Big Week for Hydraulic Fracturing in Congress & Around the US: Manufacturers & Consumers Benefit While Public Remains Skeptical

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.

Alaska
The Alaska Oil and Gas Conservation Commission has proposed a revised set of changes to state rules on hydraulic fracturing that will allow companies to keep the composition of fracking fluids secret, the commission’s chair said. “We’ve made some changes in what we proposed earlier, the most significant being that we will allow hydraulic fracturing contractors to protect the proprietary formulas of their frac fluids as trade secrets,” said Cathy Foerster, chair of the AOGCC, in an interview. The commission has set a January 15 date for hearings before final regulations are adopted, she said. For more information, please contact HBW Resources.

California
The California Department of Conservation (DOC) has sent out public notice of proposed regulations for the use of well stimulation in oil and gas production. The public notice begins the formal rulemaking process and marks the beginning of a 60-day public comment period. The regulations, which are to go into effect on January 1, 2015, are designed to protect health, safety, and the environment, and supplement existing strong well construction standards. They address a comprehensive list of issues, including testing, monitoring, public notice, and permitting. The Department also will have emergency regulations in place by January 1, 2014 to ensure that the major requirements of SB 4 are addressed in the interim. Comments regarding the proposed regulations can be submitted via email to DOGGRRegulations@conservation.ca.gov; via FAX to (916) 324-0948; or via regular mail to the Department of Conservation Office of Governmental and Environmental Relations, 801 K Street MS 24-02, 95814, Attention: Well Stimulation Regulations. Comments will also be taken at five public hearings around the state:
Sacramento — January 6, Sierra Room, California Environmental Protection Agency Building, 10th & I streets, 3-7 p.m.
Long Beach — January 6, California State University-Long Beach auditorium, 1212 Bellflower Boulevard, 3-7 p.m.
Bakersfield — January 8, Kern County Administrative Center, first floor board chambers, 1115 Truxtun Avenue, 3-7 p.m.
Salinas — January 8, National Steinbeck Center, One Main Street, 3-7 p.m.
Santa Maria — January 13, Santa Barbara County supervisors hearing room, 511 East Lakeside Parkway, 3-7 p.m.

An oil company will pay a $60,000 penalty for discharging fracking fluid into an unlined pit in Kern County. Central Valley Regional Water Quality Control Board said in a statement that Vintage Production California discharged saline water and hydraulic fracturing liquid into an unlined pit for 12 days last year. The pit was next to a newly drilled oil well near Shafter, about 20 miles northwest of Bakersfield. The board said the discharge posed a threat to groundwater quality.

Twenty of the nation’s top climate scientists have sent a letter to Gov. Jerry Brown, telling him that his plans supporting increased use of the practice of hydraulic fracturing will increase pollution and run counter to his efforts to cut California’s global warming emissions. The letter is the latest example of the increased pressure that environmentalists and others concerned about climate change have been putting on Brown in recent months. Their argument: The governor can’t say he wants to reduce global warming while expanding fossil fuel development in California. For more information, please contact us.

Colorado
Colorado officials unveiled first-of-their-kind regulations to limit methane emissions from oil and gas development in the state, drawing praise from both the energy industry and a major environmental group. The proposed state Air Pollution Control Division regulations would limit so-called fugitive methane emissions from natural gas development by requiring that operators check for methane leaks using technologies such as infrared cameras. Representatives from Anadarko Petroleum, Noble Energy, Encana Corp. and the Environmental Defense Fund attended Gov. Hickenlooper’s announcement.

Even as the final votes are tallied in Broomfield and the mandatory recount begins, one oil and gas attorney says he thinks the frack bans voters approved in at least three Colorado towns are on shaky legal ground under state law. Voters in three towns, Fort Collins, Lafayette and Boulder, approved prohibitions on fracking in the Nov. 5 elections. Broomfield plans to finish its tally on Thursday. David Neslin, an attorney with Davis, Graham and Stubbs, said he thinks the prohibitions and bans are on shaky legal ground under Colorado law. “I think under Colorado case law, local governments don’t have the authority to prohibit hydraulic fracturing,” said Neslin, who also is the former director of the Colorado Oil and Gas Conservation Commission, the state agency that oversees industry operations in the state. “That’s because a prohibition on hydraulic fracturing is tantamount to a prohibition on oil and gas development and the state Supreme Court has held that local governments can’t prohibit that,” Neslin said. In 1992 the Colorado Supreme Court struck down a drilling ban enacted by Greeley. The state also has a lawsuit pending against Longmont, where voters banned fracking in 2012. Moratoriums such as those enacted by the voters in Fort Collins and Boulder also could prove problematic, Neslin said. Colorado courts have upheld temporary moratoriums designed to allow local governments to update master plans or land use regulations, he said. Typically those moratoriums lasted for two years or less, not the five years envisioned by the frack bans, he said. For more information, please contact HBW Resources.

The results of Broomfield’s anti-fracking measure — which appeared to have failed by a slim margin on Election Day — flipped late Thursday night, but the five-year hydraulic fracturing ban’s approval was so narrow that a recount is mandatory. In unofficial results tallied on election night, the measure was down by just 13 votes. With outstanding votes — including military and overseas ballots — tallied on Thursday night, the anti-fracking ballot measure succeeded by 17 votes, according to unofficial final results released by the Broomfield elections office at 10 p.m. Officials counted the last of the outstanding ballots and determined the vote was close enough on Question 300 to order an automatic recount. The recount is expected to take place as early as Monday, but an official date has not yet been set, said Michael Susek, Broomfield’s elections administrator. The measure sought a five-year ban on fracking in Broomfield.  Of the 20,683 votes cast, 10,350 voted for the ban, and 10,333 voted against it. For more information, please contact us.

