Benefits of Fracking to the Environment & Worldwide Economies Touted As Anti-Development Activists Share Dreamy Vision of an Energy Free World

HBW Resources: Ollison Hydraulic Fracturing Report

Below is a summary prepared by Bo Ollison, HBW Resources’ Senior Director of Policy, of publicly available activities currently underway at the federal, state and international levels that could impact the use of hydraulic fracturing for oil and gas extraction.  HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.

States 

State Legislative Update: Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.

Colorado
A slim majority of Colorado registered voters support the use of hydraulic fracturing to extract oil and natural gas, and most also view the practice as at least somewhat safe, a new survey shows. The results of the Quinnipiac University Poll likely will come as good news to oil and gas industry leaders who are growing concerned that the recent passage of anti-fracking measures in a number of Front Range cities may lead to a statewide push to block the practice. The university’s phone survey of 1,206 Colorado voters found that 51 percent support fracking, while 34 percent oppose it and 16 percent are undecided or didn’t answer. For more information, please contact us.

Colorado’s Energy industry is continuing to make the case that hydraulic fracturing is safe and a critical part of the state’s economy. They’re stepping up efforts following the recent passage of fracking bans and moratoriums in three Front Range communities. The outcome of a ban in Broomfield has yet to be determined. “Merely the fact that they qualified shows that there’s not enough education out there on these issues,” said Jon Haubert, spokesman for Coloradans for Responsible Energy Development. Anadarko and Noble Energy formed the group in September. They’ve been running pro-fracking radio and TV ads across the state. Haubert says the goal is to educate people and correct misinformation. For more information, please contact HBW Resources.

District of Columbia
Environmental activists are planning a rally in support of legislation, Bill 20-481, Fossil Fuel Divestment Act of 2013 is to require the divestment, and prohibit the investment, of public funds in the stocks, securities, or other obligations of certain companies which hold the largest fossil fuel reserves and to provide for the identification of companies with the largest fossil fuel reserves. The D.C. Council held a hearing on the bill on Tuesday, and supporters plan to gather outside the district government building. The intent of the bill is to prevent the district from investing in companies that contribute to climate change, air pollution and rising sea levels.

Illinois
The Illinois Department of Natural Resources (IDNR) has added three additional public hearings throughout Illinois to capture public comments on proposed regulations to implement provisions of the state’s new Hydraulic Fracturing Regulatory Act. In addition to hearings already scheduled for Nov. 26 at the University of Illinois at Chicago (UIC) Student Center East, and Dec. 3 at the Rend Lake College Theatre in Ina, the IDNR has also scheduled hearings on Dec. 5 at the Holiday Inn Effingham in Effingham, Dec. 17 at the Decatur Civic Center in Decatur, and Dec. 19 at the Southern Illinois University (SIUC) Student Center in Carbondale (6:00 p.m. start). All hearings will begin at 6:30 p.m. unless noted.  For more information please visit the IDNR website athttp://www.dnr.illinois.gov/OilandGas/Pages/PublicHearings.aspx.

Maryland
Natural gas continues to make good economic and environmental sense, said Drew P. Cobbs, executive director of the Maryland Petroleum Council. Whether drilling for natural gas in Marcellus Shale will occur in Maryland remains an open question, he said. The price of natural gas will always be a factor in that decision-making process. While some of the initial leases in Western Maryland for rights to drill for gas remain in effect, a large number have expired. Once the work of Gov. Martin O’Malley’s Marcellus Shale Safe Drilling Initiative Advisory Commission is complete, Maryland will have the strongest and likely strictist fracking laws in the country, Cobbs said. If drilling occurred in Maryland, it would likely be near the Pennsylvania border, where infrastructure for moving the gas already exists, Cobbs said. Drilling, if allowed, would likely not occur until 2017. If drilling is allowed in Maryland, fracking operations and gas production would help state and local governments, Cobb said. The Sage Policy Group estimatesGarrett County would collect $162 million in revenue from shale gas operations and Allegany County $65 million. The state of Maryland would collect $214 million, the Sage study claims.

New York
A local group is asking the Hurley Town Board to strengthen language of a proposed town moratorium on the gas drilling method known as hydraulic fracturing. At a recent board meeting, Tobe Carey, a spokesman for the group Sustainable Hurley, said critics of hydraulic fracturing, want to avoid seeing the moratorium invalidated. “Once a solid moratorium is in place, we can focus on our mutually agreed upon goal of enacting zoning changes that are in line with the requirements of the town’s comprehensive plan,” Carey said. The group’s concerns include the absence of a standard state Department of State local law filing form and the need for wording that conforms to state Municipal Home Rule Law. “A local law must say ‘Be it enacted by the (local government board),’” Carey said. “Failure to include an enacting clause renders a local law invalid.” Members of the group also questioned why fines were set at between $100 to $250 per day for violations. The proposed moratorium is proposed to be for a year while town officials make changes to land use regulations. Under the proposed moratorium, there would be no reviews of “any applications for any new wells, projects or businesses involving the practices of horizontal or directional drilling or hydraulic fracturing.” The moratorium would apply to property where “any well, project or business” would be involved in hydraulic fracturing. Town Supervisor Gary Bellows said the concerns would be sent to the town’s attorney to determine if changes are needed before a public hearing is set on the proposed moratorium.

Norse Energy, or what’s left of it following its entrance into Chapter 11 and then Chapter 7 bankruptcy, has decided to file a lawsuit against New York Gov. Andrew Cuomo, Dept. of Environmental Conservation (DEC) Commissioner Joe Martens, and State Health Commissioner Nirav Shah. This lawsuit would force the completion of the SGEIS (Supplemental Generic Environmental Impact Statement) and adoption of associated draft gas drilling regulations. The official Norse Energy lawsuit has not yet been filed but according to MDN’s sources, it will be filed in early December.

North Carolina
A dozen state lawmakers and legislative staff took a three-day field trip to Arkansas to look at fracking operations outside Little Rock. Sen. Bob Rucho (R, District 39) is leading the trip as co-chairman of the Joint Legislative Commission on Energy Policy. He said the trip is important to give lawmakers a first-hand look at hydraulic fracturing operations as North Carolina drafts regulations to allow fracking. For more information, please contact us.

