HBW Resources: Ollison Hydraulic Fracturing Report
Below is a summary of publicly available activities currently underway at the state, federal and international levels that could impact the use of hydraulic fracturing for oil and gas extraction. With numerous state legislatures now in session, HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.
State Legislative Update: Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
SB 4, by Democratic Sen. Fran Pavley (D, District 27) would erect a permitting system, mandate groundwater monitoring and dictate more disclosure, including having fracking firms notify neighbors of planned wells and release more information about the chemicals they shoot underground. The measure is less stringent than unsuccessful bills that would have sought a fracking moratorium, which some members vowed to continue seeking. The bill passed the Assembly on a 54-20 vote and passed the Senate with a 29-8 vote. Governor Jerry Brown said he’ll approve regulations for hydraulic fracturing criticized by environmental groups as the state prepares for development of the largest shale-oil reserves in the U.S. For more information, please contact HBW Resources.
A Texas-based business has been granted a high-volume hydraulic fracturing permit to extract natural gas, crude oil or both in a Michigan community. GeoSouthern Energy got the OK from Michigan earlier this month. The project is planned for Livingston County’s Conway Township, located about 55 miles northwest of Detroit. GeoSouthern’s Michigan Department of Environmental Quality permit allows the company to drill about 4,400 feet into the ground and 5,000 horizontally. The permit allows injection of 3 million gallons of water, as well as sand and a mixture of as many as 30 chemicals. For more information, please contact us.
An advocacy group from the Finger Lakes sued the state Department of Health, attempting to force the agency to release documents related to New York’s review of hydrofracking, the much-debated technique used to free gas from underground shale formations. The Seneca Lake Pure Waters Association filed legal papers in state Supreme Court after its appeal under the Freedom of Information Law was turned down earlier this year. The group, which is based in Geneva, Seneca County, and has been critical of shale-gas drilling, is looking for any factual documents or statistics from the state Department of Health that have been used in the state’s review of fracking, which has been on hold in New York since 2008.
Michael Guesman, an employee of Youngstown, Ohio’s Hardrock Excavating LLC, plead guilty in federal court to illegally pouring thousands of gallons of hydraulic fracturing wastewater down a storm drain which flowed to the Mahoning River. Charges are still pending against Hardrock Excavating and its owner, Benedict Lupo. According to the indictment, Lupo ordered employees to pour wastewater from the company’s storage facility down the storm drains after dark. The practice lasted for at least three months until the Ohio Department of Natural Resources received an anonymous tip. Inspectors found puddles of oil in a tributary to the Mahoning River and traced it to Hardrock Excavating’s storage facility.
By a 7-0 vote, the Bowling Green City Council approved an ordinance that bans fracking and disposal of fracking waste fluids from the drilling for natural gas in the city limits. The Ohio Department of Natural Resources claims it maintains legal authority to issue all drilling permits throughout the state, even in cities that pass ordinances to ban the activity. Bowling Green City Attorney Michael Marsh, in a Sept. 4 letter to council members, said he wrote the ordinance to be a part of the northwestern Ohio city’s criminal code, not its zoning code.
Job growth to serve Ohio’s emerging shale natural gas industry is stronger percentage-wise in the Dayton region than any other part of the state, figures released by the Ohio Department of Job and Family Services show. The employment figures cover the time period from the fourth quarter of 2011 until the fourth quarter of 2012. It shows statewide employment in core shale drilling industries such as pipeline construction and well drilling rose by 1,310 jobs, or 17.7 percent. For the Dayton region covered by the Dayton Development Coalition, core industry job growth rose 42.6 percent, from 94 in the fourth quarter of 2011 to 134, or 40 jobs, by the fourth quarter of 2012.
The Northeast Ohio Public Energy Council (NOPEC) signed an agreement with a new supplier that emphasizes buying Ohio gas over interstate gas. The deal means more than 270,000 households and small businesses for whom NOPEC negotiates a price for gas will see rates at a deep discount to gas coming from distant states. NextEra and NOPEC have a six-year contact that begins in April 2014. The current contract with Dominion Energy Solutions runs through March. Initially, the NOPEC price to consumers should drop by 50 cents to 60 cents per 1,000 cubic feet, he said, or 5 cents to 6 cents per 100 cubic feet. NextEra intends to deal directly with the major companies drilling in Ohio, and as more Ohio gas is added to supplies, NOPEC is betting that the discount compared to interstate-sourced gas could be as much as $1 per Mcf .