Illinois
The start of hydraulic fracturing in Illinois is at least a year away, the director of the state agency in charge of permits said. Marc Miller of the Illinois Department of Natural Resources said proposed regulations are nearly complete. But he said it would take months — including public hearings and website comments — before the first permits are issued. In addition, no companies have taken the first step of registering since the agency started accepting sign-ups in early October. “I think the companies want to see how the rules are going to come out,” Miller said during a meeting with The State Journal-Register editorial board. The Illinois Department of Natural Resources is also seeking public feedback on the state’s first-ever regulations for high-volume oil and gas drilling. The DNR published proposed regulations for hydraulic fracturing, which begins a public comment period that will last until Jan. 3.

Michigan 
State officials have submitted the latest in a series of reports, “Additional Areas final report” that Gov. Rick Snyder says will help Michigan make decisions about future energy policies. The report was submitted by Steve Bakkal, director of the Michigan Energy Office, and John D. Quackenbush, chairman of the Michigan Public Service Commission. The report is the second of four final reports that will be submitted to Governor Snyder. In his Special Message on Energy and the Environment in November last year, Governor Snyder laid out a vision for a “no regrets” energy policy, one that would be adaptable and built on three pillars: excellent reliability, an affordable price, and a protected environment. With respect to natural gas development and usage, the report states, “The only non-renewable energy source that is sufficiently available in Michigan is natural gas. … Michigan producers have used hydraulic fracturing since the 1950s and continue its use today. … Demand in Michigan primarily depends on the weather. …The EPA regulations coupled with the current, relatively low price of natural gas, may lead to the development of new natural gas-fired electric generating plants in Michigan.”

The Livingston County Democratic Party will protest potential hydraulic fracturing in the county noon to 2 p.m. Saturday in downtown Fowlerville. The “peaceful assembly” will be in response to a state-approved hydraulic fracturing, or “fracking,” permit in nearby Conway Township, the county Democrats said.

New Mexico
A decision by one northern New Mexico County, Mora County, to prohibit oil and natural gas development has prompted a statewide industry group and three landowners to challenge the ban in federal court. The lawsuit filed in Albuquerque by the Independent Petroleum Association of New Mexico and the landowners claims the ban is unconstitutional and violates state laws. The plaintiffs say the county lacks authority to pass such an ordinance, and it stands to effect property and due process rights as well as potential revenues that benefit New Mexico schools, universities and hospitals. “These resources belong to the people of New Mexico, not to the commissioners of Mora County. This ordinance would in effect impact each and every citizen in the state,” Richard Gilliland, president of the Independent Petroleum Association of New Mexico, said. The ordinance states any permits or licenses issued by either the federal or state government that would allow activities that would compromise the county’s rights would be considered invalid. The sparsely populated county spans more than 1,900 square miles of northern New Mexico. There are more than 120 leases on state land within the county’s boundaries, but no active wells.

New York
A pro-drilling landowners group says it will sue Gov. Andrew Cuomo, claiming he has arbitrarily delayed a decision on hydraulic fracturing for no “valid, rational or legally defensible reason.” In a newsletter sent to its members, the Joint Landowners Coalition of New York sent out the lawsuit it intends to file against the state, Cuomo and the commissioners of the Health and Environmental Conservation departments. But the group is trying to raise money to pay the legal costs before the lawsuit is filed, according to the letter. The legal document takes Cuomo to task for repeatedly delaying a decision on large-scale fracking, claiming the delays violate state law and amount to an unconstitutional government “taking” of land rights. For more information, please contact us.

North Carolina
Energy speculators are quietly preparing to take ultrasound images of Lee County’s underground geology and gauge the region’s potential for fracking. The seismic testing will mark the beginning of a sequence of exploratory steps that could lead to the first five wells producing shale gas by 2015, said James Womack, chairman of the N.C. Mining and Energy Commission. Seismic testing is expected to get underway later this month and continue into January, Womack said. The exact areas identified for the sound-wave analysis are a closely guarded secret as energy explorers seek to protect their tactical advantage against competitors. Last week, Womack laid out North Carolina’s fracking scenario to the N.C. Environmental Review Commission, an advisory body of state lawmakers, and predicted that the state could have as many as 140 wells producing natural gas by 2018.

North Dakota
The U.S. Energy Information Administration (EIA) estimates that total Bakken crude oil well output will pass the 1 million barrel of oil per day (MMbopd) mark in December. Bakken oil production is expected to rise by 26,000 barrels of oil per day (bopd) from 976,000 bopd this month to just over 1 MMbopd in December, EIA reported. The estimate comes from EIA’s “November 2013 Drilling Productivity Report”, which tracks U.S. unconventional oil and gas plays. EIA also forecasts Bakken natural gas production to grow by 27 million cubic feet per day from 1.081 billion cubic feet per day (Bcf/d) in November to 1.108 Bcf/d in December. The Bakken now accounts for a little over 10 percent of total U.S. oil production. Once its production surpasses the 1 MMbopd mark, it will become the fourth U.S. region producing over 1 MMbopd in the United States. These other regions include the Gulf of Mexico, Eagle Ford and Permian basins. For more information, please contact HBW Resources.

