Ollison Fracking Report: Summary of the latest news and events impacting shale development in the US and around the globe

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 development.  HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.

Highlights

  • Hydraulic fracturing may soon be on the ballot in Johnson County, Illinois.
  • Minnesota released a draft set of model standards to help communities struggling to regulate the boom in mining for silica sand.
  • Norse Energy filed a lawsuit in the Supreme Court of the State of New York against New York Gov. Andrew Cuomo, Dept. of Environmental Conservation (DEC) Commissioner Joe Martens, and State Health Commissioner Nirav Shah.
  • Staying warm indoors this winter will cost families in Pennsylvania who heat their homes with natural gas half as much as it did five years ago due to the influx of Marcellus shale gas and conservation.
  • The oil drilling boom’s impact on Texas coffers continues to outpace officials’ expectations, according to a report released by the Texas comptroller’s office. Comptroller Susan Combs reported that Texas ended the 2012-13 biennium with a $2.6 billion surplus, more than double the $964 million surplus her office projected over the summer.
  • U.S. crude production rose to the highest level in a quarter-century as a shale drilling boom in states such as Texas and North Dakota cut the need for foreign oil and pushed the country closer to energy independence.
  • Production from shale formations in the United States, which has led to an unexpected reversal in long declining oil output, will peak at 4.8 million barrels per day (bpd) in 2021.
  • British Prime Minister David Cameron has warned the European Commission not to propose European Union-wide legislation to regulate the nascent fracking industry.
  • Mexico’s bill that ends a 75-year state oil monopoly will be sent to President Enrique Pena Nieto for enactment.
  • UK energy giant BP and the Omani government have announced a new 30-year deal, which will see the oil company invest $16 billion in a shale gas project in Khazzan, Oman.
  • British Energy Minister Michael Fallon published a regulatory roadmap outlining ways in which oil and natural gas, including shale deposits, could be exploited in the country.
States 

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

California
Comprehensive rules on hydraulic fracturing that take effect in California on Jan. 1, under SB 4, will require drillers to notify nearby landowners at least 30 days before fracking begins and conduct assessments of wells upon request. After a year, the rules will be replaced by permanent regulations, which the state government is still formulating.

There’s an effort underway to qualify an ordinance that would place a moratorium in Butte County on hydraulic fracturing and “other unconventional [methods of] oil and gas recovery, and on disposal of toxic wastes from these operations.” According to a press release from Citizens’ Action Network, notice was filed with the county elections office Nov. 27 to begin collecting signatures to place the ordinance on next year’s general-election ballot. Signature gatherers need to obtain signatures amounting to 10 percent of the votes cast in Butte County during the last gubernatorial election—about 7,500—to get the ordinance onto the ballot. They have 30 days after getting the go-ahead from the elections office to gather the signatures. If passed, the moratorium would stay in effect until “sufficient regulations are in place to protect Butte County’s fresh water, air and soil, agriculture and other key industries, and the health and welfare of Butte County’s communities,” says the press release. For more information, please contact us.

More than 150 environmental groups are asking California coastal regulators to halt offshore fracking, saying the practice violates state law. Wetsuit-clad demonstrators holding surfboards submitted the letter to the California Coastal Commission before its meeting in San Francisco. Among the organizations signing the letter: 350.org, AFSCME Chapter 57 Retirees, Alaska Inter-Tribal Council, Ban Fracking in California Campaign, Center for Biological Diversity, Citizens’ Environmental Coalition, CREDO, Food & Water Watch, Friends of the Earth, Greenpeace, Natural Resources Defense Council, and the Sierra Club.

Colorado
A district court judge has issued an order preventing Broomfield from certifying the results of a vote on an anti-fracking measure that passed with 20 votes, the Broomfield Enterprise reports. But the election results were certified last week, and Broomfield plans to ask District Court Judge Francis Wasserman to reconsider his ruling. Broomfield voters last month narrowly approved Ballot Question 300, which bans fracking in the county for five years. Wasserman’s ruling was made in response to a lawsuit filed earlier this month by a group called Broomfield Balanced Energy Coalition, which supports the use of fracking as a way to retrieve trapped oil and gas. The group claimed it wasn’t allowed to watch over the recount of the ballots. For more information, please contact HBW Resources.

