23 June 2014

Sidley Shale and Hydraulic Fracturing Report

Volume 3, No. 25

Federal

FERC approves Cameron LNG project. The Federal Energy Regulatory Commission (FERC) approved the final environmental impact statement (EIS) for Sempra’s Cameron LNG export terminal. The EIS found the $10 billion Texas terminal would have “less-than-significant” environmental impacts, once mitigation measures specified in the final report are implemented. NGOs participating in the proceedings had argued the EIS should analyze the environmental impacts associated with hydraulic fracturing operations that may supply a portion of the gas that would be exported, asserting that authorizing LNG exports would lead to an increase in hydraulic fracturing, which, they claim, will lead to air and water pollution. FERC, however, reasoned these potential upstream impacts are beyond the scope required by the National Environmental Policy Act. The NGOs may ask FERC for a rehearing, before challenging the approval in court. This is only FERC’s second LNG export terminal approved. FERC approved the Cheniere Energy Sabine Pass export terminal in 2012, after similarly declining to review the potential environmental impacts of hydraulic fracturing.

NGOs sue seeking more protections for species located in western states. Several NGOs filed suit against the U.S. Fish & Wildlife Service claiming the Service’s listing of the lesser prairie chicken as a “threatened” species under the Endangered Species Act (ESA) will not provide the protections required to reverse the bird’s population decline. The suit claim that populations in the five states that make up the bulk of the prairie chicken’s habitat – Colorado, Kansas, New Mexico, Oklahoma and Texas – declined by 50% between 2012 and 2013. Governors from the five states oppose the “threatened” listing, and have argued that voluntary programs developed by those states would allow the bird to recover without harming agriculture and energy development. Oil and gas development will be limited in large areas across the five states that are expected to be determined to be part of the prairie chicken’s habitat. Similar ESA determinations due later this year and during 2015 regarding the Greater sage grouse and Gunnison sage grouse could impose similar restrictions on drilling.

Stakeholders near deal for drilling in Roan Plateau. Drilling the shale formation under Colorado’s Roan Plateau has been stalled since 2007, when the U.S. Bureau of Land Management (BLM) leased 55,000 acres to companies with plans to drill thousands of natural gas development wells. As a result of a 2012 suit by NGOs, the court ordered a remand of the leases back to BLM, citing potential harms to mule deer, elk and cutthroat trout as well as air quality concerns. Under a proposed settlement, NGOs, BLM, industry attorneys and Colorado politicians have agreed to terms where BLM would buy back some of the leases and includes conditions for BLM’s planned revisions to the area’s regional management plan. Congressman Scott Tipton (R- CO), who was involved in the negotiations, wrote to Secretary of Interior Sally Jewel reporting that the proposed deal would allow drilling to proceed in an environmentally protective way. The Department of Interior must still approve the proposal.

FRA: Information on crude oil trains is not confidential. The Federal Railroad Administration (FRA) issued a statement that information provided to states regarding trains hauling crude oil, such as their routes and volumes of oil, should not be kept confidential for security reasons. Last month, Transportation Secretary Anthony Foxx ordered that such information be provided to state agencies for trains hauling one million gallons of crude oil or more to better prepare for an emergency response to accidents. Some railroads asked states to sign agreements restricting public access to that information, citing security concerns. After the announcement, Montana and Washington state officials agreed to make information on train routes and crude oil volumes public, citing state open records laws. At least one railroad has threatened to sue in order to block the release of those data, citing the potential for criminal misuse of the information.

States

California revises proposed hydraulic fracturing regulations. The California Department of Conservation’s Division of Oil, Gas, & Geothermal Resources (DOGGR), issued new proposed regulations for hydraulic fracturing. Highlights include the need for more detailed information about sites and water used for stimulation to be included in permit applications and requirements for drillers to notify nearby residents so that they may request that the company test their groundwater and measure seismic activity during and after stimulation. Any seismic activity of magnitude 2.0 or greater must be reported to the state.

North Dakota hits 1 million barrels of oil per day. The North Dakota Department of Mineral Resources announced that the state’s oil production, largely centered in the Bakken shale play, reached just over 1 million barrels per day in April 2014, second only to Texas. Only four other states (Alaska, California, Louisiana and Texas) have produced 1 million barrels of oil per day, however, each of them have a long history of conventional oil production. In 1999, before the widespread use of hydraulic fracturing and horizontal drilling, North Dakota did not have a single drilling rig. Today, North Dakota produces more than 12% of the country’s oil, mostly from shale. The Department of Mineral Resources projects that North Dakota output will peak at between 1.5 and 1.7 million barrels per day by 2017.

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