At a recent hearing before a state legislative committee, Mitch Gillespie, assistant secretary for the N.C. Department of Environment and Natural Resources, said the agency plans to study locations in the far western counties of North Carolina to assess their feasibility for hydraulic fracturing. However, Jamie Kritzer, public information officer for DENR, said the agency does not yet have any funding from the General Assembly to conduct this preliminary testing and this would a long-range effort. “As part of a long-range plan, the department has determined that rock sampling and additional research are necessary in this region to determine whether the potential organic-rich formations contain oil or natural gas,” said Kritzer. “At this time, DENR does not have an appropriation from the General Assembly needed to conduct testing in western North Carolina.” In his testimony before the Committee on Energy Policy, Gillespie presented a preliminary list of sites that could be considered for the feasibility of fracking. Most of the sites on the list are located in the Piedmont and the Coastal Plain, according to a story by Carolina Public Press. The Carolina Public Press reported that Gillespie stated DENR plans to spend $11,725 to examine the site for possible fracking. Kritzer said this is a hypothetical amount for a study and no amount has been appropriated yet.

North Dakota
Oneok Partners LP, a subsidiary of Tulsa-based Oneok Inc., and Gov. Jack Dalrymple announced that the company intends to invest up to $780 million on projects that include infrastructure upgrades, an expansion of a pipeline and a new factory capable of processing about 200 million cubic feet of natural gas daily, or double the amount of any of its existing plants in the state. For more information, please contact HBW Resources.

North Dakota has seen a rapid increase in the number of millionaires living in the state as surging oil and gas activity pads residents’ pockets. State tax officials said that the number of people with seven-figure incomes is at an all-time high. A record 1,126 people reported earning more than $1 million on their 2012 individual tax returns, state Tax Department figures show. By contrast, 339 “income millionaires” were reported in 2006, before the unconventional oil boom took off in North Dakota’s Bakken Shale. Millionaire earners for 2012 were concentrated in North Dakota’s western oil-producing counties, where many North Dakotans have seen their incomes puffed up by the royalties drillers pay to mineral owners for extracting their crude. Average adjusted gross income in the fast-growing state jumped from $60,947 to $74,221 last year, according to official data. North Dakota boasts the lowest unemployment rate in the nation at less than 3 percent.

Ohio
A new state report shows natural gas production rose 18.4 percent in Ohio last year compared with 2011, another sign that development of the Utica shale play is picking up steam. The report from the Ohio Department of Natural Resources said the increase was influenced by production from 80 horizontal wells in the Utica that provided about 15 percent of the state’s natural gas. It also said Utica wells accounted for half of all drilling permits issued last year by the department. A few additional highlights cited by ODNR are:
·         Ohio produced $1.1 billion worth of coal in 2012, the fifth year in a row that production topped $1 billion.
·         Industrial mineral extraction employed more than 11,000 Ohioans.
·         Mineral industries produced $239 worth of resources for every Ohioan.

Natural gas processors MarkWest Energy, Dominion Resources, M3 Midstream and others are building about $12 billion worth of infrastructure in Ohio, according to an official with the state Department of Natural Resources. For more information, please contact us.

Iron Eagle Enterprises will be opening a water recycling terminal by the end of November to serve oil and gas drillers operating in the Youngstown area. The facility will be the first third-party treatment facility permitted in the state. The treatment operations will be managed by RETTEW Flowback, an engineering firm with offices in Canton that also provided site design and facilitating permitting. The facility will recycle wastewater created by oil and gas drilling operations in Carroll County. The wastewater will be treated first and filtered to remove contaminants. The recycled water will be hauled back to the producers to continue the cycle of drilling and stimulating wells. The facility will be able to treat 14,000 barrels of water per day. A barrel contains 42 gallons of water. For more information, please contact HBW Resources.

Everflow Eastern Partners LP, based in Canfield, wants to construct two oil and gas wells within the Massillon city limits, one each on separate 40-plus-acre tracts. Both locations include land owned by city residents and the city of Massillon. Council heard from Everflow’s leasing manager, Les Dundics, who said the company hopes to have the “Sisko well” drilled in February 2014 between Treemont Avenue SE and Wellman Avenue SE just east of St. Timothy’s Episcopal Church. The “Oser well” is targeted for the area of Treemont Avenue SE and Lincoln Way E, northeast of 16th Street SE. Dundics said that well could be drilled by April 2014. If council approves the leases, Dundics said all waste from the drilling sites would be hauled away by Everflow. No roads would be closed due to daily operations at well sites, he said, but nearby residents are likely to hear some noise from work done there.

In one Ohio county that is home to roughly 30,000 people, the number of hotels open for business is about to double to four. A Candlewood Suites broke ground this month and construction began last month on a Microtel Inn & Suites in Carrollton, the largest village in agricultural Carroll County. The neighboring counties see it, too: hotels rising from the ground and existing hotels undergoing renovation to make room — or literally, rooms — for those manning and operating wells and otherwise working in Ohio’s Utica shale region. It is a level of hotel building not seen in years, if ever, for some of these municipalities. In Stark, Carroll, Columbiana, Jefferson, Guernsey and Belmont counties — which in 2010 had fewer residents collectively (692,459) than the city of Columbus — 10 hotel projects are in various stages of planning, seven hotels have broken ground, two have been remodeled and one opened just last week in Steubenville, in Jefferson County. Tom Hartnett, who chairs the real estate practice of Canton-based law firm Day Ketterer Ltd., says the increase in hotels in the last 12 to 16 months is part of a progression in Ohio’s shale country.

Community members from eleven Ohio Counties gathered in Columbus, OH to launch the Ohio Community Rights Network (OHCRN).  Attendees at the meeting finalized and signed The Columbus Declaration, calling upon communities across the state to join together in a movement to elevate the rights of people, their communities and nature above the claimed “rights” of corporations. The creation of the OHCRN comes out of successful and ongoing campaigns in many Ohio communities to secure Community Rights and protections from the harms of fracking, drilling and injection wells throughout the state.

