unfounded concerns and narrow interests. U.S. policymakers should focus on commonsense access and reasonable safety measures—not burdensome over-regulation and market-distorting subsidies."  (Emphasis is ours.)

Hmmm ...

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The Ohio Oil & Gas Energy Education Program (OOGEEP) released its second economic impact study this past week:  "According to the study, Ohio's natural gas and crude oil industry could help create and support more than 200,000 Ohio-based jobs from the leasing, royalties, exploration, drilling, production and pipeline construction activities for the Utica shale reserve. The state could experience an overall wage and personal-income boost of $12 billion by 2015 from industry spending."  (From the press release.)  Nice.

For a copy of the study, see here.

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The Pennsylvania Department of Environmental Protection (PA DEP) has announced plans to create a new, stand-alone Oil and Gas Bureau.  From the Pittsburgh Post-Gazette:  "The Corbett administration's reorganization will create a new stand-alone Oil and Gas Bureau for the program that oversees regulation of the booming, and sometimes controversial, Marcellus Shale gas development in the state."

For a copy of the related press release, see here.

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The WSJ has an interesting article on how to think about the world's oil supply:  "But there is another way to visualize the future availability of oil: as a 'plateau.' *** In this view, the world has decades of further growth in production before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand."  Take a look.

[Note:  Subscription may be required.]

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The National Petroleum Council has issued a new report entitled, Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources.  From the press release:  "First, the potential supply of North American natural gas is far bigger than was thought even a few years ago. As late as 2007, it was thought that the United States would have to become increasingly dependent on imported liquefied natural gas, owing to what appeared to be a constrained domestic supply. That is no longer the case. It is now understood that the natural gas resource base is enormous and that its development – if carried out in acceptable ways – is potentially transformative for the American economy, energy security, and the environment, including reduction of air emissions. These resources have the potential to meet even the highest projections of demand reviewed by this study."  (Emphasis is ours.)

What about our domestic oil resources you ask?  Hit the link to find out!

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We reported yesterday on several of the amendments approved by West Virginia's Joint Select Committee on Marcellus Shale (see here).  Forbes is reporting that the committee has also made some decisions regarding permit fees:  "Natural gas operators would pay $10,000 to drill a well in West Virginia's share of the Marcellus shale field, and $5,000 for each additional well at the initial site, under a proposal adopted Wednesday by a special legislative committee."

Not so in Ohio!

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We've reported several times on the application filed by Laser Northeast Gathering Company, LLC, with the Pennsylvania Public Utility Commission (see here and here, e.g.).  The Times Leader is reporting that Laser is now seeking to withdraw that application:  "In a filing dated Thursday, Laser asked the Pennsylvania Public Utility Commission for permission to withdraw the application it filed in January 2010. It said it is no longer willing to serve any and all potential customers, and that it is no longer committed to expand its facilities to meet demand as would a public utility."  Interesting.

For more, including a copy of the filing, see here.

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The State Journal is reporting that the West Virginia Legislature's Joint Select Committee on Marcellus Shale approved three amendments this past week:  "One amendment, which passed by a 4-3 vote, would abolish the Oil and Gas Board and transfer its duties to the Department of Environmental Protection. The second would allow for public comment and hearings on gas well permits, while the third would increase the number of people who would have to be notified when a company plans to drill a well. Those two passed unanimously."

For more on the committee's work, see here.

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While not new to the industry as a whole, the WSJ is reporting on recent attempts to enact local bans on oil and gas development in Pennsylvania:  "Challengers to natural gas drilling are taking a new approach in Pennsylvania, putting the rights of energy companies to drill in the massive Marcellus Shale basin on the ballot in what are believed to be the nation's first voter initiatives seeking to ban such activity."

Fortunately, Ohio law largely preempts these initiatives.

[Note:  Subscription may be required.]

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The American Petroleum Institute (API) has released the results of a new study concluding that "U.S. oil and natural gas policy changes could generate more than 1.4 million new jobs, $800 billion in additional government revenue, and 10 million barrels worth of added daily oil and natural gas production by 2030."  Click the link for more, including a copy of the study.

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The New York Department of Environmental Conservation (NY DEC) has finally released a revised Draft Supplemental Generic Environmental Impact Statement (SGEIS) for public review.  Interestingly, the NYT introduces its report on the document as follows:  "Natural gas drilling using a controversial technique known as hydraulic fracturing could create up to 37,000 jobs and generate from $31 million to $185 million a year in added state income taxes for New York at the peak level of well development."

For more, including a copy of the report itself, see here.

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We've reported previously on the Delaware River Basin Commission's (DRBC's) oil and gas rulemaking (see here and here, e.g.).  The Philadelphia Inquirer is reporting that the rule package will be considered in October:  "The Delaware River Basin Commission, which has not allowed natural-gas drilling in eastern Pennsylvania counties within the basin, announced Tuesday that it would not act on its proposed drilling regulations at its Sept. 21 meeting, as one commission member had demanded."

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Last week, the Marcellus Shale Coalition hosted its inaugural "Shale Gas Insight" conference at the Pennsylvania Convention Center.  From the Houston Chronicle:  "A who's who of Pennsylvania's emergent natural gas industry will meet in Philadelphia this week to talk about a shale gas boom that supporters say has boosted domestic energy supplies while creating tens of thousands of jobs. Drilling opponents, meanwhile, are planning a rival event to spotlight what they contend is the environmental and public health toll."

For more, see here (Philadelphia Inquirer); and here (Forbes).

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The LAT is reporting on possible utility rate increases due to pipeline upgrades being undertaken in response to the pipeline explosion last year in San Bruno:  "Three of California's largest utilities are asking customers to help pay for nearly $4 billion in pipeline safety projects needed after last year's deadly San Bruno disaster."  But, as you might expect:  "For many Southern California residents, the proposed hikes are coming on top of $3.2 billion in rate increases sought by Southern California Edison to upgrade its aging electrical grid. *** The effort to hike rates to finance pipeline projects could become just as controversial."

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You may be interested to know:

• Director of Ohio's Department of Natural Resources, David Mustine, has stepped down to become General Manager for Energy for JobsOhio, the state’s new private, nonprofit development corporation.  For more, see here (ODNR News Release).  Assistant Director, Scott Zody, will serve as interim director of the state agency.

• Two bills have been introduced in the Ohio Senate to (i) impose a moratorium on fracing until U.S. EPA finishes its hydraulic fracturing study (SB 213); and (ii) regulate the fluids used in the frac process, including disclosure (SB 212).  There is little likelihood that this legislation will be adopted.  Nonetheless, it was only a matter of time before something like these would be introduced ...

 

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Our mention yesterday of the jobs being created in North Dakota as a result of oil development of the Bakken reminded us of this article in the NYT on the promise of "green jobs":  "In the Bay Area as in much of the country, the green economy is not proving to be the job-creation engine that many politicians envisioned. President Obama once pledged to create five million green jobs over 10 years. Gov. Jerry Brown promised 500,000 clean-technology jobs statewide by the end of the decade. But the results so far suggest such numbers are a pipe dream."  (Emphasis is ours.)

When even the NYT is saying it, you know there's a problem ...

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Dominion Resources, Inc., has filed a request to export liquefied natural gas (LNG) from its Cove Point terminal, according to this article in the Pittsburgh Tribune-Review.  Very interesting.

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That's the finding of a report just issued by the Federal Trade Commission (FTC), according to this press release.  "The Federal Trade Commission today issued a Bureau of Economics staff report examining trends in the petroleum industry and how they have affected gasoline prices between 2005 and early 2011. It concludes that while a broad range of factors influence the price of gasoline, worldwide crude oil prices continue to be the main driver of what Americans pay at the pump."  You can find a link to the report there as well.

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We've reported previously on the benefits to North Dakota from production out of the Bakken (see here, e.g.).  Now USA Today is getting into the act:  "Unemployment is a national problem in the U.S., but you wouldn't know that if you travel through North Dakota. *** The reason?  Billions of dollars are coming into the state and thousands of people are following—all because millions of barrels of oil are flowing out."  For more, see here.

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The WSJ is reporting that the Securities and Exchange Commission (SEC) has started asking operators for more information regarding their use of hydraulic fracturing:  "The Securities and Exchange Commission is asking oil and gas companies to provide it with detailed information—including chemicals used and efforts to minimize environmental impact—about their use of a controversial drilling process used to crack open natural gas trapped in rocks."

No reason to be surprised, given other moves by U.S. EPA and others ...

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IHS Cambridge Energy Research Associates (IHS CERA) has issued a new report calling for the re-evaluation of greenhouse gas emissions estimates prepared by U.S. EPA.  From the CERA website:  "The estimates are based on assumptions that do not reflect current industry practice and should be reevaluated, the reports says. *** 'Estimates are being used that are not supported by data, do not reflect current industry practice and would be unreliable to use as a base for decision-making.'"  For more, including a copy of the report, see here.

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The U.S. Geological Survey recently released an updated survey on recoverable reserves in the Marcellus.  From The Hill:  "According to the updated USGS mean estimate, the area contains 84 trillion cubic feet of technically recoverable natural gas and 3.4 billion barrels of natural gas liquids.  *** The new estimate for the Marcellus Shale — which includes portions of New York, West Virginia and other states — is far higher than the 2002 survey, when the mean estimate was 2 trillion cubic feet of natural gas and 10 million barrels of natural gas liquids."  However, according to Bloomberg:  "The U.S. will slash its estimate of undiscovered Marcellus Shale natural gas by as much as 80 percent after a updated assessment by government geologists."

You can find a copy of the updated survey here.

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We thought you might be interested in these items on regulatory initiatives addressing Marcellus development in West Virginia:

• From the Houston Chronicle:  "Another factor that could help lawmakers: the emergency Marcellus rules ordered earlier by acting Gov. Earl Ray Tomblin. The Department of Environmental Protection could issue them as soon as this week, according to state officials and stakeholders. *** These rules are expected to cover several key areas. One involves permits for the horizontal drilling method that often accompanies Marcellus development. Another is oversight of the large volumes of water withdrawn from area supplies, and of the chemicals mixed with that water before it is pumped underground to break up the shale and release the gas. Environmental groups remain concerned about this hydraulic fracturing process, also known as fracking, and the large pools of tainted water left over afterward."

