Volume 2, No. 49
EPA to examine methane study. Environmental Protection Agency (“EPA”) Administrator McCarthy has said the Agency will review the approach taken by researchers at Harvard University who found higher rates of methane emissions from oil and gas operations than previous EPA estimates. EPA and the Emissions Database for Global Atmospheric Research (a joint project of the European Commission’s JRC Joint Research Centre and the Netherlands Environmental Assessment Agency) have used a “bottom-up” approach, estimating methane emissions using emissions factors, such as the amount of methane typically released per unit of natural gas sold, for example. The Harvard researchers used a “top-down” approach, measuring what is present in the atmosphere and then using meteorological data and statistical analysis to trace it back to regional sources. Environmental groups have urged EPA and the U.S. Department of Interior to reduce methane emissions from the oil and gas industry, citing the new report.
SEC reviewing claims of tight oil reserves. The Securities and Exchange Commission (“SEC”) is challenging claims by a number of oil and gas companies regarding the scope of their tight oil reserves. The SEC has asserted the companies have included less valuable natural gas liquids (“NGLs”), such as ethane and propane, in estimates of proven crude oil reserves. In response, 14 companies have agreed to separate estimates of crude oil and NGL reserves, although several noted that because their NGL reserves were insignificant, including NGLs and crude oil in a single estimate had no material impact on reserve valuations. How companies report condensate, a lighter type of crude oil commonly produced by Eagle Ford and Utica shale wells, may also come under scrutiny because generally it sells for less than heavier crude oil and is more difficult to market.
Labor Department reviews pay in Texas. The U.S. Department of Labor is reporting that it recovered $6.1 million in additional wages for oil and gas workers in Texas since 2012. The Department of Labor’s Wage and Hour Division stated that complex arrangements among well companies, service companies, contractors and subcontractors increases the likelihood that employees are misclassified as independent contractors. The Department has also said that it intends to maintain its effort in Texas, as well as a similar program in the Marcellus Shale.
USGS investigating Texas seismic activity. The U.S. Geological Survey is setting up seismic recorders in Azle, Texas, a suburb of Fort Worth, to investigate recent seismic activity there. The town has experienced 19 tremors over the past month, with the largest having a magnitude of 3.6 on the Richter Scale. Azle’s mayor is seeking an investigation by the Texas Railroad Commission to determine if underground injection wells that dispose of hydraulic fracturing wastewater are a contributing cause, and the USGS recorders will help the town determine the epicenter.
Industry, Senator spar over crude exports. Senator Ed Markey (D-Mass.) has urged U.S. Trade Representative Michael Froman not to support easing export restrictions on U.S. crude oil. The Energy Policy and Conservation Act of 1975, passed shortly after the Middle East oil embargo, largely prohibits U.S. crude oil exports. Hydraulic fracturing, however, created a surge in crude production that is surpassing U.S. refining capacity, in part because many refineries are designed to refine imported heavy and sour crudes. Some believe the crude oil export ban violates World Trade Organization (“WTO”) rules, exposing the U.S. to WTO action by other member nations. Sen. Markey, however, believes the export ban is consistent with WTO rules and that oil exports would be contrary to longstanding U.S. law and practice.
Trade group challenges two Colorado ordinances. The Colorado Oil & Gas Association (“COGA”) filed two lawsuits challenging a Fort Collins ordinance extending a five-year moratorium on hydraulic fracturing and an ordinance banning the practice in Lafayette, Colorado. Both ordinances were passed as ballot initiatives in early November. COGA argues the ordinances are preempted by state law, which assigns exclusive authority over oil and gas regulation to the Colorado Oil & Gas Conservation Commission (“COGCC”). COGCC has intervened in ongoing litigation challenging the city of Longmont’s moratorium on hydraulic fracturing but Governor John Hickenlooper said that the state had no plans to intervene in the Fort Collins and Lafayette cases. The cities of Boulder and Broomfield also passed moratoria on hydraulic fracturing within city limits, but no suits have yet been filed challenging those.