Oklahoma
Oklahoma is on track to establish statewide inspection standards for compressed natural gas fueling pumps within the year after a state agency voted to start drafting rules for inspectors. Checks of Oklahoma’s approximately 100 CNG stations currently fall to local fire departments or city code inspectors. A law signed by Gov. Mary Fallin (R) in April designated that responsibility to the Oklahoma Corporation Commission, though the measure did not provide funding for the effort — a point noted by all three commissioners last week. For more information, please contact HBW Resources.

Pennsylvania
Allegheny County Council has voted down a proposal that would institute a three-year moratorium on natural gas drilling in county parks. The final vote on the bill itself failed, 2-9, with four council members abstaining because of conflicts of interest.

More than $16 million has been approved for 116 greenways, trails and recreation projects around the state through the Marcellus Legacy Fund. Gov. Tom Corbett announced the money was approved by the Commonwealth Financing Authority. The money was part of $28.5 million made available over the past two years to fund Marcellus Legacy Fund programs. Projects throughout southwestern Pennsylvania will benefit from the money. The authority also approved money for programs relating to watershed restoration and protection, baseline water quality data, abandoned mine drainage abatement and treatment, orphan or abandoned well plugging and flood mitigation.

The Juniata County Commissioners approved a distribution plan for $50,000 of 2012-2013 Marcellus Shale Open Space Funds. Commissioner Robert Reynolds said a conclave of township representatives was held several weeks ago to present ideas for the distribution of funds. According to information about the funds provided by Chief Clerk Jim Bahorik, revenue may be used for planning, acquisition, development, rehabilitation and repair of outside spaces. Locations include greenways, recreational and natural areas, conservation and beautification projects, community or heritage parks and water resource management. For more information, please contact us.

The revenue stream the Evans City borough hoped to see from selling water to shale gas drillers has begun to trickle in. So far the trickle has added up to about $75,000. Public works director Norm Nelson said that water from the borough’s former water plant on Route 528 has been sold to several drillers. Tanker trucks pull up to the plant, fill up, and take the water to drilling sites. Shale gas drillers use millions of gallons of water to hydrofracture the shale rock covering natural gas pockets one mile or more underground. When borough council in February 2012 decided to connect to Pennsylvania American Water instead of using its own plant, it opened the reservoir to drillers. Nelson said 8 million gallons of water was recently sold to Rex Energy for the fracking of the six wells on a hill behind the former water plant. The charge to buy water is $7 per 1,000 gallons. Nelson estimates the borough has made about $75,000 so far. In addition, Evans City received a lump-sum payment of $13,000 in 2008 when a shale gas lease was signed. The borough also received $8,300 for timber removal at the site of the wells, plus $12,250 for land disturbance. “It’s a moneymaking venture for the borough,” Nelson said. The earnings go into the general fund and will be spent as needed by council.

Residents in the southwestern portion of North Huntingdon might receive requests for permission for people to get on their property in order for a land company to complete seismic testing. The tests are necessary for natural-gas companies to determine the best locations to drill. Commissioners areconsidering an ordinance to regulate seismic testing in the township. The ordinance would require any land-surveying company to obtain a permit from the township before they could use explosives, weight drops, thumper trucks or any vibrating machines. The proposed ordinance would set a buffer zone of 300 feet from any building. Any resident within 300 feet of the action source would have to be notified in writing. The land company also would have to obtain written permission from a homeowner to be on the property for testing. Testing would be restricted to 8 a.m. to the earlier of sunset or 7 p.m. Monday through Friday and 9 a.m. to the earlier of sunset or 7 p.m. Saturdays

A state environmental court ruled that the Department of Environmental Protection must decide whether a drilling company can gather Utica Shale gas from Western Pennsylvania properties without all of the owners’ consent. The decision helps clarify one of many questions about Pennsylvania’s 1961 pooling law – known as the Oil and Gas Conservation Law – which is being tested for the first time since the start of modern shale gas development in the state. Pooling enables drilling companies to combine adjacent tracts of leased land into one unit from which they can drain oil or gas with the fewest wells. “Forced” pooling allows them to do that even if a property owner in the middle of the unit objects to signing a lease or has signed with a different company. Hilcorp Energy Company asked DEP in July to declare Utica Shale drilling units for 3,267 acres in Lawrence and Mercer counties – all but 35 acres of which the company has under lease – but DEP said it wasn’t in its jurisdiction and directed the company to apply to the Environmental Hearing Board instead. In its opinion, the hearing board said DEP – not the court – is the appropriate body to consider such applications. The hearing board can then review a case if DEP’s decision is appealed. For more information, please contact us.

Texas
A Dutch fertilizer company said it plans to build in Beaumont what would be the largest methanol plant in the United States. The plant would cost more than $1 billion and produce about 1.75 million tons of methanol per year, according to the company, OCI N.V. “Basically, this project has one input: natural gas,” CEO Nassef Sawiris said in an interview with FuelFix. “And the final product, methanol, is currently being imported into the U.S. The U.S. has about a 5-million-ton deficit so this project will substitute imports.” OCI N.V. owns another methanol plant in Beaumont, which has a capacity of 730,000 tons per year and alone accounts for 80 percent of the nation’s methanol production available for sale, Sawiris said. OCI N.V. purchased the previously mothballed Beaumont methanol plant two years ago and is in the process of expanding its capacity. Methanol is made from natural gas and is used in a wide range of products, including paints and glue. But it also has the potential to be a replacement for gasoline, or to be blended into gasoline just like ethanol is, Sawiris said. Other countries allow methanol to be used in gasoline, but Congress has yet to approve legislation that would allow it, he said. For more information, please contact HBW Resources.