• From the West Virginia Department of Environmental Protection:  "The West Virginia Department of Environmental Protection, *** filed an emergency rule today with the Secretary of State’s Office to increase the DEP’s regulatory oversight of horizontal well development in the state. *** The rule, which adds new permit application requirements for operators drilling horizontal gas wells, as well as new operational rules to protect the state’s water quality and quantity, will become effective after approval by the Secretary of State and remain in effect for 15 months."  You can find a copy of the rule here.

Interesting.

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That's according to an article in the Philadelphia Inquirer on complaints regarding water withdrawals by operators in Pennsylvania.  "Public confusion about where the drillers can legally withdraw water in the summer - and where it is banned - has caused an increase in complaints to the SRBC [i.e., the Susquehanna River Basin Commission]. *** Withdrawals that the public reports as suspicious turn out to be legal pumping by municipal road crews, garden centers, and nurseries that are allowed to withdraw small amounts of water. Gas drillers have sufficient, metered withdrawal points to meet their needs."

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We reported previously on a Cornell study claiming that natural gas development will likely contribute more to global warming than burning coal (see here).  The Patriot-News is now reporting on the conclusions reached by scientists at Carnegie Mellon University:  "The peer-reviewed study published Aug. 5 in 'Environmental Research Letters' appears to be a direct refutation of an April study from researchers Robert Howarth and Anthony Ingraffea at Cornell University that indicated that shale gas was worse for global warming than coal."  Looking specifically at Marcellus shale development, it finds that "Marcellus gas is essentially no different than conventional natural gas, the study found, and 20-50 percent cleaner than coal for producing electricity."

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The Department of Energy (DOE) has released its 90-day report on shale gas development finding, on balance, that federal and state regulatory programs are effective in protecting the public.  The report goes on to make several recommendations, focusing largely on improving the public's perceptions.  You can find a copy of the report here.

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The WSJ is reporting that New York State's Attorney General has issued subpoenas to several producers seeking valuation information:  "New York state's Attorney General recently issued subpoenas to several energy companies requesting details of how they value their natural gas discoveries, the latest evidence of increasing regulatory scrutiny of gas drillers."  Does this increase or decrease the likelihood that producers will want to enter New York, if and when the moratorium on hydraulic fracturing ends?

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The Times Leader is reporting on a recent industry win overturning Morgantown's ban on Marcellus shale drilling.  "On Friday, Monongalia County Circuit Court Judge Susan Tucker delivered a victory to Charleston-based Northeast Natural Energy in its legal battle with the city of Morgantown. *** Northeast is drilling wells above the Monongahela River about a mile from a city drinking water intake. Citing concern over its water supply and the lack of tough state regulations, the City Council passed an ordinance in June to ban deep horizontal drilling and hydraulic fracturing within city limits and up to a mile beyond.*** Tucker sided with Northeast, declaring the state has sole regulatory authority over oil and gas operations."  Nice.

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The Billings Gazette has an interesting update on development of the Niobrara shale.  It starts:  "Development of the oil-rich underground zone has cooled as testing of the geology and consolidation of interests in the play slowed action in the state’s southeast counties of Laramie, Platte and Goshen, said Michael Bodino, head of energy research for Global Hunter Securities LLC."  The overall message though - Don't give up yet!

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At least, those are the results of a Quinnipiac University survey according to the NY Post:  "The Quinnipiac University survey found state voters back the drilling, 47-42 percent, with majority support in both the suburbs, 52-35 percent, and upstate, 51-39 percent."  Who opposes drilling in NY?  "City voters."  No surprise there.

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The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for August 2011 finding, among other things:  "Natural gas working inventories ended July 2011 at 2.8 trillion cubic feet (Tcf), about 7 percent, or 194 Bcf, below the 2010 end-of-July level. EIA expects that working natural gas inventories will build strongly, approaching last year's high levels by the end of this year's inventory build season. The projected Henry Hub natural gas spot price averages $4.24 per million British thermal units (MMBtu) in 2011, $0.15 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.41 per MMBtu."  (Emphasis is ours.)

For more, see here.

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On July 21, 2011, Citizens For Pennsylvania’s Future (“CPF”) filed a lawsuit against Ultra Resources, Inc. (“Ultra”) in the United States District Court for the Middle District of Pennsylvania alleging that Ultra violated the Clean Air Act ("CAA") by not applying for and obtaining the proper permit to construct and operate its natural gas wells, pipelines, compressor stations and associated equipment in Tioga County and Potter County, Pennsylvania.  The central issue is whether all of Ultra's equipment involved in its natural gas production operations should be aggregated for air permitting purposes, which would impose significantly more stringent permitting, recordkeeping and reporting requirements on Ultra.

We will monitor the suit and keep you posted.

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Mandatory pooling is back on the table for consideration in Pennsylvania - at least in part.  "[T]he Marcellus Shale Advisory Commission has revived a debate over whether to allow areas of Pennsylvania rich with natural gas to be gathered into large land 'pools,' even against property owners' wishes."  (From the Pittsburgh Post-Gazette.)  The new proposal appears to have a strange twist, though:  "Only drilling companies would be forced to allow pooling, not property owners who haven't signed leases."

Better than nothing?

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The Philadelphia Inquirer is reporting that Dominion Resources is building a $500 million natural gas processing plant in West Virginia:  "The Richmond, Va., energy company announced Thursday that it would construct a processing and fractionation plant along the Ohio River in Natrium, W. Va., that would separate propane, butane, and ethane from gas extracted from the Marcellus Shale formation and, increasingly, the deeper Utica Shale."

For a copy of the press release, see here.

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From NPR:  "The rise of fracking as a method for extracting natural gas from shale rock has triggered demand for a key ingredient in the process: silica sand. In parts of the upper Midwest, there's been a rush to mine this increasingly valuable product."  And without the gratuitous attacks on the industry ...  Really.  Interesting.

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So says the NYT public editor about yet another NYT article on the dangers associated with U.S. shale production:  "In the article and in the document viewer, readers never learn the actual positions or identities of the e-mail senders, who are characterized using descriptors like 'official,' 'energy analyst,' 'federal analyst,' 'senior adviser' or 'senior official.' Nowhere is an e-mailer characterized as an 'intern.'"  (Emphasis is ours.)  What's happened to the paper of record?

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The Pennsylvania Patriot-News has an interesting article on Europe's interest in the Marcellus:  "Ever since New York state declared a moratorium on drilling for natural gas in the Marcellus Shale, the conventional wisdom has been it was watching Pennsylvania and learning from us.  It turns out other eyes are watching us as well. *** Markus Wailand, a film producer from Vienna, recently spent 10 days interviewing people involved with Marcellus drilling in Pennsylvania for what he called Austria’s version of '60 Minutes.'"

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That aphorism comes to mind when considering U.S. EPA's new proposal to reduce air emissions from oil and gas operations. From its press release: "Today’s proposal would cut smog-forming volatile organic compound (VOC) emissions from several types of processes and equipment used in the oil and gas industry, including a 95 percent reduction in VOCs emitted during the completion of new and modified hydraulically fractured wells."  But - it really helps industry make money:  "EPA’s analysis of the proposed changes, which also include requirements for storage tanks and other equipment, show they are highly cost-effective, with a net savings to the industry of tens of millions of dollars annually from the value of natural gas that would no longer escape to the air."  Really!  Thank goodness they're looking out for at your pocketbook.  (Emphasis is ours.)

You can find a copy of the rule package here.

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The Energy Information Administration recently commissioned INTEK, Inc., to assess the technically recoverable onshore shale gas and shale oil resources of the lower 48 states as of January 2009.  Among other things, INTEK found:

Eighty-six percent of the total 750 trillion cubic feet of technically recoverable shale gas resources identified in Table 1 are located in the Northeast, Gulf Coast, and Southwest regions, which account for 63 percent, 13 percent, and 10 percent of the total, respectively. In the three regions, the largest shale gas plays are the Marcellus (410.3 trillion cubic feet, 55 percent of the total), Haynesville (74.7 trillion cubic feet, 10 percent of the total), and Barnett (43.4 trillion cubic feet, 6 percent of the total).

Very interesting.  For more, see here.

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The WSJ has a good article on the substantial impact environmental politics can have on a state's oil and gas - and job - development.  Comparing Pennsylvania and New York, it observes:  "More than 2,000 wells have been drilled in the Keystone State since 2008, and gas production surged to 81 billion cubic feet in 2009 from five billion in 2007. A new Manhattan Institute report *** estimates that a typical Marcellus well generates some $2.8 million in direct economic benefits from natural gas company purchases; $1.2 million in indirect benefits from companies engaged along the supply chain; another $1.5 million from workers spending their wages, or landowners spending their royalty payments; plus $2 million in federal, state and local taxes. Oh, and 62 jobs."

But, consider Pennsylvania's northern neighbor, which has in effect imposed a moratorium on Marcellus drilling:  "Consider New York's Broome County, which borders Pennsylvania and from which you can spot nearby rigs. The county seat of Binghamton ought to be a hub for shale commerce, but instead its population is falling as its young people leave for jobs elsewhere."  (Emphasis is ours.)

Read it all.  Especially if you're a policymaker.

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We've previously noted the substantial benefits of local production.  The Republic discusses yet another example, this time in New Mexico:  "Although the boom isn't expected to last, it's the latest sign of an uptick in New Mexico oil production despite ongoing debate over the state's environmental regulations. Oil production in New Mexico during the just-ended fiscal year had increased by more than 4 percent. *** Every $1 increase in crude oil prices generates $4 million in revenue for state coffers over the course of a year."  (Emphasis is ours.)

Useful in a slow economy?

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The PA Marcellus Shale Advisory Commission has issued its final report on natural gas drilling in the state.  According to the press release, it contains 96 policy recommendations that include increasing setback distances, making more information available to the public, imposing tougher civil and criminal penalties for violations of law, and at the same time assisting local companies do business with the natural gas industry.

You can find a copy of the report here.