Ohio
From 2008 to 2010, numerous landowners in eastern Ohio entered into oil and gas leases with Anschutz Exploration Company, which were later assigned to Chesapeake Exploration LLC. These leases contain a “Preferential Right to Renew” or a “fair market value” provision. This clause provides that, “[i]f, at any time during the primary term…or within one year from the expiration, cancellation or termination of this Lease, Lessor receives an acceptable bona fide third-party offer to lease the Leasehold, in whole or in part, Lessor shall promptly provide the Lessee, in writing, of all of the verifiable particulars of such offer. Lessee shall have thirty (30) days…to advise Lessor, in writing, of its agreement to match said third-party offer…” To settle disagreements about the meaning of this provision, Chesapeake filed a declaratory judgment action against numerous landowners who threatened to terminate the leases unless Chesapeake matched or “bettered” third-party offers that they had received. The Court found no ambiguity in the provision and ruled that Chesapeake has the right to match a bona fide offer and renew the lease; and if Chesapeake chose not to match the offer, the lease “run[s] its course.” The Sixth Circuit Court of Appeals affirmed the lower court’s decision. The Sixth Circuit rejected the landowners interpretation that Chesapeake was obligated to match any third-party offers and failing to do so constituted a breach of the lease, requiring Chesapeake to remove its equipment immediately. The Circuit Court found that the language of the “preferential right to renew” clause does not require Chesapeake to “match” any third-party offer, but rather allows Chesapeake thirty (30) days in which to decide whether to accept or reject the offer. Chesapeake has a “right” to match, not an “obligation” to match a third-party offer. If Chesapeake decides not to exercise its right, the lease remains “in force…so long as” Chesapeake is actively engaged in drilling operations.

An Ohio state investigation has determined that methane or natural gas in drinking water in northeast Portage County is naturally occurring, not tied to nearby drilling. The 25-page report from the Ohio Department of Natural Resources analyzed the well water of Jason and Debby Kline of Nelson Township. The Klines complained in December 2012 after Mrs. Kline reported that she had accidentally ignited methane mixed with her tap water while using a candle in the master bedroom. The Klines were worried that the methane had come from two Utica shale wells that had been drilled about 1,500 feet away on the border between Nelson and Windham townships by Mountaineer Keystone LLC on the Soinski pad. The state agency concluded that “the methane in 6*/the Kline water well is naturally occurring and is not the result of oilfield activities by Mountaineer Keystone at the Soinski well pad.” The report continued: “Isotopic analysis of the methane in the Kline well was identified as near-surface microbial gas that is genetically different from thermogenic gas produced in deeper geologic formations like the Utica shale.”

Drill Capital, an alternative asset manager focused on investments in the North American energy sector, has closed on a transaction for the construction of a new hotel located in eastern Ohio, at the center of the Utica Shale formation. The three-story hotel, which will consist of 83 rooms, will be built under a Wyndham Hotel Group portfolio brand and is set to open in the second quarter of 2014. The deal capitalizes on the rising demand for lodging accommodations in the Utica Shale, a key energy production hub, for oil and gas workers, engineers, and travelers. For more information, please contact us.

Investment banking firm Boenning & Scattergood Inc. has witnessed shale development transform community banking throughout much of Pennsylvania. So it’s without pause the Philadelphia-area firm sets sights on the Marcellus and less-developed Utica shale play with a new spinoff of sorts, investing in promising yet undervalued banks primarily with less than $1 billion in assets. Shale Community BanFund LP launched in May with a $10 million capital raise and much of its focus on eastern Ohio, where small banks are in need of capital, said Robert Wagner, the fund’s managing principal.

Gulfport Energy, Hess Corp., XTO Energy and Rice Energy combined to record 50 natural gas drilling permits for property in Belmont County from the Ohio Department of Natural Resources. Though Chesapeake Energy’s strong presence helps Carroll County lead the way in Utica shale permitting with 339 registrations, counties such as Belmont, Harrison, Jefferson and Monroe are closing the gap on the more northern counties. In Harrison County, companies have registered 141 permits, with 74 wells drilled. In Monroe County, drillers have combined to record 47 Utica shale permits, with 26 wells drilled.

Oregon
Sen. John Barrasso (R, WY) and 11 other members of the 113th Congress from Colorado, Utah, and Wyoming urged Energy Secretary Ernest J. Moniz to approve the application of a proposed LNG export terminal on Oregon’s coast next. “West Coast LNG export facilities, such as Jordan Cove, would provide Colorado, Utah, and Wyoming, and Indian tribes such as the Ute Indian tribe direct access to international markets,” the three senators and eight House members said in their Nov. 12 letter. “Specifically, Jordan Cove would allow gas shipped on the Ruby pipeline to be exported to Asian markets.” In addition to Barrasso, Sens. Orrin G. Hatch (R, UT) and Michael B. Enzi (R, WY), and Reps. Cynthia Lummis (R, WY), Jim Matheson (D, UT 4), Doug Lamborn (R, CO 5), Rob Bishop (R, UT 1), Scott R. Tipton (R, CO 3), Jason Chaffetz (R, UT 3), Cory Gardner (R, CO 4), and Chris Stewart (R, UT 2) signed the letter.