Apache Corp has eliminated its reliance on what arguably could be the biggest long-term constraint for fracking wells in the arid western United States: scarce freshwater. For only one well, millions of gallons of water are used for hydraulic fracturing, or fracking, the process that has helped reduce U.S. reliance on foreign oil over the past five years by cracking rock deep underground to release oil and gas. In Irion County, where Apache is drilling dozens of Wolfcamp shale wells in the Permian Basin, the company is meeting its water needs for hydraulic fracturing by using brackish water from the Santa Rosa aquifer and recycling water from wells and fracking using chemicals. The company’s approach could have broader significance for areas prone to drought. Apache, which has the most rigs running in the Permian, the oil-rich region that spans 59 Texas counties, says the model can cut costs and truck traffic rattling small towns stretched by the country’s drilling boom.

Dow Water & Process Solutions (DW&PS), a business unit of The Dow Chemical Company, and Omni Water Solutions have treated more than 245,000 barrels of flowback and produced water from Texas’ Eagle Ford shale hydraulic fracturing operations. Already in operation in Karnes County since June, Omni’s HIPPO mobile water treatment unit – which includes both Dow ultrafiltration and DOW FILMTEC Reverse Osmosis (RO) membrane technologies – is being used by another leading operator in Gonzales County to reduce water hardness and boron, and enable reuse of the cleaned water for drilling and hydraulic fracturing operations. The reuse of produced and flowback water is of high significance to oil and gas operators, particularly due to local water shortages and historically dry conditions in the region.  Water reuse allows operators to minimize the use and cost of freshwater resources, while reducing complexities surrounding local wastewater disposal and onsite wastewater trucking.

Formosa Plastics Group, Asia’s largest chemical producer, is seeking U.S. permits for a $2 billion expansion of its Texas operations as cheaper natural gas prices make U.S. production more competitive. The Taiwanese company asked federal and state environmental regulators to approve plans for an ethane cracker unit and downstream derivatives. For more information, please contact HBW Resources.

Arizona-based Republic Services, a solid waste and recycling titan, is adding 49 state-of-the-art compressed natural gas trucks to its Houston fleet, as it phases out its older diesel-powered trucks, the company announced. “We are serious about reducing ozone-forming emissions whenever possible,” said Greg Rutherford, Houston area president of Republic Services. “We are excited to do our part to leave a cleaner and healthier community for future generations.” Republic is part of a larger move to compressed natural gas for its trucks, as companies seek to benefit from fuel prices that can trim as much as two dollars for the energy equivalent of a gallon of gasoline.

Jones Energy Inc. said it has entered into a definitive agreement with an undisclosed privately-held company to acquire producing and undeveloped oil and gas assets in the Anadarko Basin for $195 million. The assets include 26,000 net acres in the Cleveland, Tonkawa, and Marmaton plays in the Texas Panhandle and western Oklahoma, with 92 producing wells and proved reserves of 14.3 million barrels of oil equivalent, the company said in a statement. The acquisition bring Jones Energy’s total number of identified Cleveland drilling locations to more than 680, providing more than seven years of drilling in the Cleveland formation alone. In addition, the company said it will add two rigs in 2014 to accelerate its development program, boosting its rig count from 10 to 12. The acquisition is expected to be accretive to earnings and cash flow in 2014. For more information, please contact us.

Wyoming
Wyoming’s top court heard oral arguments in a challenge brought by environmental groups over the state’s fracking fluid disclosure law. The Wyoming Oil and Gas Conservation Commission adopted the first disclosure rule in the U.S. several years ago, and while it requires companies hand over their list of ingredients to the commission, green groups want that information released to the public. A district judge earlier this year sided with industry groups and the WOGCC that any ingredients deemed to be trade secrets can be withheld from the public. The environmental groups argue that while a Wyoming trade secret laws would apply to the overall formula for fracking fluids, it does not apply to the individual ingredients. The WOGCC and Halliburton, which has intervened in the case, say that the data does meet trade secret standards and that “the products used in hydraulic fracturing operations are the result of years of significant research and development efforts involving substantial investment,” according to Halliburton’s brief.

National
The House passed the following energy related bills last week:
Drilling permits: The House passed, H.R. 1965, the Federal Lands Jobs and Energy Security Act, introduced by Rep. Doug Lamborn (R, CO 5) with a 228-192 vote. The bill, which cleared the Natural Resources Committee back in July, accelerates onshore drilling permit decision and would require a quarter of nominated acreage be made available for leasing. In its Statement of Administration Policy: H.R. 1965, the Administration faults the bill for undermining the nation’s energy security and for setting “an arbitrary standard for leasing in open areas over leasing on the basis of greatest resource potential…” According to the White House, this “legislation would also remove the environmental safeguards that ensure sound Federal leasing decision-making by eliminating appropriate reviews under the National Environment Policy Act and undermine public resource planning efforts that have established a balanced approach to responsible oil and gas development while providing protection valuable surface and subsistence resources…”
Fracking regulations: the House passed H.R. 2728, the Protecting States’ Rights to Promote American Energy Security Act. Rep. Bill Flores’s (R, TX 17) bill, which cleared committee on a largely party line vote, would block Interior from enforcing any federal fracking regulation in states that already have similar regulations or guidance for fracking on the books. The vote was 235-187 with 12 Democrats joining the Republicans in supporting the bill. . Sen. Orrin Hatch (R, UT) has introduced a similar fracking bill in the upper chamber. Sens. Mike Enzi (R, WY), John Barrasso (R, WY) and Jim Risch (R, ID) are also sponsors. The House of Representatives also voted 142-276 to reject an amendment from Rep. Peter DeFazio (D, OR 4) that would block exports of natural gas produced on public lands. That was a greater margin of support for the foreign energy sales than during three similar votes last year. DeFazio said the foreign sales threaten a resurgence in domestic manufacturing, as companies move operations back to the United States to take advantage of cheap power supplies and feedstocks from surging U.S. natural gas production. In a Statement of Administration Policy: H.R. 2728, the White House expressed its strong opposition to this bill, arguing that it prohibits the BLM “from ensuring that hydraulic fracturing activities taking place on Federal and Indian lands are managed in a safe and responsible manner.” The Administration points to the Mineral Leasing Act as requiring the BLM to oversee oil and gas operations on these lands. The bill is seen as undermining the DOI’s trust responsibilities to protect Indian lands and will “require BLM to defer to existing State regulations on hydraulic fracturing on Federal lands, regardless of the quality or comprehensiveness of the State regulations – thereby preventing consistent environmental protections.”
Natural gas pipelines: the House passed with a 252-165 vote, H.R. 1900, Rep. Mike Pompeo’s (R, KS 4), “Natural Gas Pipeline Permitting Reform Act.” The legislation would speed up decisions on natural gas pipelines by giving FERC a 12-month deadline to make a decision (other agencies would have 90 days to weigh in once FERC completes environmental reviews). After the deadline, projects would be automatically approved. For more information, please contact HBW Resources.