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Maybe not the best thing to do when you are concerned about rolling blackouts due to increased cooling demand during a heat wave:  "Mayor Gives $50 Million to Anti-Coal Campaign" (NYT).  To do what?  "Expressing frustration with the paralysis at the national and international levels on setting policies to combat climate change, Mayor Michael R. Bloomberg announced on Thursday that he would donate $50 million to the Sierra Club’s campaign to shut down coal-fired power plants across the United States."  (Emphasis is ours.)

Why don't they turn off their air conditioning for a couple of days, just to see what it's like first?

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We've reported previously on various economic impact studies done showing the benefits of local oil and gas development (for example, see here (Oklahoma); here (West Virginia)).  The Philadelphia Inquirer is reporting on an updated study for Pennsylvania:  "'Our estimates suggest that in 2020 the Marcellus industry in Pennsylvania could be creating more than $20 billion in value added, generating $2 billion in state and local tax revenues, and supporting more than 250,000 jobs,' said the authors associated with Penn State's department of energy and mineral engineering."

Not bad at all.

[Update:  You can find a copy of the report here.]

[Link now fixed.]

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We've reported previously on studies of air emissions from natural gas sites in the Fort Worth, TX, area (see here, e.g.).The city of Fort Worth recently released the final report on a study focused on air pollution issues surrounding natural gas exploration in the area, finding:

While Fort Worth residents are exposed to these and other pollutants released from natural gas sites, the measured and estimated air pollution levels did not reach levels that have been observed to cause adverse health effects.  Further, the measured benzene and formaldehyde levels in Fort Worth were not unusually elevated when compared to levels currently measured by TCEQ elsewhere in Texas.

For more, including a copy of the report, see here.

[Update:  The Fort Worth Star-Telegram finds that the study is not credible when it comes to its criticisms of compressor emissions because it relied solely on modeling of what could happen, rather than what actually happens, in the field.  Interesting.]

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Earlier this week, acting West Virginia Governor Earl Ray Tomblin issued Executive Order No. 04-11 requiring the state's Department of Environmental Protection to develop rules regulating Marcellus Shale production.  "The rules will focus mostly on the 'fracking' process, in which millions of gallons of water are mixed with chemicals and pumped underground to fracture shale deposits. Among other things, the regulations will make companies that withdraw more than 210,000 gallons of water a month disclose the list of additives used in frack fluid, and file a water management plan with the DEP."  - from the Charleston Gazette.

We will post a copy of the order once we obtain it.

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The Wheeling Intelligencer has a free-market/regulatory success story for Ohio taxpayers (resulting in large part from cross-state regulatory program differences):  "For months, Pennsylvania gas drillers tapping into the Marcellus Shale have been shipping the hydraulic fracturing, or fracking, waste to eastern Ohio. The Buckeye State is on pace to gain nearly $1 million in fees from out-of-state drillers for accepting the brine."

Of course, there are the usual statements regarding environmental fears.  Still, interesting.

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Ohio ranks in the top 10 of most attractive places for oil and gas investment worldwide according to a Calgary-based global petroleum survey (from this article in RigZone):  "The states in the top 10 were deemed as having attractive commercial and regulatory climates, and were described by survey respondents as having stable and predictable regulatory framework, favorable corporate taxation systems and being energy-friendly with rich resources."

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Ohio has created an Oil and Gas Leasing Commission to encourage the productive development of state lands.  Among other things:  "After the effective date of the rules [to be issued], [the Act] generally requires the state agency that owns or controls the parcel of land that is the subject of a nomination approved by the Commission to enter into a lease with the Commission's selection of the highest and best bidder."  (From the bill analysis.)

For a copy of the legislation, see here (HB 133).

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The Philadelphia Inquirer is reporting on the possibilities a shale gas revolution can bring to the state:  For example, "Power plants could consume more gas to produce electricity, displacing coal. Natural gas vehicles might replace some diesel and gasoline transport. A few entrepreneurs are even talking about shipping liquefied gas to overseas markets."

Read it all.  Interesting.

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Ohio's Governor Kasich signed Amended Substitute House Bill Number 153 (HB 153) on Thursday amending several significant provisions of Ohio's oil and gas conservation laws.  HB 153, for example, clarifies that production operations in Ohio include "all operations and activities and all related equipment, facilities, and other structures that may be used in or associated with the exploration and production of oil, gas, *** including operations and activities associated with site preparation, site construction, access road construction, well drilling, well completion, well stimulation, well site activities, reclamation, and plugging."  See 1509.01(AA).

It also clarifies that the Division of Oil and Gas Resources Management has, with only limited exceptions, sole and exclusive authority over all aspects of oil and gas E&P operations in Ohio: 

There is hereby created in the department of natural resources the division of oil and gas resources management, which shall be administered by the chief of the division of oil and gas resources management. The division has sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state, excepting only those activities regulated under federal laws for which oversight has been delegated to the environmental protection agency and activities regulated under sections 6111.02 to 6111.029 of the Revised Code. The regulation of oil and gas activities is a matter of general statewide interest that requires uniform statewide regulation, and this chapter and rules adopted under it constitute a comprehensive plan with respect to all aspects of the locating, drilling, well stimulation, completing, and operating of oil and gas wells within this state, including site construction and restoration, permitting related to those activities, and the disposal of wastes from those wells.

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The New York Department of Environmental Conservation (NY DEC) has released a series of documents related to its Preliminary Revised Draft Supplemental Generic Environmental Impact Statement (SGEIS) issued in September 2009.  From the Executive Summary:  "The final SGEIS will apply statewide, except in areas that the Department proposes should be off-limits to surface drilling for natural gas using HVHF technology. As explained below, these areas include the watersheds associated with unfiltered water supplied to the New York City and Syracuse areas pursuant to Filtration Avoidance Determinations issued by the U.S. Environmental Protection Agency ('EPA'), reforestation areas, wildlife management areas, state parks, and 'primary' aquifers as defined by State regulations, and additional setback and buffer areas."

Continue Reading...

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

Ouch.

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

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

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

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

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

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

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

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

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

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

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

For more on the study, see here.

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

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

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

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

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

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

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

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

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

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

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

Continue Reading...

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

More energy production is better for all of us.

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

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

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

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

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

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

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

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

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

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

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

Interesting.

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

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

Very interesting.  For more, see here.

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

Not unexpected.

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

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

And:

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

Good to remember.  You can find the opinion here.

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

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The State of Texas has filed its initial brief challenging U.S. EPA's endangerment finding that concludes that greenhouse gases (GHGs) pose a danger to human welfare, according to this release by the State Attorney General's office.  "The EPA’s Endangerment Finding concluded that greenhouse-gas emissions contribute to the 'perceived but undefined danger' variously referred to as global warming or climate change. The States’ brief explains that the Endangerment Finding is legally flawed because the EPA 'refused to determine what ‘atmospheric concentrations’ of GHGs' pose a threat to humans – which is required by the Clean Air Act. When the EPA issues an Endangerment Finding, the Clean Air Act requires the agency to establish clear standards. The States’ brief explains that the EPA made no 'attempt to determine whether reducing GHG emissions will have any impact on climate change.'"

You can find a copy of the brief at the link as well.

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The Energy and Climate Change Committee of Britain's House of Commons has issued a report finding "no evidence that the hydraulic fracturing process involved in shale gas extraction – known as ‘fracking’ - poses a direct risk to underground water aquifers provided the drilling well is constructed properly."  For more see here.

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The NYT is reporting on the potential for increased smog due to oil and gas operations:  "Thousands of natural gas wells are expected to be drilled in Pennsylvania over the next few years, requiring a fleet of construction equipment, diesel engines and compressor stations. Together, they could be a large new source of smog-forming emissions along the Northeast corridor, much of which still struggles with old air quality standards at a time when U.S. EPA is preparing to make the rules stricter."

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The Washington Times has a good article on the benefits to the local economy of domestic production:  "Sunnyside's recent profits are through the roof, up more than 200 percent in the past three years.  Mr. Battista's workforce has tripled since 2008, from five to 15 employees.  Solar power wasn't the economic savior, however.  Instead, the booming Marcellus Shale natural gas drilling industry gave the small-town businessman the means to build a bigger, better store and invest in new trucks to transport goods to gas companies drilling across western Pennsylvania."

The store opened 31 years earlier to do business with an infant solar-power industry that never materialized.

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The Daily Local News is reporting that local regulation may be the next big obstacle to oil and gas development in Pennsylvania:  "Kathryn Klaber, president of the Marcellus Shale Coalition, an industry group, told the commission Friday that drilling firms are having difficulty navigating the 779 zoning ordinances in the 1,491 municipalities in the Marcellus shale region."

Fortunately, in Ohio, the Division of Mineral Resources Management's preemption authority is pretty strong.  See Ohio Rev. Code s. 1509.02.

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The Pennsylvania Public Utility Commission (PUC), in a narrow 3-2 decision, has remanded the application of Laser Northeast Gathering Company, LLC, to an administrative law judge (ALJ) for a determination on whether the granting of a certificate of public convenience is necessary or proper for the service, accommodation, convenience or safety of the public (see this press release).  This overturns an earlier decision of the ALJ finding that Laser Marcellus was not a public utility under Pennsylvania law, which had focused on whether the pipeline should have the power of eminent domain (see our earlier discussions here and here, e.g.).

For a copy of the relevant motion and related opinions, see here.

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The Pennsylvania Department of Environmental Protection has released the findings of a third study showing no emissions levels that would be of public concern:  "'The results show there are no emission levels that would be of concern to the health of residents living and working near these operations,' DEP Secretary Mike Krancer said. 'They are consistent with the results of our air monitoring in southwest and northeast Pennsylvania, the other two areas of the state with the most Marcellus drilling.'"  (News Release.)

For a copy of the study, see here.

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According to this article in the Pittsburgh Tribune-Review, Cheniere Energy Inc. has received approval from the Department of Energy to export 2.2 Bcf of LNG per day:  "Cheniere said that under the Energy Department decision, it will have seven years to begin exports after Federal Energy Regulatory Commission approval. The terminal will maintain its ability to import LNG."