Oral arguments for and against a special election ballot measure in Loveland will be heard in 8th Judicial District Court.  A resident-driven ballot initiative for a two-year moratorium on hydraulic fracturing, or fracking, within Loveland city limits has been tangled up in court since Loveland resident Larry Sarner filed a lawsuit against the city in September. Though City Clerk Terry Andrews determined the Protect Our Loveland-submitted ballot initiative and signed petitions were valid, a split City Council declined to put the moratorium language on the November ballot after Sarner filed his lawsuit. In a final brief filed by Sarner through his Denver-based law attorneys at Holsinger Law, the Loveland resident reaffirms his claims from the original challenge of the initiative process and petitions, including that Andrews set the threshold too low for the number of signatures required on the petitions. The city contends that Andrews was justified in relying upon the number of registered voters that had been provided to her by the Larimer County Clerk and Recorder’s Office. In a reply to Sarner’s opening brief filed on Dec. 3, City Attorney John Duval also argued against Sarner’s claims that 343 petition signatures should have been thrown out for reasons including position of notary stamp and illegible information, which Duval called “overly technical interpretation and applications” of the statues. If the court rejects Sarner’s protest, a special election would be required within 150 days of the ruling, but if he rules in Sarner’s favor, no vote will occur. Oral arguments in the case will be held in courtroom 4C at the Larimer County Justice Center, 201 LaPorte Ave., Fort Collins, at 9:30 a.m. Dec. 18.

Illinois
The Illinois Department of Natural Resources is 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.

Hydraulic fracturing may soon be on the ballot in Johnson County. The group Southern Illinoisans Against Fracturing our Environment (SAFE) plans to turn in more than enough signatures to get a question put to voters in March. The group will present the signed petitions to the County Clerk in Vienna. If all the signatures collected are confirmed as legitimate, election officials will place an advisory question on that ballot that will ask voters the following: “Shall the people’s right to local self-government be asserted by Johnson County to ban corporate fracking as a violation of their rights to health, safety and a clean environment?” Whatever voters decide – the ballot measure will not force a change in policy. The advisory question will simply advise county leaders of the community’s opinion of fracking. For more information, please contact HBW Resources.

Two aldermen in Chicago have raised the possibility of banning older models of a railroad oil tank car tied to several deadly accidents. Aldermen Edward Burke and Matthew O’Shea recommended that outdated type DOT-111 cars, which are often used to transport hazardous materials such as crude oil and ethanol, be deemed a public nuisance to prevent them from entering the city. Such a move would likely face an immediate legal challenge from the railway industry and the federal government, as interstate comment laws pre-empt municipal bans, according to Association of American Railroads spokeswoman Holly Arthur. For more information, please contact us.

Minnesota
Minnesota released a draft set of model standards to help communities struggling to regulate the boom in mining for silica sand, which oil and gas drillers use for hydraulic fracturing. They’re meant to give smaller governments a toolbox of approaches they can tailor to cope with sand mining’s effects on the environment, public health and roads and bridges. The Environmental Quality Board posted the draft on its website to start a 30-day public comment period which ends January 13, 2014, and will hold a public meeting on Wednesday, December 18, 2013 to discuss details.

New York
New York Governor Andrew Cuomo (D) says he may not decide whether the state should go ahead with hydrofracking for natural gas until after the November 2014 elections. Governor Cuomo, who previously said he’d decide on whether to OK fracking in New York before Election Day 2014, now says he wants to give his Health Commissioner, Dr. Nirav Shah, all the time he needs to complete an ongoing health review, that began over a year ago. “I don’t want to put any undue pressure on them that would artificially abbreviate what they’re doing,” said Cuomo.

Norse Energy, or what’s left of it following its entrance into Chapter 11 and then Chapter 7 bankruptcy, filed a lawsuit in the Supreme Court of the State of New York against New York Gov. Andrew Cuomo, Dept. of Environmental Conservation (DEC) Commissioner Joe Martens, and State Health Commissioner Nirav Shah. The lawsuit would force the completion of the SGEIS (Supplemental Generic Environmental Impact Statement) and adoption of associated draft gas drilling regulations.

The Groton Town Board struck down a proposed six-month hydrofracking moratorium with a 3-2 vote. The six-month moratorium would have allowed the board more time to study the effects of fracking in the area. Voting in favor of the moratorium were Town Supervisor Glenn Morey and Councilman Ellard Sovocool. The vote was preceded by a public hearing, and more than 100 people attended.