Sen. Max Baucus (D, MT) proposed reducing tax breaks available to the oil industry. Baucus, who leads the Senate Finance Committee, said the proposal is part of a much wider plan to overhaul corporate tax law. The proposal would limit companies’ use of accelerated depreciation to write off capital expenditures immediately — a change that would cut across many industries. But some of the biggest effects would be borne by the oil and gas industry, which would be barred from immediately writing off intangible drilling costs, such as repairs, site preparation and hauling supplies. Baucus’ plan also would bar taxpayers from claiming a percentage depletion for oil and natural gas wells. The industry also would be forced to abandon the “last in first out” accounting technique that allows inventories to be valued at the most recent price paid when calculating net profit and taxable revenue. The draft discussion offers proposals to:
·         Replace current rules with a system that better approximates economic depreciation based on estimates from the Congressional Budget Office.
·         Reduce the number of major depreciation rates from more than 40 to 5.
·         Eliminate the need for businesses to depreciate each of their assets separately.
·         Permanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses.
Sen. Baucus has requested that the Congressional Budget Office provide an analysis of economic depreciation rates of tangible assets. He has also requested feedback from stakeholders by January 17, 2014. Comments can be sent to Tax_Reform@Finance.Senate.Gov.

Rep. Lois Capps (D, CA 24) wants the Obama administration to put a moratorium on fracking in federal waters off California’s coast until the practice’s effects on wildlife and public health can be studied further. “The techniques, materials and chemicals used in offshore fracking differ in significant ways from those used in onshore fracking, and there are clear differences in the surrounding environment that would be affected,” she writes. For more information, please contact us.

Sen. Bernie Sanders (I, VT) introduced a bill that would eliminate tax subsidies for the oil, gas and coal industries. The End Polluter Welfare Act, S. 1762, would end $100 billion worth of tax breaks for the industries over 10 years. Sanders said he introduced the bill because budget conference negotiators are trying to iron out differences between House and Senate proposals — they’re expected to produce a report by Dec. 13. Senate Democrats have called for tax increases on corporations and the wealthy in order to replace sequestration cuts, but Republicans have said they won’t accept any tax increases. Rep. Keith Ellison (D, MN 5) has introduced a companion measure in the House.

Energy Secretary Moniz said that the U.S. could issue its next ruling on LNG exports within one to two months. The next application in line is the Freeport LNG Development LP terminal proposed in Texas. Two months later we could see an approval of the Cameron LNG facility in Louisiana. Evaluation of past applications for exports to non-FTA countries and the government shutdown are both factors in the slowdown of the approval process according to Moniz. For more information, please contact HBW Resources.

The U.S. Department of Energy (DOE) has awarded nearly $5 million to research projects at seven universities that will seek to expand existing knowledge of methane hydrates and its potential impact on the environment, U.S. economic competitiveness and energy security. Two Texas universities are among the recipients of the DOE award. The University of Texas at Austin will receive nearly $1.7 million to fund its research with Ohio State University and Columbia University-Lamont Doherty Earth Observatory into the primary influences on the development of persistent, massive hydrate accumulations in deep sediments below the seabed. By extending a 3-D reservoir model to accumulations, the role of free gas in their persistence, and locations where these massive accumulations might be possible, DOE said in a statement. DOE awarded Texas A&M University’s Engineering Experiment Substation approximately $390,000 to develop a numerical model to address the numerous complexities associated with production from hydrate-bearing sediments. The project, which TEES will conduct with the Georgia Institute of Technology, will provide a power new modeling tool to optimize future hydrate production-related testing and a greater understanding of how hydrate systems react to induced or natural changes in their environment. Other universities that are receiving research funds include the Massachusetts Institute of Technology, George Tech Research Corporation, Oregon State University, the University of Washington and the University of Oregon. For more information, please contact HBW Resources.

A technical support document detailing the changes the Obama administration made to the models for its controversial “social cost of carbon” estimate, used to estimate the economic impacts of climate change on society, are now open for public comment. The administration has previously put the changes out for public rulemaking as part of other rulemakings. But in the Federal Register, the technical corrections are being published on their own, with 60 days for public comment.

Petroleum interests, manufacturers, chemical makers and other groups launched a coalition that will push to fully utilize domestic shale oil and gas resources to support a manufacturing “renaissance.” TheAmerican Shale and Manufacturing Partnership brings together several groups that lobby powerfully on behalf of domestic energy production, including the American Fuel and Petrochemical Manufacturers, America’s Natural Gas Alliance, the U.S. Chamber of Commerce’s Institute for 21st Century Energy, and the National Association of Manufacturers. Others among the 15 charter members of the group include the Cynthia and George Mitchell Foundation, Rice University, and Texas A&M University. “Our goal is to make sure that Washington, frankly, when it comes to shale, gets out of the way,” Jay Timmons, president of the National Association of Manufacturers, said at a launch event yesterday. “The states generally get [permitting] right.” Another major focus of the group will be pushing a message about the full scope of what domestic shale production means for the U.S. economy.

State power regulators are urging the Environmental Protection Agency to give states plenty of leeway to decide how they would meet upcoming carbon emissions standards for existing power plants. The National Association of Regulatory Utility Commissioners (NARUC) adopted a resolution Wednesday calling on the EPA to recognize the “primacy” of states to “lead the creation of emission performance systems that reflect the policies, energy needs, resource mix, economic conditions of each State and region.” The state officials are basically pressing the EPA to take an expansive view of Clean Air Act section 111(d), which hands states an important role in crafting plans to meet federal emissions requirements for existing pollution sources. “[T]he guidelines should be flexible enough to allow States individually or regionally to take into account, when establishing standards of performance, the different makeup of existing power generation in each State and region,” the NARUC resolution states. For more information, please contact us.