[CORRECTION:  Note that the DOE order is for LNG exports to any permitted importing nation (not just China, as was reported in the Tribune-Review article) (we have corrected the post accordingly).  In fact, the DOE announcement notes:  "In August 2010, Sabine Pass Liquefaction, LLC filed a two-part application requesting authority to export up to 803 billion cubic feet per year of domestically produced natural gas as LNG for a period of 20 years. On September 10, 2010, the Department approved these exports to 15 countries with which the U.S. already has a Free Trade Agreement covering natural gas. Today the Department is extending this authorization to include all other countries except those that lack the ability to receive imports or those with which trade is prohibited by U.S. law or policy."  Very interesting.

For a copy of that announcement, and a link to the order, see here.]

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That's the message of the IEA according to this article in the WSJ:  "The world oil market urgently needs extra supplies to prevent economic damage to importing countries that could derail the global recovery, the governing board of the International Energy Agency said."

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That's the title to a recent post by John Stossel discussing, among other things, the movie Gasland.  "But as I write in my syndicated column this week, it turns out that the film misleads:  The best fire scene in the movie was shot in Colorado, where the filmmaker is in the kitchen of a man who lights his faucet. But Colorado investigators went to that man's house, checked out his well and found that fracking had nothing to do with his water catching fire. His well-digger had drilled into a naturally occurring methane pocket."

It's good.  Read the whole thing.

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There are several articles on drilling on state lands in Ohio that you might find of interest (see here, from the Dayton Daily News; and here from the Columbus Dispatch).

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Ohio EPA and Ohio DNR appear to have reached agreement on a policy regarding the use of POTWs for brine disposal:  "Disposing directly into a surface water body, either directly or via a Publicy Owned Treatment Works (POTW), is not listed as one of these options [for brine disposal found in Ohio Rev. Code Section 1509.22].  Moving forward, ODNR does not envision using its authority to allow for discharges to surface waters either directly or via a POTW."

For a copy of the writing, see here.

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The WSJ has an interesting article on long-haul natural gas trucks.  The costs appear prohibitive at the moment:  "United Parcel Service Inc., which runs one of the country's biggest truck fleets, pays about $95,000 for an average long-haul "tractor"—the front part of the 18-wheeler, housing the engine and driver. It recently ordered 48 natural-gas versions at a cost of $195,000 apiece—about double the cost of a diesel model, said Mike Britt, UPS's director of engineering and maintenance."  Still, very interesting.

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We've frequently noted the articles in the media on hydraulic fracturing.  The NYT had one on May 7th (mis)stating:  "But the practice [i.e., hydraulic fracturing] also pours millions of gallons of dangerous chemicals into the ground and into wastewater treatment systems, which in some cases cannot remove all the potential toxins. There are also numerous documented cases in which fracking fluids leaked into aquifers and contaminated drinking water."  (From Google cache; emphasis is ours).  

What you don't see often is the following:

Correction: May 17, 2011

An article on May 7 about the Obama administration’s appointment of a panel of experts to find ways to make hydraulic fracturing safer misstated the prevalence of cases in which fluids from the gas drilling process have been proven to have contaminated drinking water. There are few documented cases, not numerous ones, although federal and state investigations into reports of such incidents are continuing.

And even that isn't necessarily correct (what documented cases?) ...  Still, the NYT should be commended for trying.

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U.S. EPA has directed six natural gas producers in Pennsylvania to disclose how they intend to dispose of their drilling wastes.  "EPA’s action follows a request by PADEP asking drillers to voluntarily stop taking wastewater to Pennsylvania wastewater treatment plants by May 19. EPA wants to know where drillers are now going to dispose of their wastewater and will work with PADEP to ensure EPA has access to this information."

For a copy of the letters see here (for a sample letter and the enclosure).

It's starting to look like a frontal assault.

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The NYT is reporting that President Obama has announced steps that this administration will take to increase domestic oil production:  "In his weekly radio and Internet address, Mr. Obama said the administration would begin to hold annual auctions for oil and gas leases in the Alaska National Petroleum Reserve, a 23-million-acre tract on the North Slope of Alaska. The move comes after years of demands for the auctions by industry executives and Alaska’s two senators, Lisa Murkowski, a Republican, and Mark Begich, a Democrat."  In addition:  "The administration will also accelerate a review of the potential environmental impact of drilling off the southern and central Atlantic coast and will consider making some areas available for exploration. The move is a change from current policy, which puts the entire Atlantic Seaboard off limits to drilling until at least 2018."

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The WSJ is reporting that California regulators are proposing to require the state's natural gas utilities to undertake safety tests on decades-old pipelines in response to the PG&E explosion that occurred in the fall of last year.  "The proposed order, issued late Tuesday, stems from an explosion last September of a natural-gas line owned by PG&E Corp. that killed eight people and destroyed dozens of homes in San Bruno. A federal investigation showed the pipeline, built in the 1950s, had manufacturing defects but had never had a safety test that might have revealed such flaws."

(Note:  Subscription required.)

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We've mentioned recently a number of attacks on domestic production, and wanted to note that it's not everyone.  Here is an article from the Tucson Citizen commenting on the recent Duke University study, for example:  "Upon further reading [], 'The authors admit they have no baseline data at all, which makes it impossible to characterize the state of those water wells prior to recent development.' So we don’t know if nearby drilling caused 'contamination' or if the presence of methane there is a natural phenomenon. The headline does not match the story."

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The Energy Information Administration (EIA) has issued its Short-Term Energy Outlook for May.  Regarding natural gas, it summarizes:

Natural gas working inventories ended April 2011 at 1.8 trillion cubic feet (Tcf), about 11 percent, or 230 billion cubic feet (Bcf), below the 2010 end-of-April level. EIA expects that working gas inventories will build strongly during the summer and approach record-high levels in the second half of 2011. The projected Henry Hub natural gas spot price averages $4.24 per million British thermal units (MMBtu) in 2011, $0.15 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.65 per MMBtu.

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A couple of items to note regarding hydraulic fracturing in the news:

• The U.S. Department of Energy has initiated its own review of hydraulic fracturing (i.e., in addition to the study being done by U.S. EPA):  "A group of highly respected experts with experience in industry, environmental groups and state regulatory agencies will form a subcommittee of the Secretary of Energy's Advisory Board to conduct the review, and will work to identify, within 90 days of beginning their work, any immediate steps that can be taken to improve the safety and environmental performance of hydraulic fracturing. They will also develop, within six months of beginning their work, consensus recommended advice to the agencies on practices for shale extraction to ensure the protection of public health and the environment."  Why?

• Researchers at Duke University have issued a study finding systematic evidence of methane contamination in areas being drilled using hydraulic fracturing, according to this report in the Philadelphia Inquirer.  Interestingly, it found no chemical contamination:  "We found no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids."  For a copy of the report, see here.

 

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It's unclear who owns the minerals underlying much of Ohio's state park system, according to this article in the Columbus Dispatch.  "Of the 115,300 acres of state parks, the Ohio Department of Natural Resources estimates that it owns the gas rights for 34,590 acres. That's less than one-third of the state park land that could be opened to drilling if lawmakers approve one of several proposals."

Interesting.  And a good map illustrating the issue.

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A Texas court of appeals recently upheld a lower court's award of $2 million to a producer for a regulatory taking imposed by the City of Houston via a permit revocation (see City of Houston v. Maguire Oil Company, et al., Fourteenth Court of Appeals, Case No. 14-09-00701-CV).  The genesis of the taking - the misapplication of a local ordinance imposing drilling restrictions.  For a copy of the case, see here.

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The San Francisco Chronicle is reporting that Chevron has agreed to purchase additional Marcellus assets in Pennsylvania from Chief Oil & Gas LLC and Tug Hill Inc.  "The transaction is expected to close by the end of June and will give the company access to about 5 trillion cubic feet of gas in the area, the company said. In February, Chevron completed its $3.58 billion purchase of Atlas Energy Inc., a Moon Township, Pa., owner of 622,000 acres in the Marcellus Shale."

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U.S. EPA and the Army Corps of Engineers (Corps) have published for comment a guidance document that describes how the agencies intend to identify waters protected by the Clean Water Act and implement the Supreme Court's decisions in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers (531 U.S. 159 (2001)) and Rapanos v. United States (547 U.S. 715 (2006)).  You can find the guidance document, and supporting documents, here (Docket ID No. EPA-HQ-OW-2011-0409).

Comments are due July 1, 2011.

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With the renewed targeting of the profits made by some of the majors in the oil and gas industry, we thought some perspective is in order.  From ExxonMobil:

Here’s a simple fact of economics that’s getting everyone in Washington pretty excited this week: When prices increase for a commodity like oil, companies that produce and sell that commodity earn more money.

***

For every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon. That’s not a typo. Two cents.  (Emphasis is ours.)

What are the taxes on a gallon of gasoline?  48-cents?

Continue Reading...

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According to this press release, the Illinois Attorney General has filed suit against independent producer Capco Offshore of Texas, Inc., for a spill of thousands of gallons of oilfield waste, including brine and crude oil, into ditches and farmland in Jasper County, Illinois.  The suit alleges "water pollution and oil spill liability claims for the April 5 overflow of a concrete storage pit at the well site just south of Willow Hill. After a citizen complaint, the Illinois Department of Natural Resources’ Office of Mines and Minerals (IDNR/OMM) and the Illinois Environmental Protection Agency (IEPA) estimated at least 1,000 barrels, or 42,000 gallons, overflowed at the site near the Embarras River."

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The Houston Chronicle is reporting that U.S. EPA will soon release guidance in fracking with diesel:  "Federal regulators will soon clarify the rules for natural gas companies that inject diesel fuel into the ground as part of their hydraulic fracturing operations, the head of the Environmental Protection Agency said Tuesday."  Don't they still need rules?

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According to this article, Shell Oil Company has announced that it will no longer seek to drill for oil this summer in certain parts of the United States:  "Shell Oil Company has announced it must scrap efforts to drill for oil this summer in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. The move has angered some in Congress and triggered a flurry of legislation aimed at stripping the EPA of its oil drilling oversight."  That's after spending nearly $4 billion on the project.

