Volume 2, No. 34
Comments on BLM hydraulic fracturing rule vary widely. The comment period closed on the revised U.S. Bureau of Land Management (BLM) draft regulations for hydraulic fracturing, leaving BLM to sift through 900,000 comments. The comments vary:
- A number of state agencies, that currently regulate hydraulic fracturing, opposed the rule. For example, the North Dakota Department of Mineral Resources argued that federal rules will introduce uncertainty that will discourage potential investors away from the Bakken Shale play.
- Industry groups and members of Congress representing states with significant shale deposits argued that state agencies are much more experienced in oil and gas regulation and their own state’s unique geology, and that the absence of aquifer contamination under state regulations makes the rule unnecessary. They also contend the federal rules would discourage production on federal and tribal lands by increasing costs (15 times greater than BLM estimated), imposing lengthy permitting times, and creating substantial uncertainty.
- A coalition of environmental and sporting groups support the draft rule, but urged BLM to make it more stringent by eliminating exemptions for state regulations meeting federal standards, eliminating the option to submit cement logs for well groups instead of individual wells, mandating closed-loop tank systems for wastewater, requiring pre- and post-drilling ground and surface water sampling, imposing flaring reductions, and prohibiting any drilling near surface water. The comments also criticized the FracFocus.org website used by many states for the reporting of chemicals used in hydraulic fracturing fluid and urged BLM to establish its own database. The groups also want BLM to drop protections for chemicals identified as trade secrets by well service companies.
BLM declines to offer Colorado parkland for oil and gas leases. After an initial decision to include eight parcels of federal land near Colorado’s Mesa Verde National Park in a November lease sale, BLM is now withholding them from the sale, stating that it is still conducting an environmental review. The National Park Service and La Plata County, Colorado officials had urged BLM to exclude the parcels from the lease sale. Depending on the final environmental review, the parcels could be leased in 2014. BLM has previously deferred the leasing of these parcels, citing similar environmental concerns and the need to update resource management plans.
Environmental group and Texas debate conservation program. Defenders of Wildlife issued a report alleging a Texas conservation program is not protecting the dunes sagebrush lizard, a species which is proposed for listing as endangered under the Endangered Species Act and which is located in areas of the Permian Basin in west Texas. The report claims satellite and aerial photos show projects and related roads are being developed within the protection area. The Texas Comptroller has responded that Texas A&M University and the Texas Habitat Conservation Foundation, which monitor aerial photos and drilling permits to enforce the plan, believe the report misinterprets low resolution images. Colorado and Wyoming have adopted similar habitat conservation plans in order to steer clear of ESA restrictions on development. Environmental groups have protested those plans, preferring a formal listing for various species found near shale plays. A court challenge to the Texas conservation plan is pending.
Wisconsin county imposes moratorium on silica mining. The Trempealeau County Board passed a moratorium on mining silica until a health study can be completed. Silica mined in Wisconsin and Minnesota is preferred by shale developers as a proppant used in hydraulic fracturing fluid. The Board passed the moratorium on a 12-0 vote with two abstentions and three board members not attending the vote despite a previous 8-8 deadlock on a similar measure. Although other jurisdictions in Wisconsin and Minnesota have passed silica mining moratoria, Trempealeau County was seen as friendly to the practice, approving 26 permits for mines and processing plants over the past three years. Under the moratorium, no new mines or mine expansions will be permitted.
Ballot measures against hydraulic fracturing continue. Environmental groups continue to pursue local ballot measures to ban hydraulic fracturing. The Athens Community Bill of Rights Committee gathered the signatures needed to place a ban on hydraulic fracturing on the Athens, Ohio November 2013 ballot, but the local elections board invalidated the proposed initiative, because its language was misleading and the proposed ban extended beyond the city limits. In Colorado, the Fort Collins city council approved a ballot measure that would impose a five-year moratorium on hydraulic fracturing and storage and disposal of hydraulic fracturing wastewater. Supporters claim five years is required to study the potential impacts on public health and property values. Prospect Energy is the only shale developer in Fort Collins. It is already subject to an ordinance prohibiting new wells under an agreement with the City that the company’s existing operations will meet environmental and safety standards more stringent than state regulations. A representative for Prospect stated that the moratorium would nullify its agreement with the city.
Wyoming proposes new water testing, accelerated well plugging program. The Wyoming Oil & Gas Conservation Commission issued a draft rule that would require drilling companies to sample nearby surface and groundwater before drilling and after production begins. The sampling requirements are subject to the consent of landowners, which is sometimes difficult to obtain. The Commission will take public comments on the draft until October 7, 2013 and make a final decision during its November meeting. The Petroleum Association of Wyoming supports pre-drilling sampling, but to keep costs down, would support post-drilling only when there may be reason to suspect a problem. Local environmental groups support both pre- and post-drilling sampling, calling it “cheap insurance” for the industry. The Commission is also considering new taxes on drilling companies to expedite its program to plug approximately 1,200 abandoned oil and gas wells. Locating and plugging abandoned wells could reduce residual emissions from those wells, as well as the risk presented when new horizontal wells are drilled.