The Erie County Legislature banned high volume hydraulic fracturing on county land and imports of any drilling waste to its water treatment facilities. The legislation passed 9-2. The vote comes almost three years after Buffalo became the second city in the nation to ban the controversial gas drilling practice, also called “hydrofracking.” On Dec. 3, the County Legislature received a petition with 3,845 signatures supporting the ban. The legislation also includes a ban on importing drilling waste to county water treatment facilities and using the waste on county roads to melt snow and ice.

The law that will prohibit the disposal of hydrofracking wastewater in Orange County’s sewer systems will take effect as soon as appropriate filings are made with Albany. The county legislature approved the measure last month and sent it to County Executive Edward Diana for his signature. He declined to sign or veto it, so it automatically became law. The legislature previously adopted a local law this year that prevents fracking brine from being applied on county roads as a snow-melting agent. For more information, please contact HBW Resources.

North Carolina
proposed search for natural gas in layers of rock which lie beneath Robeson and the surrounding counties could be the first step in bringing to the area a controversial operation that environmental groups say could have lasting effects on the region’s health. The area has yet to be assessed by the U.S. Geological Survey, but findings of organic carbon — one of the key requirements for the existence of oil and gas resources — in North Carolina’s Deep River and Dan River basins, both of which lie far north and west of Robeson, have suggested to researchers that rock beneath Robeson and surrounding counties could harbor the same potential. Drew Elliot, communications director for the North Carolina Department of Environment and Natural Resources, said the department is prepared to determine if the potential for natural gas could exist in the area, and Mitch Gillespie, the department’s assistant secretary for the environment, has estimated that $61,000 of the $300,000 set aside for research by the General Assembly will be put to use in the Cumberland-Marlboro Basin. North Carolina Commerce Secretary Sharon Decker has said a tax on fracking could boost her agency’s coffers and in turn be used to offer incentives to corporations who would consider locating to the state. The American Enterprise Institute, a not-for-profit organization that studies industry policy, points to the oil and gas industry as a continuously growing source of employment, with the number of job holders in the industry in 2012 a 67 percent increase since 2009.

North Dakota
The percentage of North Dakota oil shipped by rail will likely jump significantly in the next year as producers increasingly turn to trains to reach U.S. refineries where premium prices are fetched, the state’s top oil regulator told lawmakers. Lynn Helms, director of the Department of Mineral Resources, told the Legislature’s Government Finance Committee that he expects as much as 90 percent of the state’s crude will move by rail in 2014, up from about 60 percent at present. North Dakota, the nation’s No. 2 oil producer behind Texas, is on pace to surpass 1 million barrels daily early in 2014, Helms has said. For more information, please contact us.

Pennsylvania
Staying warm indoors this winter will cost people who heat their homes with natural gas half as much as it did five years ago due to the influx of Marcellus shale gas and conservation. Customers of Columbia Gas of Pennsylvania, the natural gas distribution company that serves most of the area, are paying $5.13 per unit for gas in the fourth quarter this year compared to $10 to nearly $16 in 2008, when Marcellus extraction was just getting started. “We are seeing natural gas prices that are on average about 45 percent lower since 2008, and a significant portion of that is attributable to Marcellus shale,” said Jennifer Kocher, state Public Utility Commission (PUC) press secretary. Marcellus production has reached 12 billion cubic feet a day, and the vast majority of the gas is coming from Pennsylvania and West Virginia, according to the Marcellus Shale Coalition, citing a U.S. Energy Information Administration (EIA) report. Current production is six times more than was it was in 2009, the coalition said. The addition of Marcellus shale gas to the state’s gas supply has driven prices down, while conservation from more efficient appliances and lighting and the economic recession have lowered demand, she said.

The county that includes Pittsburgh could reap more than $73 million by leasing a public park for gas well drilling, a newspaper reported. The Pittsburgh Post-Gazette obtained documents that show Range Resources and driller Huntley and Huntley sent a proposal to Allegheny County Executive Rich Fitzgerald last month that list a signing bonus of $3,000 an acre and a 17 percent royalty on future sales. The signing bonus alone could generate nearly $3.5 million. Range Resources spokesman Matt Pitzarella said royalties could be generated for decades, and there will not be an impact on Deer Lakes Park. The plan is to reach the gas through horizontal drilling from neighboring properties so rigs will not be located on county property. For more information, please contact us.