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U.S. EPA has extended several deadlines that you may find relevant:

First, EPA has been asked to reconsider the requirement to submit requests to use best available monitoring methods during the 2011 calendar year by April 30, 2011 and pursuant to its authority under CAA section 307(d)(7)(B) consequently is extending the deadline contained in those provisions until July 31, 2011. Second, EPA has also been asked to reconsider the time period during which owners and operators of certain specific sources could automatically use BAMM without having to request approval by the Administrator. As a result of this second request, pursuant to its authority under CAA section 307(d)(7)(B) EPA is also extending the date by which owners and operators of certain specific sources would not be required to request approval by the Administrator for the use of BAMM from June 30, 2011 until September 30, 2011.  (Emphasis is ours.)

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The WSJ is reporting that the Federal Energy Regulatory Commission (FERC) has fined Brian Hunter, the hedge fund trader whose trades led to the downfall of Amaranth Advisors LLC, $30 million.  "In a statement, FERC said it found Mr. Hunter 'sold significant numbers of futures contracts' at times when the market was vulnerable to big price swings 'with the intent to depress prices and financially benefit his significant derivative positions held on other platforms.'"

(Note:  Subscription may be required.)

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The Pennsylvania Department of Environmental Protection (DEP) has asked Marcellus producers to stop disposing of their wastewater streams at the remaining treatment facilities in the state:  "At the direction of Governor Tom Corbett, acting Department of Environmental Protection Secretary Michael Krancer today called on all Marcellus Shale natural gas drilling operators to cease by May 19 delivering wastewater from shale gas extraction to 15 facilities that currently accept it under special provisions of last year’s Total Dissolved Solids (TDS) regulations."

Well ...

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New York's Attorney General has told the U.S. Army Corps of Engineers and other federal agencies that he will sue if they fail to conduct a full review of proposed hydraulic fracturing regulations in the Delaware River Basin.  "'Both the law and common sense dictate that the federal government must fully assess the impact of its actions before opening the door to gas fracking in New York,' said Attorney General Schneiderman. 'New Yorkers are correctly concerned about fracking's potential dangers to their environment, health and communities, and I will use the full authority of my office, including aggressive legal action, to ensure the federal government is forced to address those concerns.'"  (See here for more.)

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"Billions in Potential Value" is how this article from centralohio.com describes the possible resource recovery from the Utica Shale in Ohio.  "In a presentation to the Ohio Oil and Gas Association last month, Larry Wickstrom, the state's geologist, estimated producers could recover as much as 15.7 trillion cubic feet of natural gas and 5.5 billion barrels of oil from Ohio's share of the Utica Shale."  And that's a conservative estimate.

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Yes, it may be hard to believe your eyes, but look here (in the NYT):  "The country has been handed an incredible gift with the Marcellus Shale. With an estimated 500 trillion cubic feet of reserves, it is widely believed to be the second-largest natural gas field ever discovered. Which means that those of you who live near this tremendous resource have two choices. You can play the Not-In-My-Backyard card, employing environmental scare tactics to fight attempts to drill for that gas. *** Or you can embrace the idea that America needs the Marcellus Shale, accept the inconvenience that the drilling will bring, but insist that it be done properly."

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The WSJ has an interesting article on the shale potential in France.  "One option that has been fiercely debated is shale gas, whose emergence in the U.S. has helped the country reduce its dependence on imported energy and eased prices while providing a fuel that burns cleaner than oil or coal. France has abundant shale, with the most promising drilling area covering 10,000 square kilometers in the southeast, and technological advances are making it possible to extract deposits trapped deep in the rock."

(Note:  May require a subscription.)

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The NYT is reporting on U.S. EPA's efforts to regulate the use of diesel in hydraulic fracturing operations.  "While Congress in 2005 exempted fracturing from the need to get permits under the Safe Drinking Water Act, it is not exempt when diesel is used. But companies have acknowledged using diesel in some instances. At a subcommittee hearing today, Sen. Tom Udall (D-N.M.) questioned Perciasepe on that."

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U.S. EPA does intend to regulate natural gas drilling in the United States.  According to this article at nasdaq.com:  "The Environmental Protection Agency has the authority to regulate natural gas drilling and is committed to doing so, EPA Deputy Administrator Robert Perciasepe told a Senate committee Tuesday."  How?  Through the Clean Water Act.

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The Oklahoman is reporting on a new national registry for frac fluid constituents:  "The searchable site allows visitors to look up the chemicals used on wells in their area, while offering a wealth of information about the process industry officials say has been instrumental in triggering a revolution in oil and gas production."  For the site itself, go here.  Very cool.

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A new study has been in the news lately claiming that natural gas likely will contribute more to global warming than burning coal because it is vented to the atmosphere in far larger quantities than previously thought (see, e.g., this article in the NYT).  The problems with the study appear to be numerous, however, including the inappropriate use of "lost-and-unaccounted for" data from Texas and long-range transmission pipeline data from Russia; the misuse of a warming factor 45% higher than the one used, for example, by the UN's Intergovernmental Panel on Climate Change (IPCC); and the use of a 20-year limited time frame to study the effects of methane in the atmosphere rather than the commonly used 100-year time frame.  See here.

Apparently others have noticed the issues - see here (Council on Foreign Relations).

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Marcellus a non-issue for western New York?  That's the topic of discussion in this article from the Buffalo News:  "That’s because, even though the Marcellus runs through most of Western New York, the dark shale here doesn’t hold nearly the promise for drillers that it does along a swath that stretches from roughly the southeastern corner of Allegany County eastward to Delaware and Sullivan counties."

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The Denver Post has an interesting article on mapping the Niobrara for development:  "About 50 oil and gas companies are in the Niobrara, with most of the activity straddling the Colorado-Wyoming border. The top companies say they plan to drill more than 150 exploratory wells in 2011."

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There are two recent court decisions in the Appalachian Basin to bring to your attention (in the event you have similar issues):

• Allegheny Wood Products, Inc. v. Marathon Oil Company, in which the United States District Court for the Northern District of West Virginia held that Marathon had not contracted to lease property owned by Allegheny.  Allegheny claimed that it was a third-party beneficiary to a lease package entered into by Marathon, while Marathon asserted that the Allegheny property has been purposefully excluded.  Relying on fundamental principles of contract law, the court agreed with Marathon:  "[B]ased on [the lease package agreement's] plain terms, [Allegheny] did not receive a third-party option to lease its lands to Marathon."  (See Civil Action No. 1:09CV149).  And,

Swallie v. Rousenberg, in which an Ohio court of appeals examined (i) whether a grant of mineral interests that had been improperly notarized was nonetheless valid with respect to a subsequent grant of the property (looking at whether the subsequent grantee was a bona fide purchaser), and (ii) whether an oil and gas lease had expired pursuant to its terms.  It answered both in the affirmative.  (See Case No. 09-MO-2).

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The National Journal has an interesting article observing that plaintiffs lawyers are looking for work in the Marcellus Shale:  "The sound of drills piercing the Marcellus Shale formation has pricked up the ears of attorneys whose practices range from tax and regulatory to land use and environmental. But personal injury lawyers and class action attorneys have also taken notice of what some believe is an environmental disaster in waiting because of a lack of state government oversight and a natural gas industry rushing to get a piece of the shale."

You knew it was coming ...

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The Philadelphia Inquirer has a couple of articles to note:

• Pa.'s Natural Gas Rush, and
• Shale-gas regulation near river divides Pa.

You might take a look.

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The WSJ has a good article on the potential of shale gas.  "What has become known as the "unconventional-natural-gas revolution" has turned a shortage into a large surplus and transformed the natural-gas business, which supplies almost a quarter of America's total energy. This revolution has arrived, moreover, at a moment when rising oil prices, sparked by turmoil in the Middle East, and the nuclear crisis in Japan have raised anxieties about energy security. Government and producers alike have turned their attention back to domestic resources."

Read it.

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From CNBC:  "Energy Output From Shale Rock Could Match 20th Century Oil Boom."  Best line - "You can't leave 160 billion barrels in the ground."

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Reason Online has a good article making the case for increasing domestic oil production:  "Oil is the world’s most critical and scarce energy resource. Only oil is easily divisible, transportable, and vital for most transportation. Japan’s shuttered nuclear plants mean new demand for more millions of barrels of fuel oil to generate electricity for its cities and factories. Libyan oil production will now be shut down for months or years. There is almost no spare capacity in world production."  Take a look.

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The Houston Chronicle has an interesting article on the potential boost being given the Pickens plan:  "After spending nearly three years and more than $80 million of his own money to tout his energy plan, T. Boone Pickens says he's finally about to have something to show for his efforts. *** The measure, called the NAT GAS Act, aims to boost use of natural gas as a fuel in the transportation sector. Lasting five years, it would provide vehicle tax credits to buyers of vehicles powered by natural gas, giving automakers greater incentive to build them."  Interesting.

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The Intelligencer has an article on the possible drilling in Ohio:  "'The economies around us are benefiting from drilling. You see it in Pennsylvania, it's real; you see it in West Virginia, it's real. Now it's here, and we have to grasp the opportunity,' said state Sen. Wilson, D-Columbiana. 'I think this is the biggest opportunity for job growth for eastern Ohio we have seen in a generation.'"

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The Plain Dealer has an interesting article on the potential for Ohio oil and gas resources and proposed legislation for drilling on state lands.  "Ohio's new governor proposed leasing park land in his biennial budget and both the Ohio House and Senate have bills in the hopper that could authorize the state Department of Natural Resources to do so."

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The Register-Herald is reporting that a task force consisting of members from the Bipartisan Policy Center and the American Clean Skies Foundation recently issued a report on the benefits of domestic natural gas production, but recognizing the need for reasonable regulation.

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The Columbus Dispatch is reporting that the city will be constructing a CNG fueling station, to be open to the public by October.  "The city of Columbus is among those helping to change that. The city is building a CNG fueling station at its fuel center on Groves Road and hopes to open it to the public by October. It's part of a plan to add 24 CNG vehicles to the city's fleet this year, with a promise for more vehicles and three more stations over the next seven years."

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The NYT has an interesting article on the likely increased use of natural gas worldwide.  "Still, with the global demand for energy expected to grow by double digits in coming decades, analysts are anticipating a new boom in gas consumption. Given the growing concerns about nuclear power and the constraints on carbon emissions, one bank, Société Générale, called natural gas the fuel of 'no choice.'"

