17 February 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 7


Industry Challenges White River National Forest Management Plan. The Western Energy Alliance filed a formal objection to the U.S. Forest Service’s White River National Forest management plan, claiming that it was compromised by political pressure from the White House and Colorado Senator Michael Bennett, foregoing reliance on an objective analysis of potential drilling impacts informed through public notice and comment. The management plan would close Colorado’s Thompson Divide to new oil and gas leasing. The Thompson Divide overlays portions of the Niobrara Shale play, however, Senator Bennett has pushed for both legislation and land management policy that would prohibit drilling on all un-leased public lands in the Thompson Divide. The coalition wants the Forest Service to create a new plan that balances multiple uses, instead of only permitting the land to be used for recreation and conservation.

Colorado Sues to Reverse Gunnison Sage Grouse Listing. According to a lawsuit filed by the Colorado Office of the Attorney General, the U.S. Fish & Wildlife Service lacked a scientific justification for listing the Gunnison sage grouse as a threatened species and establishing 1.4 million acres of land in southwest Colorado and southeast Utah as critical habitat. Colorado argues in its district court complaint that voluntary measures by the state, local government and landowners have resulted in a recovery of the bird’s populations, hitting population targets previously spelled out by Fish & Wildlife conservation biologists. Environmental groups previously filed separate suits claiming that the Gunnison sage grouse should have been listed as “endangered” under the Endangered Species Act, requiring more stringent protections for the bird and its critical habitat.

EPA Issues Report on Seismic Activity. Environmental Protection Agency (EPA) researchers have issued a report suggesting that states prohibit wastewater disposal in injection wells if seismic activity persists, despite operational regulations. According to the final report, Class II injection wells “may not be suitable to disposal operations” where there is continued seismic activity. The report suggests permit terms for disposal wells, providing recommendations for state agencies that the researchers believe would reduce the possibility of wells triggering seismic activity. Seismic activity has been linked by some research to wastewater disposal wells in Oklahoma, although, by contrast, a recent paper in Seismological Research Letters found that there is virtually no evidence of wastewater disposal wells leading to seismic activity in the Bakken Shale play.


Wyoming Tax on Flaring Flames Out. For the second year in a row, a Wyoming House bill to tax natural gas flaring from oil wells in the state failed to pass. The sponsors stated they intend to re-introduce the bill during the next legislative session, arguing that flaring results in lost tax revenue as valuable gas is wasted. Opponents, however, argued that a tax on flaring would either require companies to invest in new pipeline infrastructure or to pay additional taxes at a time when both oil and gas prices have fallen significantly. Instead, the opponents argued, a new tax would incentivized companies to abandon marginal-producing oil wells, resulting in reduced overall natural resources revenues for the state. Wyoming Gov. Mead ordered the state’s Oil & Gas Conservation Commission to revise its flaring regulations in order to reduce waste, but with its current workload, the Commission is not anticipated to begin reviewing those regulations until next year.


UK Allows Development Under National Parks. Britain’s Parliament passed a bill to eliminate existing prohibitions on hydraulic fracturing under national parks and designated areas of outstanding natural beauty. According to Energy and Climate Change Minister Amber Rudd, existing restrictions prohibit hydraulic fracturing on 40 percent of the land the government plans to offer for shale gas exploration, making shale development impractical. The bill would allow companies to drill horizontally under national parks, so long as the well pad is outside of the parks’ boundaries. Prime Minister David Cameron cited shale gas development as necessary to create jobs and reduce reliance on imported natural gas.


Researchers Report a Small Percentage of Processing Facilities Account for Most of Methane Leakage. A study published in Environmental Science and Technology reports that less than one percent of methane leaks from natural gas gathering and processing facilities. According to the report, about 30 percent of natural gas gathering facilities account for approximately 80 percent of all fugitive methane emissions. The study could prove an important additional data set for EPA as it considers potential methane rules. According to the researchers, EPA’s own greenhouse gas inventory for the oil and natural gas sector is outdated, relying on data collected during the 1990s. The inventory fails to account for higher quality technologies that prevent fugitive emissions, leak detection and repair programs being used at a majority of operations.


Crude Prices Still Down, Impacting Shale Development. Despite a brief upsurge, crude prices continued to fall as U.S. stockpiles of crude oil grew, according to the International Energy Agency (IEA). Despite dropping prices, the Organization of Petroleum Exporting Countries (OPEC) has thus far refused to change production targets, putting pressure on higher cost hydraulic fracturing operations to reduce production or find ways to reduce production costs. According to the IEA, U.S. companies are producing 200,000 fewer barrels per day than previously predicted, and Rice University’s Baker Institute for Public Policy confirmed that reduction, estimating that U.S. oil companies drilled 28 percent fewer wells in January 2015 when compared to June 2014. U.S. oil companies, however, are eyeing methods to reduce drilling costs, such as re-fracturing old wells, which can cost roughly 25 percent less than drilling new ones. Service companies reportedly are looking to re-fracturing as a way to stem the recent reduction in the number of active drilling rigs.

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