With state budget season looming, a bipartisan group of lawmakers is reviving an attempt to impose a severance tax on Pennsylvania’s natural gas drillers. The bipartisan proposal to tax 4.9 percent of the value of natural gas sold from unconventional wells could rake in an estimated $640 million in its first year, or upwards of $400 million more than natural gas companies currently pay in annual impact fees, the plan’s proponents estimate. The revenue would be pumped into education and other cash-strapped programs. Bucks County Rep. Gene DiGirolamo, (R, District 18) the primary sponsor, called the proposal a “fair and reasonable” way to ensure the state benefits from the booming industry known as “fracking,” which describes the hydraulic fracturing process that injects pressurized fluids into deep gas-bearing rock. DiGirolamo said he doesn’t believe the tax would derail companies operating in Pennsylvania. “They’re doing an awful lot of good stuff. They’re creating jobs, and I think that will continue to happen even if we have the severance tax,” DiGirolamo said. “There is an enormous amount of Marcellus Shale gas under Pennsylvania.” For more information, please contact HBW Resources.

The Department of Environmental Protection (DEP) and the Environmental Quality Board announced that the public comment period for a proposed regulation for environmental protection performance standards associated with oil and gas activities will open on Saturday, Dec. 14. The proposed regulation implements key provisions of Act 13 of 2012, including further consideration of impacts to public resources, such as parks and wildlife areas; the prevention of spills; the management of waste; and the restoration of well sites after drilling. Additionally, the draft rulemaking also includes standards affecting the construction of gathering lines and temporary pipelines, and includes provisions for identifying and monitoring abandoned wells close to proposed well sites. The public is being invited to submit comments to the EQB regarding the proposed rulemaking by Feb. 12, 2014. Comments may be submitted to EQB by accessing the EQB’s Online Public Comment System at http://www.ahs.dep.pa.gov/RegComments.

Texas
The oil drilling boom’s impact on Texas coffers continues to outpace officials’ expectations, according to a report released by the Texas comptroller’s office. Comptroller Susan Combs reported that Texas ended the 2012-13 biennium with a $2.6 billion surplus, more than double the $964 million surplus her office projected over the summer. The report also predicts that Texas taxes paid by energy development firms will be at least $2 billion more than earlier projections, resulting in $8 billion in the state’s piggy bank by 2015. The revisions means that the Rainy Day Fund could be more flush than expected for the 2015 legislative session, even after lawmakers backed measures asking voters to approve tapping the fund’s revenue stream for water and road projects. For more information, please contact us.

The Dallas City Council has decided that drilling natural gas wells will not be allowed to happen less than 1,500 feet from protected areas such as homes. The Dallas Morning News reports that the council voted 9-6 to expand the buffer from the current 300 feet.

Oil and gas production in the Eagle Ford Shale in 2014 is expected to surpass 1 million barrels per day, up from the current 650,000 barrels per day, which will help Texas alone produce more oil than several nations who are members of the OPEC oil cartel, 1200 WOAI news reports. “By sometime next year it is almost certain that we will have two separate oilfields in Texas producing over 1 million barrels of oil per day,” Thomas Tunstall, the Research Director at UTSA’s Institute for Economic Development and an expert on the Eagle Ford, told the annual meeting of the South Texas Energy and Economic Roundtable.

Eagle Ford Shale-focused oil company Matador Resources Co. has outlined a $440 million capital budget for 2014, officials say in a shareholder statement. The Dallas-based company’s capital budget includes $394 million for drilling and completions, $16 million for pipelines and $30 million for land and seismic data, according to its statement. The company also expects to produce 2.8 million to 3.1 million barrels of oil next year, potentially up 44 percent from this year’s levels. It anticipates natural gas production of 13.5 billion to 15 billion cubic feet, a 14 percent rise over 2013. In addition, Matador said it’s likely to report oil and gas revenues of $325 million to $355 million next year, potentially up 31 percent from 2013 levels. Its earnings before interest, taxes, depreciation and amortization are likely to be $235 million to $265 million, up 35 percent from last year. For more information, please contact HBW Resources.

National

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.

U.S. crude production rose to the highest level in a quarter-century as a shale drilling boom in states such as Texas and North Dakota cut the need for foreign oil and pushed the country closer to energy independence. The U.S. pumped 8.075 million barrels a day in the week ended Dec. 6, a gain of 0.8 percent, or 64,000 barrels a day, the Energy Information Administration said today. It’s the most since October 1988. U.S. oil output grew 18 percent in the past 12 months, the fastest pace on record, boosting fuel exports and reducing reliance on imports, according to the EIA. The boom will make the country the world’s largest producer by 2015, five years sooner than last year’s forecast Advances in horizontal drilling and hydraulic fracturing, or fracking, have boosted output from dense rock formations such as the Bakken shale in North Dakota and the Eagle Ford in Texas. The techniques allow producers to bore sideways through the richest layers, and then use explosives followed by a high-pressure stream of water, sand and chemicals to crack open the deposit and free the trapped oil and gas. Production in Texas has increased 21 percent from the end of 2012 through September, EIA data show. North Dakota likewise rose 21 percent, Wyoming is up 14 percent and Oklahoma added 19 percent, Colorado gained 11 percent and New Mexico advanced 12 percent, EIA records show. Domestic oil output will average 8.54 million barrels a day next year, according to the EIA, the statistical arm of the Energy Department.