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The Pittsburgh Post-Gazette has an interesting article on the start of the Marcellus shale boom.  "But a convergence of Wall Street interests, corporate money and academia helped transform Marcellus almost overnight from rock to rock star, spurring predictions of a natural gas bounty in the U.S. and unleashing a massive land rush across the commonwealth."  Nice.

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That's the message from the Texas Railroad Commission (RRC) to U.S. EPA, according to this article in the WSJ.  After exonerating Range Resources from claims that its operations had contaminated nearby drinking water wells, one RRC Commissioner observed:  "'This is an example of overreaching at its worst,' said Michael Williams, one of three elected commissioners who oversee oil and gas drilling. The EPA 'has a built-in bias against the fossil fuel energy industry.'" (Emphasis is ours.)

We first mentioned the issue here - U.S. EPA had issued an imminent and substantial endangerment order against Range, claiming that its operations had resulted in natural gas migration into nearby domestic water wells.  Range, already investigating the issue with RRC involvement, contested that finding and demanded proof.  The WSJ article addresses the RRC finding - after a hearing on the matter - that Range's operations were not at fault, and that the gas is likely the result of other methane naturally migrating from a shallower formation - something that has frequently been observed in the area.  U.S. EPA never seriously looked into that possibility.

You can find copies of the order and background materials here.  You can find copies of related deposition transcripts and emails from/between U.S. EPA personnel and environmental consultants/activists here.

Naturally, the WSJ is reporting that U.S. EPA intends to continue to move forward against Range.

[Update:  For a related article in the Houston Chronicle, see here.  "Investigators included geochemical 'fingerprints' of the gas in the water wells, which they said show it didn't come from the Barnett shale formation, where Fort Worth-based Range was drilling, but rather the shallower Strawn gas field, which begins 200 to 400 feet below the surface."]

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The Houston Chronicle is reporting that the Haynesville Shale has become the largest producing natural gas shale formation in the country.  "The U.S. Energy Information Administration said the Louisiana find, which experts say could have up to 39 trillion cubic feet of natural gas, overtook Barnett's volumes by mid-February even after the Texas site recovered from freezing weather."

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U.S. EPA has extended the deadline to submit greenhouse gas reporting data to September 30, 2011.  For more, see here.

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The NYT is reporting that a House panel has voted to limit U.S. EPA's authority over greenhouse gas emissions:  "Moving on a central tenet of the Republican energy and environment platform, a House committee on Tuesday approved a measure to halt the Environmental Protection Agency’s proposed program to regulate greenhouse gas emissions. Republican leaders promised a floor vote on the bill before the Easter recess."  Several Democrats joined in passing the limitation.

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Bloomberg is reporting that there is a resurgence in the use of railroads to transport oil produced out of the Bakken and Three Forks shales (see here - http://www.businessweek.com/ap/financialnews/D9LUG0RG0.htm).  "Trains have quickly become a huge part in hauling crude from North Dakota's oil patch with producers shipping barrels to more profitable markets not served by pipelines."  Very interesting.

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The Dayton Daily News has an interesting article on potential development in Ohio.  "The major new target is what geologists call the Utica Shale, a deep rock formation beneath eight states with untapped potential here. Speculation runs high that it could amount to a major deposit."

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According to this article in the Herald-Dispatch, West Virginia geologists have created an interactive online map of the Marcellus Shale.  "The map shows completed and permitted well sites, thickness and depth of shale, and other information. It also has a list of frequently asked questions."

You can access the map here.

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The Houston Chronicle has an article looking at the exemption from severance taxes for shale operations in Louisiana.  The issues are those faced by other producing states.

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We noted earlier the articles recently published by the NYT regarding shale development, including the claim that it involved the discharge of radioactive wastewater in PA (see here).  Well, you would think they would have waited for the facts - right after those articles came out, the PA Department of Environmental Protection announced the results of in-stream monitoring that was done months earlier:  "DEP Announces Testing for Radioactivity of River Water Downstream of Marcellus Water Treatment Plants Shows Water Is Safe."  (See here.)  More:  "“We deal in facts based on sound science,' said DEP acting Secretary Michael Krancer. 'Here are the facts: all samples were at or below background levels of radioactivity; and all samples showed levels below the federal drinking water standard for Radium 226 and 228.'”

For a more in-depth take down of the NYT articles, see the posts from former PA DEP Secretary, John Hanger (here).

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U.S. EPA has extended the deadline for reporting greenhouse gas (GHG) emissions from March 31, 2011, to an unspecified date later this summer.  For more, see here.

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The Parkersburg News and Sentinel is reporting legislation on Marcellus drilling in the state is looking more likely (without forced pooling provisions).

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We noted previously the regulatory proposals of the Delaware River Basin Commission (see, e.g., here).  Hearings on those proposals have started and have generated quite a bit of coverage.  If you are interested - DRBC gas regs not popular, on either side of the natural gas drilling debate; Delaware River Basin Commission listens as it weighs new natural gas drilling rules (NJ Star-Ledger); DRBC extends comment period on draft natural gas development regulations.  For video, see here.

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The NYT recently had a series of articles on E&P operations.  Notice a trend?

• Is Natural Gas Good, or Just Less Bad?
• Regulation Lax as Gas Wells’ Tainted Water Hits Rivers
• Toxic Contamination From Natural Gas Wells

The follow up NYT article - perhaps illustrating the purpose of the earlier ones:  Pressure Grows for Answers on Fracking.  It observes:  "Congressional Democrats are demanding answers from the Environmental Protection Agency about the safety of hydraulic fracturing, a form of natural gas drilling also known as fracking, after revelations that wastewater from such drilling, which contains radioactive material, is regularly dumped into rivers and streams without proper treatment."  (Emphasis is ours.)

No agenda here, certainly.

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The Register-Herald has a good article on West Virginia's natural gas industry, focusing on non-Marcellus assets.

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Yesterday, the United States Court of Appeals for the Sixth Circuit upheld a lower court's ruling that Kentucky follows the “at-the-well” rule for purposes of royalty calculations, meaning that - with appropriate lease language - lessees may deduct post-production costs before paying landowner royalties (Poplar Creek Development Company v. Chesapeake Appalachia, LLC).  The royalty provision cited by the court stated:  "To pay to the Lessor a royalty for the gas produced and marketed from any gas well on the leased premises at the rate of one-eighth (1/8) part of the wholesale market value of such gas at the well based on the usual prices paid therefor ..."  (Emphasis is ours.)  Moreover, the court held that "'at-the-well' refers to gas in its natural state, before the gas has been processed or transported from the well."

Another good case for the Basin!

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The Elmira Star-Gazette is reporting that a group of New York families has filed suit claiming that Anschutz Exploration Corp. contaminated their water wells through the company's drilling operations.  "The lawsuit seeks $150 million for each of 10 claims in the suit and another $500 million in punitive damages."  You can't help but like the way the report starts, though:  "A New York City law firm has filed a suit ..."  New York City?  Elmira's a couple hundred miles away ...

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We've reported several times on the rules proposed for drilling in the Delaware River Basin by the Basin's Commission (DRBC) (see here, e.g.).  The Philadelphia Inquirer has focused on one significant point regarding those rules - "The Delaware River Basin Commission has drafted regulations that would ban so-called reserve pits in the environmentally sensitive Delaware watershed. The DRBC's regulations would require closed-loop drilling and off-site disposal of cuttings."

Just thought you might want to know.

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There have been a number of tragic natural gas transmission line incidents lately, prompting a call for greater regulation.  Among the responses is the Pipeline Transportation Safety Improvement Act of 2011 sponsored by Senator Lautenberg.  Notably, it calls for a reconsideration of the exemption for natural gas gathering lines - despite the fact that the incidents in no way relate to gathering lines - and would require excavators, as well as the owners of underground facilities, to participate in One-Call programs.

It's still the beginning of the legislative process, but this is something to monitor.

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The Columbus Dispatch is reporting that Governor Kasich has appointed a new chairman of the Public Utilities Commission of Ohio (PUCO) - State Representative Todd Snitchler of Uniontown  (R).  "Snitchler will leave the legislature to fill the three remaining years on the term of Alan Schriber, who resigned as chairman of the Public Utilities Commission of Ohio."  Congratulations!

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The NYT is reporting on congressional hearings convened by the House Energy and Commerce Committee to address U.S. EPA's regulation of greenhouse gases.  A sample:  "'The E.P.A. and the Obama administration have decided that they want to put the American economy in a straitjacket, costing us millions of jobs and billions of dollars a year,' Representative Joe L. Barton, Republican of Texas, said in his opening remarks. 'They couldn’t get it through the legislative process, so they’ve tried to do it by a regulatory approach. It’s not going to work.'”

Of course, the opening remarks of U.S. EPA's Administrator were just as strong, suggesting that pending legislation to eliminate that regulatory authority would harm the children:  "The bill appears to be part of a broader effort in this Congress to delay, weaken, or eliminate Clean Air Act protections of the American public. I respectfully ask the members of this Committee to keep in mind that EPA’s implementation of the Clean Air Act saves millions of American children and adults from the debilitating and expensive illnesses that occur when smokestacks and tailpipes release unrestricted amounts of harmful pollution into the air we breathe."  For a copy of those remarks, see here.

The next year or two promise to be interesting ...

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The WSJ is reporting that West Virginia's Department of Environmental Protection (DEP) is asking for a more than 10-fold increase in its permitting fees for producers looking to drill horizontal wells in the Marcellus Shale:  "DEP has proposed increasing the fee to $10,000, in legislation introduced Monday. Huffman said the resulting revenues would fund the additional inspectors needed, while also covering costs of other regulatory provisions in that bill."

That's up from $650.  Ouch.

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There are a number of interesting updates regarding U.S. EPA's plan to study the use of hydraulic fracturing in E&P activities:

First, the members of the agency's Science Advisory Board (SAB) were announced earlier this month.  See here.  You will note, the group is heavy with academics.

Second, U.S. EPA has published a draft of its plan for review by the agency's Science Advisory Board.  According to the press release, "The scope of the proposed research includes the full lifespan of water in hydraulic fracturing, from acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced or used water and its ultimate treatment and disposal."

Continue Reading...