Pennsylvania
New polls released show that Pennsylvanians still support imposing a natural gas severance tax, are concerned about the Marcellus Shale drilling process known as fracking, and are more aware of the issues surrounding natural gas than their neighbors in New York. In all, three polls concerning Marcellus shale and clean drinking water issues were commissioned by the nonprofit think tank, the Civil Society Institute, which has a focus on renewable energy: one was a national survey; one on Pennsylvanians; and one on New York and New York City residents. In the Pennsylvania survey of 403 adults 18 or over questioned November 26-30, a combined 67 percent said they would “strongly support” or “somewhat support” imposing a severance tax on the natural gas industry. Those who favored the tax stretched across party lines, with 51 percent of Republicans, 68 percent of Independents and 81 percent of Democrats saying they support such a tax. Pennsylvania is the only major natural gas producing state without a severance tax. One was supposed to be approved as part of a legislative budget deal between Democratic Gov. Ed Rendell and the legislature, but the Republican-controlled Senate never approved a tax. Incoming Republican governor Tom Corbett has said he would not support imposing a severance tax on the industry. For more information, please contact HBW Resources.

Gov. Tom Corbett told an oil and gas industry conference that opponents of drilling are trying to downplay clear evidence that the shale gas boom is helping Pennsylvania’s economy. Corbett said drilling opponents suggest that the 20,000 or 30,000 jobs generated directly by the industry “really don’t mean so much” and that there aren’t many additional jobs beyond those. Corbett launched his re-election campaign last week, and one online ad claimed that the Marcellus Shale natural gas industry supports more than 200,000 jobs in Pennsylvania. Some economists said that number was too high. “The opponents of drilling have really become what I would call economic change deniers,” Corbett said, while also claiming that the industry has complied “very well” with regulations.

State Sen. John Yudichak (D, District 14) said the Marcellus shale industry will lift Northeastern Pennsylvania “out of the cloud of economic hardship” and will continue to do so for generations to come. Yudichak and Sen. John Blake, (D, District 22) co-hosted a seminar at East Mountain Inn that was attended by more than 100 representatives of local contractors, trade unions, small manufacturers and others interested in new business and job growth from the industry. John Augustine, community outreach manager for the Marcellus Shale Coalition, gave a detailed presentation on the state of the industry, its economic impact and the anticipated growth over the next 40 to 50 years. Augustine said the Marcellus shale region produces 12 billion cubic feet of natural gas per day and will soon surpass 13 billion cubic feet per day. He said that translates to well over 4 trillion cubic feet per year. Augustine said the industry employs about 232,000 people with an average salary of $83,000 per year. Between 2010 and 2012, Augustine said there were 4,500 wells drilled, representing a $31.5 billion investment. He said the projects are even higher for 2013 and beyond. He said the industry has generated $1.8 billion in tax revenue since 2006. For more information, please contact us.

More than 100 people in Robinson, Washington County, attended a four-hour series of meetings on proposed changes to the township zoning ordinance. Some farmers voiced opposition to their land being rezoned, while some Marcellus Shale leaseholders, along with a representative of driller Range Resources, expressed opposition to a proposed overlay district for natural gas drilling. Supervisors did not vote on the new zoning regulations. Brian Coppola, chairman of the supervisors, said the board will consider the public comments and questions and possibly revisit the issue in December.

Texas
Houston and Texas are playing a role in shipping giant UPS’ aggressive plans to build an LNG-fueled fleet. Clean Energy Fuels Corp. said that it inked a multiyear bulk fueling agreement to supply liquefied natural gas to two private UPS stations in Texas, one in Houston and one in Mesquite. Also, Clean Energy Fuels, which is based in California, will open three of its own LNG fueling stations in Amarillo, Mesquite and San Antonio to the UPS fleet.

new pipeline project to move Eagle Ford Shale natural gas into Mexico’s growing energy market has received its presidential permit. Houston-based NET Mexico Pipeline Partners LLC got the OK from the Federal Energy Regulatory Commission “to site, construct, connect, operate, and maintain a border-crossing facility” in Starr County for the export of natural gas. NET Mexico is an affiliate of NET Midstream, which has a long-term agreement to transport 2.1 billion cubic feet of gas per day with MGI Supply Ltd. a subsidiary of Mexico’s state-owned gas company, Pemex Gas y Petroquimica Basica. The NET Mexico project is a 120-mile, 42-inch-diameter pipeline from the Agua Dulce hub in Nueces County to a point about six miles east of Rio Grande City in Starr County. The NET Mexico Pipeline is expected to be completed in October 2014.

The Energy Department has boosted the amount of natural gas that Freeport LNG can export overseas from its Texas facility, the federal agency announced. The company’s facility in Quintana Island, Texas, now has approval to export 1.8 billion cubic feet per day for 20 years to countries that do not have a free-trade agreement with the United States, subject to environmental review and final regulatory approval. In May, Freeport LNG received approval to export 1.4 billion cubic feet of natural gas per day.

Scientists have put together a simple model of shale gas wells’ productivity that accurately describes wells fracked on the Barnett Shale. Using the model, scientists from the University of Texas, Austin, studied about 8,000 wells on the Barnett and found they would produce at least 10 trillion cubic feet of natural gas. The Energy Information Administration estimates that the Barnett contains 43 trillion cubic feet of technically recoverable gas in total. The specific estimates are not the most important result of the study; rather, it is the ability of the model itself to predict the behavior of unconventional reservoirs. “The model tries to give a picture of how gas evolves from these wells from the beginning until the very end,” said Michael Marder, an associate professor at UT Austin and co-author of the study.

West Virginia
Gov. Earl Ray Tomblin (D, WV) and Odebrecht, a Brazilian engineering, construction and petrochemical company, announced plans to explore the development of a new petrochemical complex in Washington, WV. Wood County, located in the heart of the state’s Polymer Alliance Zone, has long been rumored as a potential site for the coveted petrochemical plant. The complex, Ascent — Appalachian Shale Cracker Enterprise — would include an ethane cracker, three polyethylene plants and associated infrastructure for water treatment and energy co-generation. A purchase option on the anticipated project site in Parkersburg has already been secured. For more information, please contact HBW Resources.