Pipeline operators aren’t building infrastructure fast enough to keep up with the growing output of South Texas’ Eagle Ford and North Dakota’s Bakken shale plays, according to new study by Deloitte LLP. Developers of pipelines, storage and other so-called midstream facilities will need to invest $200 billion in capital to meet shale-driven industry demand by 2035, according to federal figures used in the study. More than a third of natural gas production in the Eagle Ford and Bakken isn’t marketed because of inadequate infrastructure, according to federal Energy Information Administration data. In the past six years, midstream businesses made twice the capital investment they had in the previous 14, according Deloitte. In the first six months of this year, such transactions increased to $25.1 billion, compared to $18.7 billion in the first half of 2012.

According to a new market research report, “Hydraulic Fracturing Market by Resource & Well Type – Global Trends & Forecasts up till 2017” published by MarketsandMarkets, Global hydraulic fracturing market will grow from estimated $31 billion in 2011. This value is expected to increase from $40 billion in 2012 to $64 billion by 2017, with 10% CAGR during the same period. North America is expected to lead the global hydraulic fracturing production market.

A six-state study found the number of jobs directly related to shale drilling fell well below industry estimates. The report, “Exaggerating the Employment Impacts of Shale Drilling: How and Why” released by the Multi-State Shale Research Collaborative, looked at the jobs impact of drilling along the Marcellus and Utica shales, which span New York, Ohio, Pennsylvania, West Virginia, Maryland and Virginia. Between 2005 and 2012, the survey found that fewer than four new jobs directly related to shale drilling were created for each new well. That figure was significantly lower than estimates in some industry-funded studies that as many as 31 new direct jobs would be created per well, according to the survey. The oil and gas industry disputes the research team’s claims that the economic gains from shale drilling are being significantly overstated by the industry as well as government. Charlie Burd, president of the Independent Oil & Gas Association, said the report, released Nov. 22 by the Multi-State Research Collaborative, portrays “blanket assumptions” as fact. For more information, please contact us.

Devon Energy Corp. DVN in Your Value Your Change Short position is nearing a $6 billion takeover of Texas shale oil driller GeoSouthern Energy Corp., according to people familiar with the matter. The acquisition, which could be announced soon, would be the largest U.S. oil and gas transaction of the year. A takeover would be a bet by Devon, a pioneer in drilling for natural gas, into pumping more U.S. crude. GeoSouthern’s operations are almost entirely in the Eagle Ford Shale, a prolific oilfield in South Texas. Devon, which has a $25 billion stock market value, was the first company to combine horizontal drilling and hydraulic fracturing, a technological pairing that unleashed the current energy boom. When it bought into the Barnett Shale in Texas a decade ago, it helped create a nationwide glut of natural gas.

Natural gas futures rose Monday, climbing for the fourth straight session, as traders bet that a powerful winter storm moving toward the East Coast, along with a recent cold spell, would boost demand for the heating fuel. Natural gas for December delivery added 4.1 cents, or 1.1%, to $3.810 a million British thermal units on the New York Mercantile Exchange, earlier reaching their highest price since Oct. 16.
The gains follow a nearly 3% climb last week as weather forecasts have shifted toward sustained below normal temperatures. Such an outlook is bullish for natural gas because nearly half of all U.S. households use the fuel as their primary heating source, according to the Energy Information Administration. With colder-than-normal temperatures, natural gas supplies fell by 45 billion cubic feet for the week ended Nov. 15, according to government data. The drop was larger than the 36 bcf decline expected by analysts. Total natural gas stockpiles now stand at 3.789 trillion cubic feet, down 2.3% from record-high year-ago levels and 0.4% above the five-year average for the week. For more information, please contact HBW Resources.

Government calculations of total U.S. methane emissions may underestimate the true values by 50 percent, a new study finds. The results are published in the Proceedings of the National Academy of Sciences, and cast doubt on a recent Environmental Protection Agency decision to downscale its emissions estimate. Carnegie’s Anna Michalak, Harvard’s Scot Miller and Steven Wofsy, and colleagues used atmospheric methane observations from across North America in 2007 and 2008 to improve estimates of methane gas emissions from a variety of human sources, including agriculture and fossil fuel drilling and refining. The study found large discrepancies with government estimates in some regions of the United States, particularly the south-central U.S., where total methane emissions were 2.7 times greater than those reported in most inventories. Emissions from oil and gas drilling and processing in this region could account for 50% of that total, representing a source of methane almost five times higher than in the most commonly used global emissions database.

A shale boom in the U.S. that’s led to lower natural gas prices and higher energy efficiency will act as a bridge to cleaner burning fuels, Carol Browner, a former Environmental Protection Agency head, said. “Right now there are a lot of reasons” to favor using natural gas, said Browner, a senior counselor at Albright Stonebridge Group, a Washington-based global strategy organization. She spoke at “The Year Ahead: 2014,” a two-day conference sponsored by Bloomberg LP in Chicago. The U.S. is forecast to pump 70.29 billion cubic feet a day of natural gas this year, up from the 2012 record of 69.18 billion as hydraulic fracturing, or fracking, has unlocked shale deposits that previously were uneconomical to produce, according to data from the Energy Information Administration, the statistical arm of the U.S. Energy Department.

WildEarth Guardians issued a notice of intent to sue the U.S. Fish & Wildlife Service over its decision not to list the Gunnison prairie dog as endangered or threatened under the Endangered Species Act. The group claims that oil and gas development and urbanization threaten prairie dog populations in Arizona, Colorado, New Mexico and Utah. The Fish & Wildlife decision was made as part of a legal settlement with environmental groups forcing the agency to make listing decisions for 757 candidate species. Several of those are active in areas of shale development. Decisions for the Greater sage grouse, Gunnison sage grouse, and Lesser prairie chicken could all impact shale development in the Southwest and Rocky Mountain states. For more information, please contact HBW Resources.