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The U.S. Department of Interior - for its moratorium activities related to the Gulf of Mexico - has been held in contempt by Judge Martin Feldman of the U.S. District Court for the Eastern District of Louisiana, according to this article in the Politico.  The order finds, interestingly:

[T]hat the government did not simply reimpose a blanket moratorium; rather, each step the government took following the Court’s imposition of a preliminary injunction showcases its defiance: the government failed to seek a remand; it continually reaffirmed its intention and resolve to restore the moratorium; it even notified operators that though a preliminary injunction had issued, they could quickly expect a new moratorium. Such dismissive conduct, viewed in tandem with the reimposition of a second blanket and substantively identical moratorium and in light of the national importance of this case, provide this Court with clear and convincing evidence of the government’s contempt of this Court’s preliminary injunction Order.

The article has a link to the order itself.  Worth a look.

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The Houston Chronicle is a good source for updates on the frac study contemplated by U.S. EPA.  For example:  "The Environmental Protection Agency is close to launching a broad study on hydraulic fracturing, but the probe doesn’t guarantee that the federal government will step in and regulate the drilling technique, EPA Administrator Lisa Jackson said Wednesday."  The agency expects to have the work plan finished within the next month or two.

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The NYT is reporting on recent legislative initiatives to curtail U.S. EPA's regulation of greenhouse gases:  "The Inhofe-Upton-Whitfield bill would, its sponsors say, prevent the E.P.A. from enacting rules that should properly be written by Congress, restrict use of the Clean Air Act to address climate change, prevent the administration from enacting a 'backdoor' carbon tax and protect American jobs from foreign competition."  Interesting.

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 We've reported several times on new rules proposed by the Delaware River Basin Commission (DRBC) to govern oil and gas development projects in the Basin (see here, e.g.).  The WSJ is reporting that two environmental groups have filed suit to prevent exploratory wells from being drilled in the Basin.

We suspect that there's more to come.

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The NYT is reporting on a letter sent by House Democrats alleging that some service companies have illegally used diesel fuel in their frac fluids:  "Oil and gas service companies injected tens of millions of gallons of diesel fuel into onshore wells in more than a dozen states from 2005 to 2009, Congressional investigators have charged. Those injections appear to have violated the Safe Water Drinking Act, the investigators said in a letter to the Environmental Protection Agency on Monday."

For a copy of the letter, see here.  According to industry (in the NYT article):  "Oil and gas companies acknowledged using diesel fuel in their fracking fluids, but they rejected the House Democrats’ assertion that it was illegal. They said that the E.P.A. had never properly developed rules and procedures to regulate the use of diesel in fracking, despite a clear grant of authority from Congress over the issue."

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We reported previously here on a study done by Pennsylvania's Department of Environmental Protection finding no air emissions that would be a cause for concern.  WHYY is reporting on another study with similar results:  "The survey observed four Susquehanna County sites from August to October. DEP official Mark Carmon said the study found elevated levels of methane, propane, butane and other gasses in the air, but nothing surpassing the warning levels for 'air-related health issues.'"

For more, including a copy of that study, see here.

Or for another related article, see here.

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The Texas Commission on Environmental Quality (TCEQ) has issued tougher air emissions regulations for producers, effective April 1, 2011, for Barnett Shale areas, according to this article in the Houston Chronicle.  "TCEQ commissioners voted Wednesday to beef up air emission limits on toxic chemicals associated with natural gas drilling and required producers to do expanded testing of their drilling sites."

For a copy of the rules and related materials, see here (Rule Project No. 2010-018-106-PR).

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The WSJ has a short article on possible legislative changes for West Virginia producers:  "One pending bill proposes rules meant to address these various concerns. Crafted by a House-Senate interim committee that studied the issue over the past year, it also proposes hefty hikes for drillers."  Those proposed hikes include a $15,000 drilling permit fee!

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The Philadelphia city council is set to vote against Marcellus Shale development, according to this article in the Philadelphia Inquirer.  "Though anti-drilling activists are hailing the measure as "bold," its effects are largely symbolic because the city has limited legal means to influence drilling activity outside its jurisdiction. The nearest drilling is taking place more than 100 miles from the city limits, and there is no gas development now in the Delaware River watershed, from which the city draws its drinking water."

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The WSJ is reporting that ExxonMobil's Outlook for Energy is optimistic for natural gas:  "Global demand for natural gas, commonly used for heating homes and businesses and for generating electricity, will increase 2% a year through 2030, the Texas oil giant says, raising the 1.8% estimate it made last year."  Interesting.  (Note:  Subscription may be required for article.)

A copy can be found here.

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WXVT15 is reporting that Arkansas state highway officials have lowered weight limits on several highways where producers are drilling in the Fayetteville Shale.  Hmmm ... Is there a method for getting a waiver if you pay a fee?

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The West Virginia MetroNews is reporting on a new study looking at the economic impact of oil and gas drilling activities on West Virginia:  "A study from West Virginia University's Bureau of Business and Economic Research labels the impact on the state's economy from natural gas production in the Marcellus Shale 'profound' and says that impact will only continue to grow."  (Emphasis is ours.)

For a copy of the study, see here (The Economic Impact of the Natural Gas Industry and the Marcellus Shale Development in West Virginia in 2009).

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We've noted before the views of ProPublica on natural gas drilling (see here).  Well, they're at it again in a new article seeking to challenge the environmental benefits of natural gas in terms of greenhouse gas emissions.  It does point out the threat to small producers, however:  "In November the EPA announced new greenhouse gas reporting rules for the oil and gas industry. For the first time under the Clean Air Act, the nation’s guiding air quality law, thousands of small facilities will have to be counted in the pollution reporting inventory, a change that might also lead to higher measurements."  After they're counted, can regulation be far away?

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The report recently issued by the presidential commission appointed to investigate last year's oil spill in the Gulf of Mexico may find rough seas ahead, according to this article in the NYT.  For example:  "'No, that's a bad idea,' Hastings [Chair of the House Natural Resources Committee] said of the suggestion to raise fees on industry to pay for more oversight. 'Listen, the amount of revenue that's coming in from the [outer continental shelf] far exceeds what it costs to regulate that industry. It seems to me that the easiest place if there's going to be more costs -- and I acknowledged there could be more costs involved -- it should come out of existing revenues that are generated with the OCS leasing right now.'"

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The Delaware River Basin Commission (DRBC) has published draft natural gas development regulations (see here).  From the DRBC's Fact Sheet:  "[T]his Article requires that water used for natural gas development projects must come from water sources that have been approved by the Commission for use for natural gas development. ***. A streamlined approval process is provided that encourages the use of existing Commission-approved water sources to minimize the need to construct and operate new water sources."

From a quick look, it appears as if the DRBC is looking to limit development through, among other things, significant bond requirements and permit fees.

Comments are due:  March 16, 2011.

[Update:  Public hearings have been scheduled for middle/late February (moved up).]

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The Intelligencer has an interesting article on natural gas processing in West Virginia.

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The Star-Gazette is reporting that the New York State Department of Environmental Conservation may allow hydraulic fracturing and increased drilling on state forest lands.  "The Strategic Plan for State Forest Management, finalized on Dec. 29, will allow the state to lease the gas rights to the Marcellus Shale formation beneath certain state-owned forest parcels, but only after public hearings are held on each lease offer."

For a copy of the Strategic Plan, see here.  It even has an interesting list of current state oil and gas leases ...

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The Akron Beacon Journal is reporting on a debate recently held on hydraulic fracturing:  "What evolved was a battle of dueling experts Thursday, as four speakers debated whether a controversial means used to extract natural gas, called hydraulic fracturing or fracking, is safe or whether it poses a threat to drinking-water wells."

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The idea of drilling for oil and gas in state parks is getting another look, according to this article (with related video) from NBC4.  "David Mustine, the new director at the Ohio Department of Natural Resources, has been quoted as saying he is open to the idea of drilling in state parks and other areas to help pump money back into the state."

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The Pittsburgh Post-Gazette has an interesting article discussing recent natural gas price estimates from the U.S. Department of Energy.  A sample:  "As a result [of the growth of supply from shale formations], the Energy Department says the price of natural gas at the wellhead, before transportation and other costs are added, will remain less than $5 per thousand cubic feet through 2022. (A thousand cubic feet is roughly equivalent to a million BTUs.) Going further out, to the year 2035, it has lowered its estimate to $6.53, from an $8.19 estimate a year ago."

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That's the most recent estimate of North Dakota's oil reserves in the Bakken shale according to this Houston Chronicle article.  "Eleven billion barrels is double the previous estimate of reserves, and could eventually push North Dakota into second place among the states for oil production, leapfrogging over California and Alaska and trailing only Texas. We won't know for sure for a couple of years, but this is considered likely by experts, according to an Associated Press story published in the Chronicle ("North Dakota oil patch larger than expected: If estimate is correct, state might soon pass all but Texas in production," Page B1, Jan. 3)."

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The San Diego Union-Tribune has an article discussing concerns over air emissions from LNG expressed by local officials (at least one of whom is a member of the California Air Resources Board):  "County officials say that San Diego Gas & Electric, which operates the region’s natural gas pipelines and distribution lines, is allowing the import of the extra-polluting gas and hasn’t taken steps to minimize its impact."  The issue - it's hotter than other gas transported by the local utility.

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The Intelligencer is reporting that Dominion Transmission, Inc., is planning on constructing a natural gas processing plant along the Ohio River in West Virginia:  "The facility is designed to phase in service for processing up to 300,000 cubic feet per day of natural gas. Fractionation capacity for up to 38,000 barrels per day of liquid byproducts of natural gas."

For the Dominion press release, see here.

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U.S. EPA has announced that it is going to defer greenhouse gas permitting requirements for biomass-fired and other biogenic sources to promote them as an energy source.  "'We are working to find a way forward that is scientifically sound and manageable for both producers and consumers of biomass energy. In the coming years we will develop a commonsense approach that protects our environment and encourages the use of clean energy,' said EPA Administrator Lisa P. Jackson. 'Renewable, homegrown power sources are essential to our energy future, and an important step to cutting the pollution responsible for climate change.'"  (Emphasis is ours.)  Such as natural gas?

