20 July 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4, No. 29

Topics discussed in this week’s Report include:

  • In Response to IG Report: EPA to Develop Plan to Increase Oversight of Diesel Fuels and to Decide on Whether to Propose Federal Disclosure of Chemicals Used in Hydraulic Fracturing.
  • BLM Issues Proposed Rule on Method for Calculating Oil and Gas Royalties.
  • Pennsylvania to Stop Using FracFocus.
  • Natural Gas Becomes Largest Source of Electricity Generation in U.S. for First Time.
  • Researchers Estimate Significantly Larger Utica Shale Natural Gas Reserves.

Vol. 4, No. 29

Federal

In Response to IG Report: EPA to Develop Plan to Increase Oversight of Diesel Fuels and to Decide on Whether to Propose Federal Disclosure of Chemicals Used in Hydraulic Fracturing. In accordance with a July 16 report from the Environmental Protection Agency’s (EPA) Inspector General (IG), EPA has agreed to consider whether it should more strictly scrutinize the use of diesel fuels in hydraulic fracturing and whether it should issue a rule mandating disclosure of chemicals used in the fracturing process. The IG’s report noted that EPA issued guidance on the use of diesel fuel in hydraulic fracturing in February 2014. However, given the statutory requirement under the Safe Drinking Water Act to regulate hydraulic fracturing involving diesel fuels, the IG’s report suggested that the agency needed to assert greater oversight of how states permit such fracking. EPA agreed to draft a plan by March 2017 for how best to address unpermitted uses of diesel fuel in hydraulic fracturing and stated that it would reach a decision on mandatory chemical disclosure by January 2016. EPA had previously published an Advanced Notice of Proposed Rulemaking in spring 2014, seeking input on potential disclosure rules.

BLM Issues Proposed Rule on Method for Calculating Oil and Gas Royalties. The U.S. Bureau of Land Management (BLM) recently proposed a rule which would change how BLM measures oil and gas production on public and tribal lands, thereby affecting the royalties the agency could collect. The proposed rule addresses a wide range of issues, including establishing official points for measuring oil and gas for royalty purposes, known as Facility Measurement Points; codifying existing guidance on commingling and establishing conditions for the approval of off-lease measurements. Hydrocarbon production on public lands is the source of over $3 billion in royalties annually, which is shared with state governments and municipalities. Production on tribal lands generates over $1 billion in royalties annually, which is returned to the tribes. With the substantial increase in production due to hydraulic fracturing, there has been considerable interest in updating the methodology for calculating royalties, which was last revised 26 years ago. BLM is accepting comments on the proposed rule until September 11.

States

Pennsylvania to Stop Using FracFocus. Pennsylvania’s Department of Environmental Protection (Pa. DEP) plans to stop using the well-known FracFocus website in 2016 as the database for hydraulic fracturing chemicals used in the state, instead posting oil and gas company data on chemicals on a website of its own. One of the most significant changes for companies appears to be that fracking well completion reports would be submitted online, instead of in the current paper format. Pa. DEP expects to have its new website up by June 2016. The Ground Water Protection Council and Interstate Oil and Gas Compact Commission operate FracFocus, which was first started in April 2011 and has since been endorsed by the Obama administration and many state agencies.

Business

Natural Gas Becomes Largest Source of Electricity Generation in U.S. for First Time. In April 2015, natural gas-fired electricity generation outpaced coal-fired electricity generation for the first time. Natural gas-fired power plants accounted for 31 percent of electricity generation that month, while coal-fired generation accounted for 30 percent. In 2010, coal-fired generation accounted for 45 percent of the United States’ electricity usage. The shale gas boom has been a major driver of this trend, which is expected to continue. Analysts expect coal-fired generation to drop by 7.5 percent this year, or 12.9 gigawatts, due to increasingly stringent regulatory demands, whereas natural gas fired-generation is expected to grow by 4.3 gigawatts.

Researchers Estimate Significantly Larger Utica Shale Natural Gas Reserves. Research released at an Appalachian Oil and Natural Gas Research Consortium workshop has estimated that the Utica Shale play could contain over 782 trillion cubic feet of natural gas, up significantly from the 38 trillion cubic feet the U.S. Geological Survey estimated three years ago. At the same time, low crude prices have led the U.S. Energy Information Administration to predict that natural gas production within the top seven American shale basins will drop 0.6 percent from July to August, which would be the largest reduction in nearly a year and a half.

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