Volume 3, No. 34
BLM rejects administrative challenges to Thompson Divide lease sales. The U.S. Bureau of Land Management (“BLM”) denied administrative appeals filed by environmental groups and local governments challenging an extension of 25 oil and gas leases in Colorado’s Thompson Divide. BLM found that leases could be extended for two years while the agency addresses deficiencies identified in the original Environmental Impact Statement (“EIS”) for the leases. The challengers had argued that oil and gas leases are inappropriate for the White River National Forest in the Thompson Divide, citing the area’s agricultural nature and appeal to tourism, and that the leases were invalid and could not be extended because of the changes required in the EIS.
Securities & Exchange Commission pursues “clean fracking” company. The Securities & Exchange Commission (“SEC”) has charged that Chimera Energy, which began touting a breakthrough technology to fracture wells without using water in 2011, was a “pump and dump” stock scam. The SEC’s complaint, filed in U.S. District Court, alleges that the technology never existed and Andrew Farmer, a man involved in the alleged scheme, used two fake CEOs and a series of press releases touting the “clean fracking” technology while dumping his own shares of Chimera for a $4.5 million profit. Before the SEC suspended trading on Chimera’s stock, the company had claimed to have licensed the technology to Mexican and French energy businesses, and a fictional Chinese company.
City of Lafayette moves to dismiss industry challenge to its hydraulic fracturing ban. Lafayette, Colorado passed a “Community Bill of Rights” via ballot initiative that, among other things, prohibits hydraulic fracturing within city limits, purports to strip corporations of any right to challenge the ban, and declares that any state or federal laws inconsistent with the ban are null and void in Lafayette. The Colorado Oil & Gas Association (“COGA”) filed suit in December last year to overturn the ban, arguing that it is inconsistent with the Colorado Oil and Gas Act. Two Lafayette residents filed a class action countersuit in Boulder County District Court seeking a preliminary injunction to bar COGA from relying on the Colorado Oil and Gas Act, alleging that the law is unconstitutional for violating the City of Lafayette’s right to “home rule.” According to the residents’ motion for a preliminary injunction, the court should decide the constitutional issue raised in their suit before hearing COGA’s challenge to the hydraulic fracturing ban.
NGOs challenge drilling permits in Pennsylvania. PennFuture, an environmental group opposed to hydraulic fracturing in Pennsylvania, has filed a challenge to permits issued by the Pennsylvania Department of Environmental Protection (“DEP”) authorizing Anadarko E&P to construct a natural gas well pad in Lycoming County. The group alleges DEP issued the permit without an appropriate best management practices plan to insure that Anadarko would not impact a neighboring stream and wetland during the construction and failed to examine the cumulative impacts of other well construction activities in the area. The case will be heard before the Pennsylvania Environmental Hearing Board.
China reduces its shale gas goals. Previously anticipating that China would be able to produce between 60 and 100 billion cubic meters of shale gas by 2020, China’s National Energy Administration has had to revise this goal downward to 30 billion cubic meters. Reportedly, China expects additional natural gas could be produced instead by increasing gas production from coal seams. Analysts report that the rate of shale gas production has been slower than anticipated in part due to the more difficult geology overlaying China’s shale formations and the wetter shale that makes it harder to fracture. China recently signed a 30-year natural gas supply agreement with Russia and is continuing to import liquefied natural gas from Qatar, Australia and Yemen.
Companies win summary judgment in Texas personal injury suit. Marathon Oil and Plains Exploration and Production won summary judgment where a Texas trial court ruled that plaintiffs failed to provide evidence that could show that their alleged personal injuries could have been caused by hydraulic fracturing. The plaintiffs had alleged that the companies’ hydraulic fracturing activities caused them to suffer a range of personal injuries, as well as created sinkholes on their property that damaged their home. The court found that the plaintiffs lacked evidence linking hydraulic fracturing to their alleged ailments.
As wells age, companies look to “refracking” to maximize production. Owners of wells that were first developed using hydraulic fracturing in the mid-2000s have seen production drop off, and companies are now hoping to use “refracking” as a method to boost output from those wells. Encana announced that it has successfully refracked wells in the Haynesville Shale play for an estimated $1 million per well, while others have begun a similar process in the Bakken Shale play. The process involves a new injection of hydraulic fracturing fluid with diverting agents to block older, lower-pressure fissures to increase the overall well pressure. The process, however, is still new and placement of the diverting agents can be imprecise.
Billions of cubic feet of gas flared in Eagle Ford. A review of records by the San Antonio Express-News estimated that in the course of extracting oil from shale in the Eagle Ford play, developers have flared nearly 39 billion cubic feet of gas between 2009 and 2012. According to the report, the gas flared could have supplied fuel for cooking and heating to every home in San Antonio and resulted in air pollution that exceeds that of the six oil refineries in Corpus Christi. The newspaper cited the lack of gas pipelines and the low cost of gas in the area. The issue of gas flaring has been prominent in the oil-rich Bakken Shale formation, leading to lawsuits by mineral rights owners, claiming that developers are flaring gas on which they should be paying royalties, as well as state regulations seeking to reduce flaring.
Environmental and industry groups work to develop methane monitors. The Environmental Defense Fund (“EDF”), an environmental group with a history of working cooperatively with the industry, announced that seven oil and gas companies have agreed to work with EDF to develop better methane monitors. There is considerable debate about the amount of fugitive methane emissions from oil and gas operations. Some claim that there are significant fugitive methane emissions from gas wells and related pipelines, making their lifecycle greenhouse gas emissions higher than coal. Others dispute those contentions and have challenged the data on which they are based. Better methane monitors may not only help resolve this debate, but could allow industry to address or otherwise capture fugitive methane emissions. The working group announced that it has narrowed their study to five different technologies that will be lab-tested with the more promising technologies moving on to field testing.
University of Texas to study Mexico’s Eagle Ford shale potential. The Eagle Ford shale, a boon for south Texas, extends across the border with Mexico. Researchers at the University of Texas at San Antonio, who previously studied the economic development potential of the Eagle Ford shale on the U.S. side, will begin studying Mexico’s portion of the shale formation. Known as the Boquillas, the Eagle Ford shale formation extends through the Burgos Basin south of the Rio Grande and to the City of Monterrey. The study comes shortly after Mexico announced that it will open shale development to foreign investors. As a result, Mexico’s state-owned oil company and several private companies are now investigating whether the country’s shale formations have significant potential for development.
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