Wyoming
Wyoming’s state government formally adopted a requirement for oil and gas producers to test nearby water bodies before and after drilling their wells, effective Mar. 1, 2014. Landowners must give their consent for operators to sample the permitted or adjudicated water sources, the state’s Oil & Gas Conservation Commission said. These sources include domestic, stock, industrial, irrigation, municipal, or other permitted uses of water, it indicated. The new rule will require producers use a “radial approach” to test drinking water sources within a half-mile radius of new oil and gas wells without an artificial cap on the number of wells tested. It includes a required Sampling and Analysis Protocol (SAP) to ensure that procedures and parameters are consistently implemented. For more information, please contact us.

National
Several big GOP bills are set to hit the House floor this week, giving Republicans something to be thankful for as they return to their home districts for the Thanksgiving recess. Here’s what you need to know:
Drilling permits: The House is scheduled to get to H.R. 1965, the Federal Lands Jobs and Energy Security Act, introduced by Rep. Doug Lamborn (R, CO 5) on Tuesday. This 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. The Interior Department opposes the bill, and testified earlier this year that it speeds up energy development “at the expense of sound public land management, public participation, and environmental review.”
Fracking regulations: On Wednesday, lawmakers will consider 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. Democrats complained that the bill’s language is too broad and would allow practically any state fracking requirement to supersede federal authority. Many industry groups are encouraging their members to support the proposed legislation.
Natural gas pipelines: And rounding out the week, on Thursday the House is scheduled to vote on 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. Democrats also oppose this bill, saying it would inadvertently cause FERC to reject applications because of too-tight deadlines.

plurality of Americans are in favor of hydraulic fracturing to extract natural gas from the ground, according to a survey of 1,003 adults by the Robert Morris University Polling Institute Powered by Trib Total Media. After a balanced presentation of hydraulic fracturing (sometimes spelled “fracking”) offered by energy groups and environmental groups, 42.3 percent reported they strongly support hydraulic fracturing while 32.8 percent expressed opposition – somewhat or strongly.  Many, 24.9 percent, were unsure. Among those with an opinion, the majority, 56.4 percent, supports hydraulic fracturing and 43.6 percent are opposed. For more information, please contact us.

A new state-by-state study by ICF International details significant U.S. job gains, manufacturing growth, and robust economic activity associated with future exports of liquefied natural gas (LNG). According to ICF, LNG exports could contribute as much as $10 to $31 billion per state to the economies of natural gas-producing states, such as Texas, Louisiana, and Pennsylvania, by 2035. However, non-natural-gas-producing states will also benefit, partly due to the boost in demand for steel, cement, equipment, and other goods. According to the report, states with a large manufacturing base, such as Ohio, California, New York, and Illinois, will see economic gains as high as $2.6 to $5.0 billion per state in 2035. In terms of employment, natural gas-producing states could see employment gains as high as 60,000 to 155,000 jobs in 2035. And large manufacturing states, such as California and Ohio, will see employment gains upwards of 30,000 to 38,000 jobs in 2035.

The U.S. Energy Information Administration raised its estimate for domestic natural gas production in 2014, expecting output next year to be up more than 1 percent from 2013’s estimated record-high levels. In its November Short-Term Energy Outlook, the EIA said it expected marketed natural gas production in 2014 to rise by 0.74 billion cubic feet per day from 2013 to 71.03 bcf per day. That would be up 0.6 bcfd, or 0.9 percent, from its October outlook of 70.43 bcf daily. If the forecast is realized, it would be the fourth straight year of record production. The agency noted that output over the last few months has hit record high levels even as prices declined. Growth has mostly been driven by rising production from the Marcellus shale play in Appalachia, which has more than outpaced declines in offshore Gulf of Mexico and Haynesville shale output. EIA also announced that U.S. domestic crude oil production exceeded oil imports for the first time since 1995. The EIA said petroleum imports were at their lowest since 1991, partially due to surging domestic oil production from hydraulic fracturing, or fracking. In October, US crude oil output averaged at 7.7 million barrels per day (bpd). The EIA says it expects output to exceed 8.8 million bpd by 2014. The domestic oil boom has been due mostly to fracking, a new technique used to get oil from shale deposits in locations like North Dakota and Texas.

In “Hydraulic Fracturing: A Game-Changer for Energy and Economies,” a new Policy Study from The Heartland Institute, Heartland Research Fellow Isaac Orr explains the advantages and disadvantages of smart drilling and the alternatives so that a better-informed discussion takes place.

The Interior Department announced that it collected and disbursed over $14.2 billion in federal revenue from energy production on federal lands and waters in fiscal year 2013, a $2 billion increase over the previous year and the second highest year so far. While much of the revenue goes to the federal Treasury, more than $2 billion last year went to states, according to figures seen by ME. The bulk of the money went to five states: Wyoming ($932 million), New Mexico ($478 million), Utah ($138 million), Colorado ($129 million) and California ($102 million). Not every state had such a windfall; North Carolina, which has far fewer federal lands than the big western states, got just $37.49.