Murrysville Councilman David Perry dismissed citizen concerns that geo-testing for shale deposits was being done on municipal land with the consent of council. Saying several residents have asked him privately about seismic testing, Mr. Perry said he wanted to clarify the issue at the public meeting. In 2011 Murrysville passed an ordinance to regulate exploration and extraction of natural gas from shale formations. There are two gas recovery districts in the northern and southern sections of the municipality that are zoned for Marcellus gas exploration and production. Currently, legislation governing shale gas drilling (Act 13) is being reviewed by the state Supreme Court. If Act 13 is upheld, the municipality may have no control over the regulation of shale gas drilling.
Exxon Mobile Corp. was charged with illegally dumping more than 50,000 gallons (189,000 liters) of wastewater at a shale-gas drilling site in Pennsylvania. Exxon unit XTO Energy Inc. discharged the water from waste tanks at the Marquandt well site in Lycoming County in 2010, according to a statement on the website of Pennsylvania’s attorney general. The pollution was found during an unannounced visit by the state’s Department of Environmental Protection. The inspectors discovered a plug removed from a tank, allowing the wastewater to run onto the ground, polluting a nearby stream. XTO was ordered to remove 3,000 tons of soil to clean up the area. For more information, please contact us.
Rep. Michele Brooks (R, District 17) plans to introduce legislation to prevent oil and gas companies from deducting post-production costs from royalties paid to landowners. Currently the state’s Guaranteed Minimum Royalty Act (58 PA. STAT. ANN. § 33 (West 2010) mandates that landowners receive at least 12.5% of the gas produced from a well; however, in reality, the landowners receive payments based on the value of the gas. How the royalty payment is calculated has led to many questions regarding whether post-production costs should be deducted from the royalty checks, with many landowners being upset by the amount of the deductions. Rep. Brooks also plans to introduce legislation that would repeal a recent law allowing oil and gas drillers to pool leased properties into one unit for horizontal wells, as long as the oil and gas contracts in effect do not prohibit these combinations. Until the Pennsylvania House added two sentences allowing the forced pooling of leases, this law was simply intended to require natural gas companies to standardize all deductions listed on royalty check stubs. Brooks wants to repeal the law’s pooling language in order to allow individual landowners to re-negotiate their leases.
Pennsylvania’s attorney general, Kathleen Kane filed criminal charges against a gas drilling company, some suggested it was an abuse of legal power, because the firm had settled the same case with federal authorities by paying fines. Kane said XTO discharged more than 50,000 gallons of toxic wastewater in the November 2010 spill, and allegedly failed to place a spill containment system under storage tanks. XTO was charged last week with five counts under the Clean Streams Law and three counts under the Solid Waste Management Act. The state Department of Environmental Protection is also preparing a separate enforcement action, spokesman Eric Shirk wrote in an email. In July, XTO settled with the U.S. Environmental Protection Agency over the spill, which included a $100,000 fine. The spill happened in part because XTO began recycling the ultra-salty drilling wastewater in late 2010, more than six months before state regulators asked the industry to do so. XTO was doing that “to try and be a good corporate citizen.” The criminal charges tell drillers that trying to recycle wastewater “exposes them to the risk of significant legal and financial penalties should a small release occur,” added XTO, an Exxon Mobil subsidiary based in Fort Worth, Texas.
Linn Energy is buying assets in the Permian Basin for $525 million, a deal meant to expand the proportion of oil production in the company’s portfolio. The West Texas properties cover 6,250 net acres, home to 124 online oil and natural gas wells that are expected to pump about 4,800 barrels of oil equivalent per day over the next 12 months. Oil makes up 63 percent of the land’s daily production. For more information, please contact HBW Resources.
More liquefied natural gas tankers may set sail from the Houston area over the next few years, as several factors combine to make the region a more attractive source of natural gas to meet rising Asian demand. Starting in late 2015, moreover, liquefied natural gas tankers could start carrying products through a widened Panama Canal. Most such vessels are too big to traverse the canal now. The Panama shortcut reduces the trip to China, Japan and other Asian markets by 7,000 miles — a major cost-cutter that could give those customers incentive to ship from Gulf Coast ports. Gulf ports have been courting export customers by offering lower natural gas prices than are available elsewhere on the international market — where the price of natural gas is pegged to the price of oil. The big advantage for Gulf Coast liquefied natural gas shippers is that they’ll operate under a more flexible business model than competitors in, for example, Canada, where export projects mostly are sticking to traditional contract models. Those projects are seeking oil-based pricing that has been the norm in the liquefied natural gas business, but Asian buyers are trying to squeeze down that price spread, and the Gulf Coast is going with the flow. Houston’s concentration of oil and gas companies means the local economy reaps the rewards of a more profitable energy industry. Rising oil prices have buoyed the region’s fortunes since the economic downturn five years ago, bumping the city out of recession and into expansion mode faster than almost every U.S. market.
