24 May 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 21

Topics discussed in this week’s Report include:

  • FERC issues environmental report supporting Transco pipeline project in Virginia.
  • Landowner challenges DRBC moratorium on hydraulic fracturing in federal court.
  • Texas: University researchers correlate seismic activity in Texas to disposal of oil and natural gas wastewater.
  • Colorado: Boulder County rescinds moratorium on hydraulic fracturing; issues short-term ban to update regulations.
  • CBO working paper projects record U.S. oil and natural gas production by 2020.

Federal

FERC issues environmental report supporting Transco pipeline project in Virginia. The Federal Energy Regulatory Commission (FERC) recently completed an environmental assessment (EA) for a Transcontinental Gas Pipe Line Co. pipeline in Virginia, concluding that the project will not have significant adverse environmental effects if recommended mitigation measures are adopted. The $190 million project would include four miles of new 24-inch diameter pipeline and is intended to serve the proposed Greensville Power Station, a 1,580 MW combined cycle natural gas-fired power plant. Obtaining approval from FERC under the National Environmental Policy Act (NEPA) is a necessary step in obtaining a Certificate of Public Convenience and Necessity for the pipeline. Several environmental nongovernmental organizations (NGOs) asserted in comments on the draft EA that FERC should have considered the potential effects of the proposed pipeline along with several other projects in the area. FERC declined to assess the cumulative effects of the projects, concluding that they were sufficiently independent and warranted independent treatment under NEPA.

Landowner challenges DRBC moratorium on hydraulic fracturing in federal court. The Wayne Land and Mineral Group LLC recently filed a lawsuit in U.S. District Court in Pennsylvania challenging the Delaware River Basin Commission’s (DRBC) de facto moratorium on hydraulic fracturing. The DRBC is a federal interstate compact commission charged with overseeing waters of the 13,539-square-mile Delaware River watershed. In 2010, the DRBC suspended review of all proposals for the exploration or development of natural gas wells until the commission issued regulations addressing hydraulic fracturing. Such regulations have not been issued in the six years since the moratorium took effect. Wayne Land and Mineral Group, which owns 180 acres of surface and mineral rights in Wayne County, is seeking to construct an exploratory well within the Delaware River watershed and argued that the DRBC lacks jurisdiction over well exploration activities when water and wastewater disposal services are secured from outside the Basin. Environmental NGOs, including the Delaware Riverkeeper Network, which have long advocated for a permanent ban on hydraulic fracturing in the Basin, announced plans to intervene in the lawsuit.

States

Texas: University researchers correlate seismic activity in Texas to disposal of oil and natural gas wastewater. Researchers from the University of Texas and Southern Methodist University have concluded that the majority of earthquakes in Texas since 1975 were related to oil and natural gas development. The study, which will be published in Seismological Research Letters, evaluated 126 earthquakes with a magnitude of 3.0 or greater and concluded that 26 percent were “almost certainly” triggered by oil and natural gas development, 33 percent were probably triggered by oil and natural gas development and 28 percent were possibly caused by oil and natural gas development. The researchers evaluated proximity to oil and natural gas development activities, proximity to the surface, and proximity to known faults and concluded that artificial seismic activity was likely linked to underground disposal of oil and natural gas wastewater but not to drilling operations themselves.

Colorado: Boulder County rescinds moratorium on hydraulic fracturing; issues short-term ban to update regulations. The Boulder County Commission recently rescinded a four-year moratorium on hydraulic fracturing and replaced it with a six-month ban designed to give the county sufficient time to update its oil and gas regulations. The commissioners cited recent decisions by the Colorado Supreme Court invalidating similar long-term bans in other Colorado jurisdictions as preempted by the state’s Oil and Gas Conservation Act as a reason for rescinding the four-year moratorium. At the same time, the commissioners concluded that a new six-month moratorium was necessary to allow the county to update its land use regulations in response to changes in oil and gas development practices and in new state regulations addressing oil and gas development.

Studies

CBO working paper projects record U.S. oil and natural gas production by 2020. A recently published working paper by the Congressional Budget Office (CBO) projects that domestic oil and natural gas production will set new records by 2020. Oil and gas production has been declining in the United States since 2015 due to falling oil prices. The CBO projects the production will decline until May 2017 and will then slowly increase due to efficiency gains and new technology that will allow increased production at lower prices. While production in 2020 is expected to exceed 2015 production rates, CBO projects oil prices to be below the $100-per-barrel prices seen in 2015, with estimates ranging from $33 to $73 per barrel.

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