Production from shale formations in the United States, which has led to an unexpected reversal in long declining oil output, will peak at 4.8 million barrels per day (bpd) in 2021, according to an Energy Information Administration forecast. This year is the bumper year for production out of the tightly packed shale rock. Output should rise by 1.2 million bpd, the highest annual jump, to 3.5 million bpd this year, according to tables in the EIA’s Annual Energy Outlook. Production will exceed 4 million bpd next year and rise more gradually toward its peak. It will fall to 3.2 million bpd by 2040. For more information, please contact us.

The largest U.S. producer of natural gas forecasts that global demand for gas will rise by about 65% by 2040 as natural gas is on track to supply 25% of global energy requirements. Exxon Mobil Corp. could just be talking its book, but that is not likely. The losing energy source, of course, is coal, according to Exxon’s “The Outlook for Energy: A View to 2040,“ for 2014 released Thursday morning. Exxon says demand for coal will rise until around 2025, but coal’s share of the global energy mix will fall from 25% today to below 20%. Oil is projected to remain the top global energy source for the next 25 years or so. Exxon expects demand for oil to rise by 25% through 2040. Much of that increase will come from sources such as deepwater, oil sands and tight (shale) oil. The following chart illustrates the degree of change. For more information, please contact HBW Resources.

This past summer, a research plane flew over three of the largest shale gas producing regions of the country, including the Marcellus Shale in Northeastern Pennsylvania, to measure methane emissions and calculate leak rates from the wells and pipelines below. Scientists from the University of Colorado Boulder and the National Oceanic and Atmospheric Administration are still studying the data gathered in June and July to determine how much of the regions’ methane might come from natural gas operations, but the results promise to provide the first published “top-down” estimates of how much methane is leaking during gas extraction from the Marcellus, Fayetteville and Haynesville shales. Top-down estimates calculate a region’s methane or other pollution based on concentrations measured in the atmosphere, while bottom-up, or inventory, estimates determine large-scale emissions by measuring leaks at some sources on the ground, like well sites.

Energy initial public offerings have skyrocketed this year behind master limited partnerships created largely to bring shale gas to market. According to an analysis by SNL Energy, the IPO market for pipelines/midstream and merchant generators has blown past numbers for 2012. To date this year, IPOs in those sectors have raised nearly $6 billion on public exchanges, up from $1.67 billion a year ago.

Marathon Oil Corp. will increase investment in its U.S. shale drilling activity and market UK and Norwegian North Sea assets for sale in 2014, company officials reported at Marathon’s analyst day in New York. The company will increase rig activity in its Eagle Ford and Bakken assets by 20 percent each, and increase rig activity by 100 percent in its Oklahoma Woodford operations, resulting in a 28-rig increase in its North America rig count. Marathon’s 2014 rig program is underpinned by 2.4 billion barrels of oil equivalent of 2P unconventional resource, which has doubled since 2011, and over 4,500 net well locations. The company projects 2014 resource play production growth of greater than 30 percent in relation to 2013, and anticipates overall year-on-year production growth of approximately 4 percent, excluding Alaska, Angola and Libya. Marathon forecasts an estimated resource production play compound annual growth rate (CAGR) over more than 25 percent for the 2012 to 2017 time period.

new poll released by Quinnipiac University found that Americans’ support for hydraulic fracturing comfortably exceeds opposition.  More specifically, Quinnipiac found that American voters support the use of this important well completion technology by a nine-point margin: 45-36. When asked about the safety of hydraulic fracturing, voters categorizing it as “very safe” or “somewhat safe” outnumbered those who said it was “not safe” by an amazing 11-point margin. This should come as little surprise, though: just last month a national poll by Robert Morris University showed strong support for hydraulic fracturing, and a previous poll from the University of Texas found that more than 80 percent of Americans support natural gas. Clearly, Americans have grown weary of the efforts of elitists and activists opposed to shale development, and they’re simply not buying the spin. And why should they?  Thanks to shale development, U.S. household income will likely rise by an average of $2,700 per year and create 1.2 million new jobs by 2020.  Because of low-cost natural gas – made possible through the responsible use of hydraulic fracturing – we’ve started to see a re-shoring of American manufacturing jobs, not to mention unprecedented energy security. For more information, please contact us.