Amelia Resources, LLC announced an update on the status of acreage sales in the Tuscaloosa Marine Shale (TMS) play. Amelia Resources stated that it has facilitated the sale of over 95,000 acres in the TMS play. The company has served as a consultant hosting a data room and marketing large acreage blocks in the TMS. Amelia is marketing 85,000 additional acres that represent the last remaining large acreage block available in the play. Amelia’s President, Kirk Barrell, said, “The TMS play continues to gain momentum with additional drilling and acreage acquisitions. Recent announcements by TMS operators indicate that there will be a significant increase in capital invested and drilling across the play in 2014.” With 23 years of experience across the Tuscaloosa Trend, Amelia Resources, LLC has evaluated over 1,000 wells in the TMS across Louisiana, Mississippi, and Texas. For more information, please contact HBW Resources.

The Carlyle Group is seeking $7 billion for global energy funds by 2015, the company revealed at its first investor day in New York. But Operating Executive Ken Hersh laid out the firm’s specific plans in a presentation Monday: $4 billion for North American energy, $1.5 billion for North American power and another $1.5 billion for international energy holdings. About 80 percent of the North American energy funds will go to exploration and production companies, which have seen surging oil and gas output thanks to technologies such as horizontal drilling and hydraulic fracturing. Fracking in particular “has transformed the paradigm around natural resources from one of scarcity to a world of abundance,” Hersh said.

The oil and gas industry increasingly will mitigate water-related business risks using technology and transparency in future years when world water supplies are forecast to become scarce, said a report from Wood Mackenzie Ltd. which used data and analysis from the World Resources Institute (WRI). The WoodMac report, “Troubled waters ahead? Rising water risks for energy,” on water risks and the global energy industry noted that individual oil and gas companies can mitigate specific water risks by understanding operational water requirements, identifying water-driven business risk, and developing a clean-water strategy. More than 50% of US shale and tight gas reserves are found in areas of medium to extremely high baseline water stress. Oil and gas companies must compete with industries and agriculture in seeking water supplies in certain areas, such as the South Texas Eagle Ford. Shale and tight gas drillers use a small percentage of water compared to other industrial users, WoodMac said, adding that individual wells need large volumes of water during short periods of time for hydraulic fracturing. “These short but intense demands add up and can threaten to displace other water users,” WoodMac said. “Over time, freshwater availability in shale development areas could decline as demand from homes and farms starts competing with hydraulic fracturing operations.” Water supply is a global concern. In the 10 countries having the largest shale and tight gas reserves, 60% of reserves are in areas facing medium to extremely high baseline water stress. Energy companies operating in these areas can expect water supply and water pollution concerns to increase.

The Tennessee Valley Authority board of directors took action to further diversify TVA’s power generating mix to keep pace with changing economic and regulatory conditions, and in keeping with TVA’s commitment to keep electric rates low and reliability high. The board approved a coal fleet plan that will retire eight coal units at three plant sites with more than 3,000 megawatts of combined generating capacity.  A number of these units were already idled or scheduled for idling and/or retirement based on an agreement with the Environmental Protection Agency. The retirements affect all five coal units at the Colbert Fossil Plant in Tuscumbia, Ala.; one of two operating coal units at Widows Creek Fossil Plant in Stevenson, Ala., and two of three coal units at the Paradise Fossil Plant near Central City, Ky. Paradise Unit 3, one of TVA’s largest coal units, will continue to operate. The board approved the construction of a gas-fired plant at Paradise. This will result in an investment of approximately $1 billion at the site. The two coal units will be retired when the gas plant is available. The new plan, which does not affect the FY 2014 budget approved by the board in August, moves TVA toward a more balanced generation fleet of about 40 percent nuclear, 20 percent coal, 20 percent gas and 20 percent hydro, renewables and energy efficiency. For more information, please contact us.

After two years of steady decline, hunger for oil and gas deals is picking up as economic uncertainties clear up around the world, according to an EY survey of industry executives. EY, the new global brand for financial services provider Ernst & Young, surveyed 169 oil and gas executives in September for its Capital Confidence Barometer, which the firm has published for four years. More than 1,600 executives across a dozen industries responded to EY’s survey. The percentage of oil and gas executives who expect to make a deal over the next 12 months jumped to 39 percent in October, up from 28 percent a year ago. While that’s still under the 48 percent peak the industry saw in October 2011, plans for oil and gas deals outpaced all but the industrial products and life sciences industries last month, according to the EY report. As executives become more bullish on the global economy, 57 percent of the survey’s oil and gas respondents said they plan to boost hiring in the next 12 months, up from 34 percent in October 2012. For more information, please contact us.

As the shale energy revolution is gaining speed in the U.S., transportation and logistics companies are experiencing an immediate and dramatic impact, according to a new PwC US report, “Shale Energy: A potential game changer – Implications for the US transportation and logistics industry.” Since 2010, the US has emerged as the largest gas producer in the world and the Energy Information Administration forecasts that, by 2040, 50% of the country’s natural gas supply will come from shale gas, dramatically impacting several segments of the transportation and logistics industry. PwC’s report says that the shale oil boom is creating considerable opportunities for the railroad, trucking, marine shipping and airline industries, as transport is needed to move gas, oil and waste byproducts.
Railroads – In addition to transporting people, equipment and oil, railroads are also being used to haul the chemicals needed in the shale extraction process and to carry away waste products. Nearly a quarter of U.S. chemical shipments being transported by rail.
Trucking – The low price of liquefied natural gas (LNG) relative to the more expensive diesel fuel has led many companies to switch to vehicles that run on natural gas. A network of approximately 150 LNG truck fueling stations on interstate highways are scheduled to be in operation by the end of 2013. In addition to changing fuel dynamics, trucking activity has increased as a result of shale production, as trucks haul fresh water, frac sand, waste products, and heavy equipment.
Marine shipping – The North American shipping industry could become a major exporter of natural gas, driven by shale gas drilling activity. There are more than 20 proposed LNG export terminals seeking permits to allow total processing of about 30 billion cubic feet a day, according to the U.S. Department of Energy. Pending applications show that US exports could result in approximately 3,600 new LNG tanker departures per year. The shipping industry is also expected to play an increasing role in the transportation of machinery and other products needed for exploration and production.
Airlines – The high price of jet fuel, the single largest cost component for airlines, coupled with the volatility of crude oil prices, is spurring a search for cheaper alternatives, such as those based on natural gas. In the near term, airports and airlines are benefiting from increased traffic to and from major shale gas regions. Flights originating in North Dakota airports serving the Bakken shale field have had an increase in load factors of almost 10% over the last five years as traffic has nearly doubled.