Reminds us of the statement:  "It's good to be the king!"  - Mel Brooks, History of the World, Part I

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The Houston Chronicle is reporting that the U.S. Court of Appeals for the District of Columbia has rejected Texas' bid to prevent U.S. EPA from regulating greenhouse gases in the state.  "The state had asked the U.S. Circuit Court of Appeals for the District of Columbia to delay the Environmental Protection Agency’s plan to seize control of permits for greenhouse gas emissions from power plants and other large industrial sources in Texas.  But the three-judge panel concluded that Texas officials have not met 'the stringent standards required for a stay' while the court reviews the EPA’s takeover of the state’s permitting authority."

Texas has refused to implement EPA's regulations.

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We reported previously on the new heads of the Ohio Department of Natural Resources and Ohio EPA (see here).  Now for another state - New York.  The NYT is reporting that NY Governor Cuomo has nominated Joseph Martens as the new head of the state's Department of Environmental Conservation.  Will it be good for NY's energy industry?  Well ...  "The announcement of Mr. Martens’s appointment drew praise from groups like the Natural Resources Defense Council. 'Joe Martens’ experience, judgment, and temperament make him the right person at the right time to meet the challenges that D.E.C. faces,' said Ashok Gupta of the natural resources council. 'He has the support and key relationships with the business and environmental community that will allow him to hit the ground running.'”

We'll see.

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The NYT has an article recognizing the use of carbon dioxide to recover energy resources:  "Last month, Texas air-quality regulators approved crucial permits for two coal-fired power plants that will capture their carbon dioxide emissions and sell them for use in nearby oil fields. Also in December, a major new pipeline operated by Denbury Resources of Plano began ferrying carbon dioxide from Mississippi to oil fields near Houston."

Better late recognition than never.

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The American Petroleum Institute (API) has released a report urging increased access to areas presently off limits to E&P activities:  "“Our industry contributes more than $1 trillion to the U.S. economy and provides most of the energy that heats our homes, fuels factories and offices, and gets people to home and work. Policy decisions seeking to burden this critical industry with punitive taxes and overly restrictive rules do nothing to boost the economy or enhance energy security. Instead, they cost jobs, damage the economy and compromise our national security. (quoting Jack Gerard, President and CEO, API)."

For more, including a copy of the report, see here.

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The Houston Chronicle is reporting on the opportunities presented by the Eagle Ford shale in S. Texas:  "That's the site of the Eagle Ford shale formation, a vast underground network of dense rock layers, discovered only recently and now thought to be one of the nation's biggest oil and gas fields."

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The Columbus Dispatch is reporting that Governor-elect Kasich has named the new Directors of Ohio EPA and the Ohio Department of Natural Resources:  "Gov.-elect John Kasich today picked Indiana native Scott Nally to run the Ohio Environmental Protection Agency and former American Electric Power executive David Mustine as head of the Ohio Department of Natural Resources."

For more, see this article from the WSJ:  "Kasich said he expected former business executive David Mustine to play a key role in exploring how Ohio would be impacted by the exploration of the Marcellus Shale."

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This headline says it all:  "Kasich hopes for gas bonanza from Marcellus Shale."  Ohio's oil and gas industry has a lot to offer the state economy, and this article from the Columbus Dispatch suggests that Governor Kasich recognizes it.

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

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

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

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

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

Happy New Year!

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

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

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

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

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

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

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

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

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

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

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

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

For a copy of the decision, see here.

Now it's up to the Commission.

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

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

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

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

Here is a copy of the pre-publication rule.

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

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

Very interesting.  (Note:  Subscription required.)

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

(Note:  Subscription required.)

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U.S. EPA has finalized a rule governing the sequestration of carbon dioxide, according to this press release.  More specifically:  "EPA finalized a rule that sets requirements for geologic sequestration of carbon dioxide, including the development of a new class of injection well called Class VI, established under EPA’s Underground Injection Control (UIC) Program. The rule requirements are designed to ensure that wells used for geologic sequestration of carbon dioxide are appropriately sited, constructed, tested, monitored, and closed. The UIC Program was established under the authority of the Safe Drinking Water Act."

For more, including a pre-publication copy of the rule, see here.

(Update:  For a copy of the Federal Register version, see here.)

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The WSJ is reporting that chemical dispersants worked better than previously thought in breaking up oil spilled in the Gulf of Mexico:  "The updated [NOAA] report finds that of the estimated 4.9 million barrels released after the Deepwater Horizon off-shore rig exploded and sank last April, roughly 77% either was directly recovered, burned off, skimmed, dispersed or evaporated or dissolved. *** The most significant change from the August report is that government scientists have doubled the amount of oil classified as 'chemically dispersed'— from 8% in August to an estimated 16% now."

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The Post-Gazette is reporting that Pittsburgh has banned natural gas drilling.  A challenge in the future?

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This article from the Columbus Dispatch reminded us that natural gas migration is often blamed on oil and gas operators, ignoring the fact that this type of migration occurs naturally in many producing regions:  "Naturally occurring natural gas led to Thursday's explosion at Darbydale Elementary School, which is to remain closed for the rest of this week.  South-Western officials expected to open the school Wednesday, but inspectors discovered today that natural gas seeping from underneath the building caused the fire in the boiler room."

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The NYT has an interesting article on energy supplies:  "Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia. In addition, the United States has increased domestic oil production for the first time in a generation."  But all is not well given this abundance:  "And while moderately priced oil and gas bring economic relief, they also make renewable sources of energy like wind and solar relatively expensive and less attractive to investors unless governments impose a price on carbon emissions."

It even notes a time-tested solution for high energy prices - High energy prices.  "The same high prices that inspired dire fear in the first place helped to resolve them. High oil and gas prices produced a wave of investment and drilling, and technological innovation has unlocked oceans of new resources."

Worth a read.

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The Houston Chronicle is reporting that more than half of the natural gas transmission lines in Texas are vulnerable to failure:  "In Texas alone, more than 25,000 of nearly 46,000 miles of transmission pipe are older than 1970 ***.  Federal regulators warned companies more than 20 years ago to reconsider the use of all pipelines built with lower-quality welding techniques that were widely employed in pipe factories prior to 1970 ***. Also a potential problem is some aged protective coating on pipes that actually can make them more vulnerable to corrosion, according to a number of pipeline experts."

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The Energy Information Administration (EIA) has released its weekly storage report:  "Working gas in storage was 3,840 Bcf as of Friday, November 5, 2010, according to EIA estimates. This represents a net increase of 19 Bcf from the previous week. Stocks were 31 Bcf higher than last year at this time and 342 Bcf above the 5-year average of 3,498 Bcf."  Graphically:

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The Energy Information Administration (EIA) has released its Short-Term Energy Outlook for November, and the projected spot price for natural gas in 2011 is not robust:

The decline in prices over the past two months was partly the result of high production, mild weather, and the absence of significant hurricane activity in the Gulf of Mexico, all of which contributed to the large inventory build. Projected Henry Hub prices rise to $4.22 per MMBtu in January 2011 because of the increase in winter space-heating demand. EIA has lowered the average 2011 Henry Hub price forecast from last month's Outlook by $0.27 per MMBtu, to $4.31 per MMBtu, based on the upward revisions in the domestic production and inventory forecasts.  (Emphasis is ours.)

For more, see here.

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We've reported previously on the study being done by U.S. EPA on the potential impact of hydraulic fracturing on drinking water (see here, e.g.).  EPA announced yesterday that eight of the nine frac companies that it had sent a voluntary information request had agreed to provide the sought-after information.  Halliburton refused and is being chastised, by subpoena, by EPA.  From its cover letter:  "EPA believes that Halliburton's response is inadequate and inconsistent with the cooperation shown to date by the other eight companies.  Since Halliburton appears not to be committed to providing all the requested information on an expeditious schedule, EPA, therefore is ordering the submission of the information outlined in the enclosed Subpoena and Information Request, pursuant to the authorities cited therein."

For a copy of the related press release, see here; for a copy of the letter and subpoena, see here and here.

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From the NYT:  Obama's Enthusiasm for Gas Drilling Raises Eyebrows.  "President Obama's newfound interest in expanded natural gas drilling yesterday surprised many on all sides of the drilling debate, from environmentalists to drillers and even the coal industry."  Indeed.

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Earlier this week, the West Virginia Supreme Court of Appeals cleared the path for oil and gas development in Chief Logan State Park, according to this article in the Charleston Gazette.  The pivotal question, according to the court, was whether "the statutory provision prohibiting the DNR from authorizing mineral exploitation within West Virginia state parks, i.e., W. Va. Code § 20-5-2(b)(8), preclude the issuance of the well permits for which Cabot has applied?"  The court found that it did not, holding that "W. Va. Code § 20-5-2(b)(8) has no preclusive effect upon the requested permits herein insofar as this statutory language was enacted after the 1960 deed conveying the subject property was executed. As such, W. Va. Code § 20-5-2(b)(8) cannot be applied to retroactively modify the parties' written agreement memorialized in their deed."  (Emphasis is ours.)

For a copy of the court's decision, see here (Cabot Oil & Gas v. Huffman, Case Nos. 35508, 35509, 35510, and 35511).

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We've reported several times on the emergence of alleged air contamination issues relating to E&P operations, primarily out of the southwest and U.S. EPA.  Not surprisingly, the claim has come to the Appalachian Basin.  The Pennsylvania Department of Environmental Protection (DEP) has released a report on a short term air quality study conducted near Marcellus Shale natural gas operations in southwestern Pennsylvania.  According to DEP Secretary John Hanger, "The data shows no emission levels that would constitute a concern to the health of residents living near these operations."  (Emphasis is ours.)

For a copy of the report, see here.

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

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

And comments:

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

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

Comments are due January 18, 2011.

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

Nice job overall, and highly recommended reading.

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

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

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

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

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

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

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

There was only a month to go!

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

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

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

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

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

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

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

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

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

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

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

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

(Note:  Subscription may be required.)

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

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

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

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

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

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

The comments are interesting as well.

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

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

Nice.

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

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

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

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

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

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

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

From the petition:

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

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

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

For more on Dr. Mason, see here.

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

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

Continue Reading...

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

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

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

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

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

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

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