The US Forest Service is expected to decide by the end of the month, whether to ban or allow hydraulic fracturing, under the forest’s new, 15-year forest management plan. The decision will settle a raging dispute between conservationists and the oil and gas industry on whether there should be development of the George Washington National Forest. The oil and gas industry argues it would be unfair for the government to ‘‘slam the door’’ on hydraulic fracturing in the forest for such a long period of time, and points out that natural gas is a cleaner fuel than coal. The Forest Service proposed banning the practice two years ago, a move criticized by Republican Governor Robert McDonnell as overreach. But the proposed ban is backed by the Army Corps of Engineers, which operates the Washington Aqueduct, and the Fairfax County (Va.) Water Authority. Both agencies provide drinking water from the Potomac River to 4.5 million customers in the District of Columbia and Northern Virginia. More than 500 million cubic feet of gas are entombed in Marcellus Shale, which runs 95,000 square miles between Virginia and Ohio.
U.S. oil production jumped to the highest level since May 1989, cutting consumption of foreign fuel and putting the U.S. closer to energy independence. Drilling techniques including hydraulic fracturing, pushed crude output up by 124,000 barrels, or 1.6 percent, to 7.745 million barrels a day in the seven days ended Sept. 6, the Energy Information Administration said today. For more information, please contact us.
The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) announced that it would take public comments on petitions seeking new crude oil rail car integrity standards, citing a July explosion in Quebec when an unattended train derailed. The train was hauling several DOT-111 crude oil tank cars from the Bakken Shale play. Among the options PHMSA is considering will be to make the American Association of Railroads’ new industry standards for DOT-111 cars mandatory. Companies have been building DOT-111 cars to that standard since October 2011. It will also take comment on requiring modifications to older DOT-111 cars. The American Association of Railroads has publicly opposed requiring the modifications, calling them technically infeasible and costing over $1 billion. The comment period will close in 60 days. For more information, please contact HBW Resources.
The Environmental Protection Agency (EPA) Science Advisory Board (SAB) Staff Office announced an upcoming public teleconference of the Hydraulic Fracturing Research Advisory Panel to receive written and oral comments from the public on new and emerging information related to hydraulic fracturing and drinking water resources. DATES: The public teleconference will be held on November 20, 2013, from 12:00 p.m. to 5:00 p.m. (Eastern Daylight Time).
Drilling for shale gas through hydraulic fracturing appears to cause smaller leaks of the greenhouse gas methane than the federal government had estimated, and considerably smaller than some critics of shale gas had feared, according to a peer-reviewed study released. The study, “Measurements of methane emissions at natural gas production sites in the United States,” conducted by the University of Texas and sponsored by the Environmental Defense Fund and nine petroleum companies, bolsters the contention by advocates of fracking — and some environmental groups as well — that shale gas is cleaner and better than coal, at least until more renewable-energy sources are developed. More than 500 wells were analyzed. The Texas study concluded that while the total amount of escaped methane from shale-gas operations was substantial — more than one million tons annually — it was probably less than the Environmental Protection Agency estimated in 2011. In particular, it indicated that containment measures captured 99 percent of methane that escaped from new wells being prepared for production, a process known as completion.
Standard & Poor’s Rating Services has claimed that Asia Pacific has huge shale and gas deposits that could lead to growth in the future. According to the US Energy Information and Administration the region boasts one of the world’s largest shale gas resources, second only to China. Standard & Poor’s credit analyst Lawrence Lu said: “Technological limitations, inadequate skills, and tough terrains require huge and costly investments. And poor infrastructure in remote reservoirs would make it difficult to get shale resources to markets. Nonetheless, the need for energy security, the push for lower emission fuel, and robust energy demand are likely to spur Asia-Pacific countries to pursue commercial production of shale gas and oil, in addition to other hydrocarbons.” It is expected that the region could take more than five years to make the most of its resources. Fixed regulatory controls on gas prices in the region make it uneconomical to begin extracting shale.