International
The hydraulic fracturing of shale in search of oil and gas has hardly started outside the U.S., but that’s changing. A record 400 shale wells may be drilled beyond U.S. borders in 2014, with most of the activity in China and Russia, according to energy consultants Wood Mackenzie. (In contrast, thousands of shale wells will be drilled in the U.S. next year.) The number of rigs used onshore in Europe and the Asia-Pacific region has increased 10 percent over the past year, data compiled by oil services company Baker Hughes show. Most of those rigs are meant for shale. “It’s likely there will be a revolution,” says Maria van der Hoeven, executive director at the Paris-based International Energy Agency. “But not everywhere at the same time. And you just can’t copy the U.S. experience.” For more information, please contact HBW Resources.

Greater political acceptance of shale gas exploration and the growing need among European countries to be self-sufficient in terms of energy is expected to result in the growth for the pumps market. Pump manufacturers, though, may not be able to capitalize on this potential as concerns on the environmental impact of fracking are likely to curb shale gas exploration activities by oil and gas companies. New analysis from Frost & Sullivan ’Strategic Analysis of the Pumps Market in the European Shale Gas Industry’, finds that the market earned revenues of 35.3 million in 2012 and expects this to reach 47.7 million in 2017. While the United Kingdom, Ukraine and Poland are at the forefront of shale gas production in order to meet energy requirements and reduce dependency on Russian gas imports, the industry will be affected by uncertain policies of local governments in other countries.

European shale gas experts say more environmental studies are needed to address public concern about the security of extraction of the fossil fuel. Rene Peters, chairman of the EU Shale Gas Expert Group, told a conference in Warsaw that data gathered from extensive exploration in the United States does not apply to Europe, where geological and environmental conditions are different. The conference, on the sidelines of U.N. climate talks, concerned shale gas’s potential as a bridge between coal and renewable energy. Concerns about the environment are among the key reasons holding back the development of the shale gas industry in Europe, where some countries have moratoriums on drilling. Only Britain and Poland are exploring their deposits, though a local protest halted exploration in southern Britain in August. The CKGR is the second biggest wildlife reserve in the world, spanning 52,800 sq km. Energy companies that have raced for a share in recent years include the Australian-based Tamboran Resources and Debswana, a joint venture between the government and the diamond company De Beers.

Botswana
Botswana has been accused of sacrificing the Kalahari, one of the world’s most precious wildlife reserves, to commercial fracking while ignoring the concerns of environmentalists and communities who could lose access to scarce water. For more than a decade, Botswana, lauded as one of Africa’s most stable democracies, has been quietly granting lucrative licenses to international companies to carry out fracking in the fragile Central Kalahari Game Reserve. But the government, often hailed as a beacon of democracy in southern Africa, disputed the definition of fracking. Its spokesman, Jeff Ramsay, said: “There is currently no fracking in the CKGR or anywhere else in the country. Coal bed methane is being prospected in the country, though there are no current commercial operations. Still not clear whether commercially viable or not, though a number of companies have shown interest.”

Canada
Malaysia’s Petronas is looking into selling a stake in its Canadian shale gas assets to an Indian firm in a bid to spread out some of the cost of bringing natural gas from North America to Asia. The deal is still subject to government approval, according to Petronas chief executive Shamsul Azhar Abbas. For more information, please contact us.

The Town of Edson is selling wastewater from the sewage lagoons to Shell Canada and other companies for the purposes of hydraulic fracking. Town public works officials initiated a pilot project in 2012 for the sale of wastewater from the lagoon. This gives oil companies an alternative to using fresh water or saline water. The selling of the wastewater could turn out to be quite lucrative for the town. “In 2013 we project we’ll have 50,000 cubic metres of wastewater [to sell] for a projected revenue of $100,000,” town assistant chief administrative officer Brigitte Lemieux said.

Cnooc Ltd., China’s biggest offshore oil and gas producer, is considering constructing a liquefied natural gas plant and export terminal in western Canada and possibly exporting the fuel to China. The plant may be built at Grassy Point near Prince Rupert in British Columbia, Cnooc said in a statement. Cnooc, through its subsidiary Nexen Energy ULC, signed an agreement to access the land with the government of British Columbia. LNG producers are exporting the fuel to Asia as consumers in the region pay a premium to import the energy source. Japan paid an average price of $15.74 per million British thermal units for LNG in July, according to data from LNG Japan Corp. That compares with an average of about $3.68 for U.S. natural gas futures traded in New York this year.