International
Fracking and the development of shale gas in Europe could create one million new jobs and add up to £3 trillion to the value of European economies, new research has found. Shale gas has the potential to make flagging industries more competitive and reduce dependence on expensive energy imports but is under threat from European Union regulators who fear the environmental impact of extracting the resources. The research, “Macroeconomic Effects of European Shale Gas Production,” carried out by Poyry Management Consulting and Cambridge Econometrics was published as the European Commission prepares legislation later this year to regulate shale-gas extraction through hydraulic fracturing. The new energy resource could add a total of €1.7 to 3.8 trillion to the value of the EU’s economy between 2020 and 2050, generating 400,000 and 800,000 new jobs by 2035, and between 600,000 to 1.1 million by 2050. The shift away from imports to domestic shale gas production potentially unlocks €191bn that could be invested in European industry with tax revenues worth up to €1.2 trillion for Europe’s indebted governments. For more information, please contact us.

Research and Markets has released a new report, “Strategic analysis of the pumps in the European shale gas industry.” The research looks at trends in the European shale gas pumps market, and the impact of political opposition towards fracking on the market. The study is divided into regional segments and looks at key drivers and restraints, key companies and significant shale reserves in these regions. The report highlights:
·         The increased investment in drilling test wells and conducting exploratory activities, which is expected to boost the shale gas pump market.
·         The requirement to treat water which is pumped back into wells and the affect this will have on pump manufacturers.
·         The energy policies of various local governments across Europe and how this affects the commercial viability of shale gas operation.
·         Experienced manufacturers will a foothold in the North American shale gas market are likely to dominate the European industry due to their experience.

Canada
Questerre Energy has reported on the results of its second core hole program for its oil shale acreage at Pasquia Hills, Saskatchewan, Canada. Michael Binnion, President and Chief Executive Officer, commented, “These results are better than we expected and confirm that our acreage overlies a well-established oil shale deposit. We will use this core data, along with the data from our first program, to commission an independent resource assessment early next year.” He added, “We expect to convert these resources into reserves with Red Leaf’s EcoShale process. Red Leaf is securing the final permits and should begin work in the field for the first commercial scale capsule this December.” The six-well core program was completed in the fall of 2012 on the eastern block of Questerre’s acreage in the Pasquia Hills area of east central Saskatchewan. 653m of good quality core was cut as well as a full suite of drilling logs over the target Second White Specs shale. All the wells drilled encountered the target formation with a minimum thickness of 26m and a maximum of 59m. This follows the first 10-well program on the western block where over 30m of the shale was cored in all the wells drilled.

Transport Canada issued an order requiring all railroads to provide advanced warning to all municipalities through which a train will travel carrying crude oil. The railroads also must issue annual reports on shipments of hazardous materials and the routes they use. The new regulations were issued in response to the explosion in Lac Mégantic, Quebec earlier this year. The U.S. Federal Railroad Administration is reviewing the regulations, although a spokesman stated that U.S. railroads already report similar information to emergency first responders. For more information, please contact us.

China
Royal Dutch Shell Plc, Europe’s largest oil company, and PetroChina Co. are producing natural gas from the Changbei field in China at a 91 percent discount to PetroChina’s average lifting cost last year across all of its assets. The cost of output from the field in the Shaanxi province is $1 per barrel of oil equivalent and that’s much lower than similar projects, Xu Li, Shell’s general manager of the asset told a group of reporters at the unit’s headquarters on the outskirts of Yulin. PetroChina’s lifting cost in 2012 was $11.74 per barrel of oil, according to its annual statement. Shell is spending $1 billion in China this year and is stepping up its investment in the nation’s unconventional natural gas sector. China, the world’s largest energy consumer, is seeking to lower its reliance on coal and replace it with cleaner sources, such as gas.

Estonia
Eesti Energia has begun tests at their Baltic Power Plant to see if there is potential in the co-incineration of oil shale and coal. Oil shale that has been deemed unfit for producing energy is added to coal with higher calorific value, which produces a fuel that can be burned. Currently, biofuel and peat have been used in the fluidized-bed boilers of Narva Power Plants, in addition to oil shale. During the test-incineration of coal, it’ll discover how the equipment reacts to this type of fuel and what effect it has on emission levels. Besides the better usage of mined oil shale and decreasing the amounts of mine waste, the co-incineration of coal and oil shale also means that more oil shale with higher calorific value remains for the oil industry, thus giving the use of the natural resource more additional value. For more information, please contact HBW Resources.

The ministers from the International Energy Agency (IEA) member countries have asked Estonia to become the 29th member of the Agency. Acting upon the recommendation of IEA Executive Director Maria van der Hoeven, the ministers were satisfied that the country met all IEA membership requirement, including the obligation to hold enough emergency oil stocks to cover 90 days of net imports, under the IEA Treaty. Accordingly, Turkish Energy Minister Taner Yildiz, the IEA Ministerial Chair, invited Estonia to proceed speedily with the country’s internal accession procedure and report back to the IEA council once all measures are completed. Minister Juhan Parts of Estonia welcomed the invitation and assured his colleagues that Estonia would speedily complete its internal accession procedures under the IEA Treaty.

India
India has begun its first commercial exploration of shale gas, natural gas that is found trapped within shale formations below the earth surface, with state-run Oil and Natural Gas Corporation (ONGC) launching drilling operations at Jambusar near Vadodara in Gujarat. The policy guidelines on the exploration and exploitation of shale gas and oil by national oil companies under nomination regime is already in place after the cabinet cleared it in September. ONGC would take up 175 blocks and Oil India another 15 blocks in three assessment phases. “The government has recently announced its shale gas policy for exploitation of this very important non-conventional hydrocarbon resource.  Announcement of the second phase of shale gas policy is being made in the near future. We would be starting exploration on our first well near Vadodara on November 26,” said the minister last week. The second phase of shale gas policy in which private players can also be a part is still on its way. “A Cabinet note is being prepared in this regard. However, we are yet to finalize the technicalities in this regard on what to do if there is an overlapping of blocks with existing oil and gas players,” said petroleum secretary Vivek Rae.  Earlier, the ministry was planning to give the first right of refusal for existing players after the auction process. As per the policy, ONGC would get 50 blocks in the first phase, while another 75 blocks in the second and 50 blocks in the third phase. Oil India would take up five blocks each in all three phases. It was ONGC that first tasted shale gas in a pilot project at Ichhapur in Burdwan, West Bengal.