China may boast the world’s largest potential reserves of shale gas but is likely to lose to Australia in the race to be second behind the United States in bringing significant production on line. For China, boosting domestic natural gas output would reduce dependency on expensive imports in the form of liquefied natural gas or pipelines from Russia and central Asia. For Australia, developing significant shale output could underpin a new round of LNG projects, either at existing plants or greenfield sites, that would give the nation an unassailable global lead in the market for the super-chilled fuel. Australia has several advantages over China when it comes to developing shale gas reserves, despite its potential resource, estimated at about 437 trillion cubic feet by the Energy Information Administration, being about 40 percent of China’s 1,115 trillion cubic feet. Chief among them is that much of the shale reserves are located in remote basins, away from population centres. Even though the reserves are in remote areas, there is existing infrastructure available as some of these areas, such as the central Australian Cooper Basin, have long histories of conventional gas and oil production. This gives shale gas output the ability to flow from the centre of the country to the east coast, where it could be fed into existing, or expanded, LNG plants. Three LNG plants based on coal-seam gas are under construction in Queensland state, but a fourth may not proceed because of concern over adequate gas reserves and the increasing difficulty of winning community support for coal-seam wells on productive farmland.
Canadian regulators published a 31-page document, “Filing requirements for onshore drilling operations involving hydraulic fracturing” outlining onshore drilling requirements for operations involving hydraulic fracturing in western territories. The Canadian National Energy Board said updated filing requirements address “unique aspects” of hydraulic fracturing. New drilling technologies involving hydraulic fracturing have led to increased oil and natural gas production in North America. Critics of the practice say it has a potential to degrade the environment. The NEB published more than 30 pages of information outlining what energy companies need to do in order to meet the requirements. It said the filing requirements apply to fracking in the Northwest Territories and Nunavut. For more information, please contact us.
China’s investment in exploration of oil and gas resources is expected to stand at 80 billion yuan (13.07 billion U.S. dollars) in 2013, according to the Ministry of Land and Resources. Such investment has risen steadily in China over the past years as the country moves to reduce dependence on imports and ensure security of energy supply. The ministry figures show that money spent on exploration of oil and gas fields rose from 19.0 billion yuan in 2002 to 67.3 billion yuan in 2011. In the 2008-2011 period, some 5.01 billion tonnes of petroleum reserves and 2.6 trillion cubic meters of natural gas were discovered. China’s dependence rates on imports of oil and natural gas came in at 58 percent and nearly 30 percent respectively in 2012, according to a report by the Economics and Technology Research Institute of China National Petroleum Corporation.
The Indian ministry of environment and forests (MoEF) has called on the petroleum ministry to include water access for explorers to be included in its shale gas policy. The final draft of the shale gas policy is reportedly waiting for the green light from petroleum minister M Veerappa Moily, after which it will be sent to the Cabinet. The environment ministry has previously raised concerns over the huge water consumption in fracking technology, as well as land-related issues. The environment ministry is expected to make the final call on issues such as leading a panel of agencies to assess the environmental impact of the blocks. The basins at Cambay, Krishna Godavari and Ranigunj are expected to see investments of around GBP 2 billion. Recoverable shale in these areas is estimated at around 12 to 15 trillion cubic feet with an immediately recoverable resource estimate of 2 to 6 trillion cubic feet.
Lithuania strengthened environmental restrictions for using shale-gas and shale-oil technologies as a state body recommended the Baltic country issue a first license for such work to Chevron Corp. New regulations, among other things, require an environmental impact study and public consultations before exploration can start, the Environment Ministry in Vilnius said on its website. It said a tender commission today suggested the government grant rights to the U.S. energy company’s local unit because “legally no other decision is possible.”
Polish Prime Minister, Donald Trusk, has announced that the country is set to focus its attention on coal and shale gas, and commit limited investments to renewable energy sources. Poland’s electricity is currently 90% produced by coal, and has been searching for ways to meet EU targets to reduce its greenhouse gas emissions. The government is hoping its shale deposits could help bring energy independence for the country from Moscow. Tusk has also been optimistic about new technologies which allow for cleaner burning of coal. It is thought that Poland could have as much as 1.92 trillion cubic metres of extractable shale gas deposits.
Spanish oil major Repsol SA is shopping for a North American oil company as it seeks to increase its investments in politically stable countries and the U.S. energy boom, according to people familiar with the talks. The Madrid-based company has told investment bankers in recent months that it is ready to spend $5 billion to $10 billion for a U.S. or Canadian exploration and production company, preferably one that produces much more oil than natural gas, these people said.
Shell and Nadra Yuzivska have signed an operational agreement as part of their production sharing agreement for the Yuzivska shale gas deposit in Ukraine’s Donetsk and Kharkiv regions which will see Shell invest $500 million in geological exploration and industrial development and a further $10 billion to construct facilities. 15 exploratory wells will also be drilled to determine the extent of resources in the deposit. For more information, please contact HBW Resources.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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