Gas driller threatens suit to compel completion of New York study. The trustee for Norse Energy Corporation USA, an oil and gas drilling company that converted its bankruptcy filing to a Chapter 7 liquidation earlier this year, announced plans to seek a court order compelling the New York State Department of Environmental Conservation (“DEC”) to complete its Supplemental Generic Environmental Impact Statement (“SGEIS”) for hydraulic fracturing. DEC has said it is waiting for the Commissioner of the New York State Department of Health to complete an evaluation of the potential health impacts of hydraulic fracturing before finishing the SGEIS, but Norse claims that delegating authority to the Department of Health was illegal and the protracted review process has exceeded relevant deadlines. Norse claims it was forced to declare bankruptcy while 27 drilling applications filed with the state were suspended until the various reviews were completed.
Massachusetts considering hydraulic fracturing moratorium. A bill imposing a ten-year moratorium on hydraulic fracturing passed out of the Massachusetts Joint Committee on Environment and Natural Resources and will next be considered by the House Ways and Means Committee. The bill would also prohibit hydraulic fracturing wastewater from being treated, stored, or disposed of within the state. Massachusetts has little to no known potential for shale development so the bill is viewed as a largely symbolic gesture. If the bill ultimately passes, Massachusetts would become the second state to ban the practice. Vermont, also lacking any notable shale reserves, banned hydraulic fracturing in 2012.
New North Dakota website will provide public information on spills. Responding to criticism for withholding information about a recent pipeline rupture, the North Dakota Department of Health announced it will soon launch a website allowing the public to monitor oil and hazardous waste spills. The website will include updates and information on historic spills going back to 1975. Although spill records are public information, groups complained that there was no practical way to access them. The Department of Health plans to update the website twice per week.
Texas oil production up by one-third. The Texas Railroad Commission’s preliminary estimates of oil production showed that the state produced 1.8 million barrels of oil per day in September 2013, compared to 1.34 million barrels per day in September of last year. Most of the growth was attributed to hydraulic fracturing in the Permian Basin. While drilling permit applications were down slightly, well completions were 75% higher than last year – 21,432 in 2013 versus 12,188 through October 2012. Although the numbers indicate that drilling efficiencies are improving, Texas was still home to nearly half of the drill rigs being used in the United States.
Brazil sells first shale gas development rights. Brazil’s National Oil Agency (“ANP”) sold 72 of 240 lease blocks to foreign and domestic oil and gas companies, including blocks for shale gas development. The state-owned oil company, Petrobras, won most of the leases along with four foreign companies, GDF Suez, Petrominerales, Trayectoria Oil & Gas, and Geopark. ANP estimates that leases in five basins could hold up to 515 trillion cubic feet of coalbed methane and shale gas. Environmental groups, scientific associations and water service companies protested the sale, claiming hydraulic fracturing could impact the Guarani Aquifer, one of the largest groundwater reservoirs in the world. ANP plans to issue regulations for shale gas development in early 2014.
CNOOC seeking LNG export approval in British Columbia. China’s state-owned off-shore oil company CNOOC Ltd. applied to Canada’s National Energy Board to export LNG from its British Columbia-based Aurora LNG project. The company’s recently acquired subsidiary, Nexen Energy, would own and operate the plant. It is seeking approval to ship 1.7 billion cubic feet per day to Asia.
Shell abandons Louisiana gas-to-liquids project. Despite incentives offered by the Louisiana state government, Shell cancelled its plans to construct a $12.5 billion gas-to-liquids plant that would have processed natural gas into diesel fuel. The company cited a need for stricter capital discipline, referring to recent concerns that the company was spending too much on capital intensive projects, including its Australian LNG export terminal.
Pennsylvania Supreme Court declines to hear drilling obligation case. A petition by Marcellus Shale mineral rights owners claiming that they could terminate their lease with Kriebel Resource Company because it failed to develop fully the shale gas resources under the lease was denied by the Pennsylvania Supreme Court. The decision effectively upholds a Pennsylvania Superior Court ruling that Kriebel Resources did not have a duty to drill more than a few shallow wells under its agreement with Terry and Carol Caldwell. It noted that there was no Pennsylvania law imposing a requirement beyond that provided by contract and that a duty to more fully develop the gas resources should not be implied against Kriebel Resources.
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