Mexico
An official with Mexico’s state-run oil company says a proposed energy reform could make it easier for Petroleos Mexicanos to create subsidiaries to exploit the country’s vast shale oil and gas reserves. Production and exploration director Carlos Morales says the company has only started to explore shale reserves that could more than double daily gas output. Mexico currently has to import gas to meet demands. He said shale exploration is not run by large oil companies such as Pemex, as it’s known, rather by small specialty operations. For more information, please contact HBW Resources.

Poland
Poland’s Prime Minister Donald Tusk dismissed environment minister Marcin Korolec as part of a government reshuffle, but said the latter would continue to represent the country in ongoing UN climate talks. “It is about radical acceleration of shale gas operations. Mr Korolec will remain the government’s plenipotentiary for the climate negotiations,” Tusk told a news conference. Korolec, as Poland’s environment minister, assumed the presidency of the UN Framework Convention on Climate Change process on November 11, the first day of the two-week conference, and was to hold it throughout 2014. His dismissal raised questions over Poland’s position in the negotiations. The country, which generates 90% of its electricity from coal, has been one of the most reluctant European Union members to toughen the existing goal of cutting greenhouse gas emissions by 20% below 1990 levels by 2020. The environment ministry under Korolec was criticized for hampering work on new shale gas legislation, which, together with red tape and poor results, forced a number of global players to quit Poland. Tusk made no bones about the importance of shale gas when he announced the changes. “It is about radical acceleration of shale gas operations,” he told reporters. For more information, please contact us.

Russia
Italian oil and gas group Eni has agreed to sell its stake in natural gas producer SeverEnergia to Russia’s Novatek and GazpromNeft for $2.94 billion. The deal is likely to increase tensions between Russia’s oil barons, already heightened by the $1.8 billion sale earlier this month of utility Enel’s stake in SeverEnergia to Kremlin-controlled Rosneft. SeverEnergia, which is expected to produce 36 billion cubic metres of gas and liquids by 2017, is a joint venture between Yamal Development and Arctic Russia BV.

Oil producer Rosneft plans to invest around 92 billion roubles ($2.8 billion) by 2015 to develop three fields in East Siberia, key to honoring its export deals with Asia, the company said. In a strategic shift in its energy policy, Russia launched the East Siberia-Pacific Ocean (ESPO) oil pipeline in 2009 to supply fast-growing Asian markets and in particular China, the world’s top oil importer. Rosneft, the world’s biggest listed producer with a daily average of 4.2 million barrels of oil this year, plans to triple oil exports to China to some 1 million barrels per day (bpd) in the coming years.

Saudi Arabia
Prince Abdulaziz Bin Salman Bin Abdulaziz, Saudi Arabia’s deputy oil minister, recently spoke at a conference in Dubai where he said that the country, a major oil exporter, is unfazed by the U.S. shale boom. According to him: “I think that the world economic growth will be sufficient to handle growth from all sorts – shale oil, shale gas, tight oil and including renewable. The kingdom welcomes new resources of energy supplies, as they are needed,” he added.

Singapore
Singapore is interested in importing shale gas from the United States, and Prime Minister Lee Hsien Loong raised the issue during his visit to the White House earlier this year, said Foreign Affairs Minister K. Shanmugam. “When the PM was on his official visit to the US, we raised it and we said we would be very happy to receive gas from the U.S.,” Shanmugan said while speaking to South Asian business leaders and policymakers on Thursday, reported the Straits Times. For more information, please contactHBW Resources.

United Arab Emirates
Cia. Espanola de Petroleos SA, the Abu Dhabi-owned oil refiner, agreed to buy Coastal Energy Co. for $2.3 billion in Canadian dollars as the Middle East sheikhdom adds to crude and natural-gas assets in Southeast Asia. Cepsa, as the Madrid-based company is known, and partner Strategic Resources (Global) Ltd. agreed to pay C$19 a share, 28 percent more than Coastal Energy’s closing price Monday, the Houston-based company said in a statement. The venture will take on Coastal Energy’s C$51 million of net debt as part of the deal, due to close in the first quarter. The acquisition is the biggest purchase since 1999 for Cepsa, Spain’s fourth-largest industrial group. Cepsa holds oil production and refining, petrochemical and electricity generation assets in Algeria, Brazil, Canada, Colombia and Panama among others. Coastal Energy also holds onshore exploration concessions in Thailand and is a partner in a service contract for a series of fields in Malaysia.

United Kingdom
Onshore UK looks to be on its way to becoming a major region of interest for large energy companies hoping to exploit shale gas resources after GDF Suez S.A. made a deal with Dart Energy Corp. to farm into some of Dart’s licenses that cover the Bowland Basin in northwest England. The French company’s move into the Bowland shale, as well as a few of Dart’s coal-bed methane projects, followed UK integrated energy firm Centrica’s own Bowland Basin deal with Cuadrilla Resources this summer. The gigantic gas resources estimated to exist within the Bowland Basin are enough explanation on their own to justify the interest from major energy companies. The Bowland Basin is believed by the British Geological Survey to hold as much as 1,300 trillion cubic feet (Tcf) of shale gas; Cuadrilla’s licenses are estimated to contain some 300 Tcf while Dart is thought to be sitting on around 110 Tcf in its Bowland licenses. However, the UK’s positive political climate towards shale gas is also encouraging those international firms wanting to develop shale gas in Europe to look to the country as other European nations vacillate over drilling for unconventional hydrocarbons.

Additional Information

For additional information, please contact Bo Ollison with HBW Resources.  His contact information is below.

Bo Ollison
HBW Resources
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E-mail: bollison@hbwresources.com
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Twitter: @BoOllison

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