North Dakota to designate lands for increased protection. The North Dakota Industrial Commission, a panel comprised of the State’s governor, attorney general, and agriculture commissioner, is examining 40 sites that may be placed off-limits from shale development or subject to additional restrictions. The sites were nominated based on historical, cultural, recreational, or natural significance and are located predominantly in the western part of the state, home of the Bakken Shale play. The commission members are currently touring the nominated sites, which are a mix of publicly and privately owned lands. There is no schedule for when the commission will issue its decisions.
West Virginia: current air regulations provide necessary protections. Representatives from the West Virginia Department of Environmental Protection (WVDEP), appearing before the state legislature, testified that its studies on noise, light, and air pollution show that current regulations on shale drilling are protecting public health but that the legislature may want to extend existing setback requirements. Under current law, the center of a well pad must be 625 feet away from an occupied dwelling, but wells, engines, and other emitting sources are not always in the center of the well pad. The studies presented included a joint WVDEP-EPA analysis of air quality at a Morgantown elementary school, which showed that levels were well within public health limits. Some of the studies, however, did show that emissions from vehicle traffic necessary to develop the wells can impact area air quality. WVDEP continues to study air quality near drilling sites and urged legislators to wait for those studies to finish before considering new regulations.
Pemex will form U.S. subsidiary. Petroleos Mexicanos (Pemex), Mexico’s state-owned oil company, will form a new U.S. subsidiary to develop shale resources and deep-water oil. The company’s CEO stated that the U.S. venture will be a learning experience that will allow Pemex to better exploit Mexico’s own shale and oil resources. Despite having substantial shale and deep-water assets, Mexico’s constitution prohibits outside companies from playing a major role in development, restricting Pemex’s ability to draw upon U.S. and other technical expertise.
Australian court vacates approval of $40 billion Woodside LNG export terminal. The Supreme Court of Western Australia invalidated the project assessment for Woodside Petroleum’s proposed LNG export terminal, finding that it was directed by three Western Australia Environmental Protection Authority (WAEPA) ministers with financial ties to the project. Although the ministers were removed during the process, the WAEPA continued to rely on the assessment. The court held that their initial involvement required WAEPA to start the assessment over. A local landowner and The Wilderness Society successfully challenged the project in court. Woodside had already abandoned the project, citing unanticipated costs, labor shortages, and technical difficulties, but if Woodside decides to resume the project, it would have start with a new assessment.
UK environmental groups protest hydraulic fracturing. Members of environmental groups blockaded the gates of a Cuadrilla Resources exploratory drilling site in Balcombe, Sussex and the corporate office of Cuadrilla’s public relations firm in London. Approximately 25 protesters were arrested, including a Green Party Member of Parliament. The protestors complained that hydraulic fracturing causes harm to the environment.
Shale acreage acquisitions slowing. BHP Billiton and Shell are reducing their shale asset purchases after writing down their existing oil and gas assets due to falling prices. A Bloomberg report asserts that Billiton and Shell are now devoting their resources to developing their assets instead of acquiring new ones. Last quarter, Billiton wrote down the value of its Arkansas shale assets by $2.8 billion dollars and Shell wrote down $2 billion on its North American assets. A Citigroup analyst reported that North American energy deals in the first half of 2013 are at their lowest point since 2004 and may stay there for years due to low natural gas prices.
Companies leaving Fayetteville Shale play. Arkansas’ Fayetteville Shale play is seeing drilling companies departing despite initial optimism. Southwestern Energy Company, BHP Billiton, and XTO Energy are withdrawing from the play despite heavy investments. Rig counts dropped from 60 in 2008 to 11 rigs today. An analyst with WTRG Economics cited low prices for natural gas, which makes plays without significant natural gas liquids or crude oil such as the Fayetteville Shale unprofitable. The University of Arkansas, Fayetteville estimated that gas companies invested $12.7 billion in area acreage but have yet to make the play a moneymaker.
Chesapeake’s former CEO investing in Utica Shale. Aubrey McClendon, co-founder and former CEO of Chesapeake Energy, is buying up acreage in Ohio’s Utica Shale play with a new company, American Energy Partners. McClendon obtained $1.2 billion in equity and debt financing from private equity firms Energy & Minerals Group and First Reserve to fund the purchases. American Energy Partners recently purchased 22,500 acres of leases from EnerVest, one of the drilling companies looking to exit the area. McClendon believes the Utica will yield large quantities of oil and natural gas liquids, a belief that led Chesapeake Energy to invest heavily in the play during his tenure as CEO.
Study: single injection well may have been responsible for Ohio seismic events. A study by Columbia University researches reports that a single injection well may have resulted in 109 tremors in Youngstown, Ohio between January 2011 and February 2012. The study found the tremors were mostly low level, but one was a noticeable 4.0 on the Richter Scale. The well began disposing of hydraulic fracturing wastewater on December 29, 2010. The first Youngstown tremors were noted 13 days later, and as the operators continued to inject fluids, the seismic activity increased. Seismic activity was also observed after the well was closed in 2011. The researchers found that the well was injecting wastewater into a fractured and unstable fault, requiring very little pressure to induce seismicity.
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