A coalition of environmental groups has filed court action against British Columbia’s Oil and Gas Commission and energy company Encana Corp. over the use of water from lakes and rivers in hydraulic fracturing for shale gas. The petition filed in B.C. Supreme Court claims the Crown agency responsible for regulating the oil and gas industry has been granting repeated short-term water permits for use in fracking — a violation of the provincial water act. The groups claim the commission has allowed up to a million litres of fresh water annually to be drained from lakes, streams and rivers to be mixed with chemicals and sand and injected under high pressure into the ground. Ecojustice, which filed the lawsuit on behalf of the Sierra Club and the Wilderness Committee, said Encana has drawn 880 Olympic-sized swimming pools’ worth of water over the last three years just from the Kiskatinaw River, which supplies drinking water to the city of Dawson Creek. The groups are asking for a court order that would declare the commission practice unlawful and a violation of the water act. They’re also asking the court to quash several short-term approvals issued to Encana. For more information, please contact HBW Resources.

Alberta’s oil sands producers have received some timely support from the International Energy Agency, with the industry – and indeed the Canadian government – facing increasing condemnation over the failure to rein in greenhouse gas emissions. As the United Nations climate summit continues in Warsaw, the IEA chief economist Fatih Birol played down the oil sands’ contribution to global warming, and said the long-term challenge is to access the energy-hungry markets of Asia while slowing the growth in emissions. In an interview from Paris, Mr. Birol also rejected calls for British Columbia to forgo the production and export to Asia of liquified natural gas due to concerns that the province would not meet its own GHG-reduction targets. He said the growing LNG imports in China and elsewhere could reduce the need for coal-fired electricity, leading to a global reductions in carbon dioxide emissions.

The chief of the Elsipogtog First Nation says the fight to halt shale gas exploration in New Brunswick will go on despite a court ruling rejecting his request for an injunction to stop seismic testing. The province’s Court of Queen’s Bench dismissed Aaron Sock’s application for an injunction, saying there was no evidence that plans by SWN Resources to proceed in its search for shale gas would amount to a degree of harm to Elsipogtog. The lawyer for Elsipogtog had argued that the provincial government failed to properly consult with First Nations before granting exploration licenses to SWN Resources. In his application for the injunction, T.J. Burke also said there is a risk of the type of violent clash that erupted last month between police and protesters near Rexton if exploration is allowed to continue. But Judge Judy Clendening said there is no evidence that the behaviour of the respondents could be the basis for possible civil unrest. She added that given that Elsipogtog had delegated responsibility for the consultation process to the Assembly of First Nations Chiefs of New Brunswick, any dispute between those two sides should be resolved at a trial. Clendening also said it is apparent that SWN Resources is suffering monetary losses as a result of protests over shale gas development.

China
Royal Dutch Shell and China’s Sinopec Corp. are drilling exploration wells to test shale potential in central China, where little prospecting for the fuel has been done, company officials said on Thursday. Shell and Sinopec have completed drilling Liye-1, one of three exploration wells planned in a joint evaluation of shale resources at Xiang E Xi (XEX) block, at the junction of central Hunan, Hubei and Jiangxi provinces in east central China. Shell and Sinopec are now drilling the second well, Engye-1, and a third one is also planned, officials said. Sinopec is the operator of the project.

Estonia
According to Keit Pentus-Rosimannus, the Estonian environment minister, has claimed that Estonia’s use of shale oil is primitive and massively impacts the environment. She has therefore suggested that shale mining should not be increased. Sandor Liive, manager of Eesti Energia, Estonian state-owned energy company, claimed in September that under the current European climate policy Estonian shale could be worthless in 30-40 years. Liive said that this means the state would get more value out of the shale if it uses it up quickly. Pentus-Rosimannus went on to say: “So far, Estonian oil shale has been used primarily in a rather primitive way – by burning it in a furnace…mining oil shale and the oil shale industry leave an extremely massive and dirty footprint on our nature and the living environment of people. According to my evaluation, our nature is just not capable of taking a bigger burden than that now.” For more information, please contact us.

Israel
Israel is on the cusp of becoming a natural gas exporter and key energy power in the Middle East, a move that could produce significant geopolitical changes in a region beset by turmoil. That includes a new alliance with Turkey, which seems to be moving toward setting aside its political differences with the Jewish state, just as it is doing with Iraq’s oil-rich Kurds, in the interest of achieving its ambition to become the main energy broker in the region. Israel is now considering its options for exporting gas from its Tamar field, which began production March 30, and the larger but still undeveloped Leviathan field, which is due to come onstream in 2015. Between them these fields contain an estimated 30 trillion cubic feet of gas. Israel has set aside 40 percent of its gas production for export, expected to earn $50 billion in the next 20 years. A pipeline under the eastern Mediterranean from Leviathan, which contains an estimated 16 tcf of gas, to Turkey is one of the more ambitious options. If it comes off it could pump 105.9 billion cubic feet of gas a year to Turkey, which has no energy resources. Eventually, that could reach 353 bcf annually in the second half of the decade using the pipeline, which will cost $2 billion to $3 billion to construct. Turkish energy minister, Taner Yildiz, made no bones about it last week: “Turkey is interested in Israeli gas.” For more information, please contact us.

United Kingdom
A Greenpeace website is encouraging Weaver Vale residents to check whether their property is being considered by the government as a potential fracking site. The website, wrongmove.org, asks participants to enter their postcode before flagging up the nearest ‘not for shale’ points – with several sites around Northwich, Winsford and Middlewich. For more information, please contact HBW Resources.

Additional Information

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

Bo Ollison
HBW Resources
2211 Norfolk Street, #410
Houston, TX 77098
Tel: 713-337-8810
E-mail: bollison@hbwresources.com
Web: http://www.hbwresources.com
Twitter: @BoOllison

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