Americans know very little about fracking, according to a new study, “’Fracking’ controversy and communication: Using national survey data to understand public perceptions of hydraulic fracturing,” in the journal Energy Policy. The study found 55% of Americans know little or nothing about fracking. Fifty-eight percent have no opinion. Nearly equal numbers support and oppose the technique. Twenty-two percent say they support it, while 20% are against fracking. Lead author Hilary Boudet from Oregon State University said the demographic breakdown of fracking opponents and supporters is similar to what previous research has found about emerging technologies. “People who are older, males, those with conservative political ideologies tend to be more supportive of fracking than those who are younger, female and more liberal,” Boudet said. Media consumption also plays a role. Boudet said those who watch television news more frequently are more likely to support fracking, but newspaper readers are less likely to be supportive. For more information, please contact HBW Resources.

Chemicals used in hydraulic fracturing can disrupt human hormone function, according to a study released Monday by researchers from the University of Missouri and the U.S. Geological Survey. The researchers said more than 100 of those ingredients are known or suspected endocrine disrupting chemicals, or EDCs, that have been linked to negative health effects such as increased risk of cancer, low fertility rates and decreased sperm quality. Susan Nagel, one of the researchers for the study and an associate professor for the MU Department of Obstetrics, Gynecology and Women’s Health, said she was “greatly” surprised by the lack of scientific literature on the topic of the effects of natural-gas drilling chemicals on human endocrine systems, and she said the study released today is the first laboratory study conducted on the issue. The researchers collected samples of ground and surface water from Garfield County, Colo., where there is heavy drilling activity, and used ground and surface water collected in Boone County — where there is no known drilling activity — as a control. Garfield County has more than 10,000 active wells, the researchers stated.

The Interior Department should beef up efforts to ensure taxpayers get a fair return on billions of dollars worth of petroleum that oil and gas companies produce from federal lands and waters, congressional auditors said. A Government Accountability Office report, “Oil and Gas Resources: Actions Needed for Interior to Better Ensure a Fair Return” looks critically at the intricate system of lease terms for companies that took in over $66 billion in fiscal 2012 from the sale of petroleum produced in federally owned regions. The report is most critical of Interior’s management of onshore areas, arguing that regulators have been sluggish in trying to adjust royalty rates that have remained static at 12.5 percent even as oil prices—and companies’ returns—have soared. “As a result of not successfully changing federal regulations to provide itself with the flexibility needed to make timely adjustments to onshore lease terms, Interior’s ability to ensure that the public is receiving a fair return is limited,” the report states.

International 

British Prime Minister David Cameron has warned the European Commission not to propose European Union-wide legislation to regulate the nascent fracking industry, saying such a move could create uncertainty and stifle investment. Rising energy bills are a big issue ahead of a 2015 election and Cameron is keen to tap Britain’s large resources of shale gas to shore up the country’s energy security as its North Sea oil reserves decline. In a letter to European Commission President Jose Manuel Barroso, Cameron said the European Union could derail investment in British shale gas extraction, or fracking as the process is known, if it chose to legislate. “I am not in favour of new legislation where the lengthy timeframes and significant uncertainty involved are major causes for concern,” Cameron wrote in the letter dated Dec. 4. “The industry in the UK has told us that new EU legislation would immediately delay imminent investment.” Cameron’s demarche fits into his broader strategy for reform of the EU. He has been pushing for a reduction in red tape, arguing that EU regulations are stifling economic growth and costing the continent billions of euros.

Argentina
Royal Dutch Shell Plc’s Argentine unit plans to triple shale investments on prospects that the government will change energy policies to spur development of the Vaca Muerta formation and cut fuel imports. Shell Argentina will increase its shale capital expenditures to about $500 million next year from $170 million at year-end, Chief Executive Officer Juan Jose Aranguren said. The company that mainly refines crude in Argentina will boost test drilling in Vaca Muerta with a long-term goal of producing light crude from its shale operations, he said. Argentina will need $300 billion to develop Vaca Muerta in a six-year period that would make the country oil sufficient starting in 2020 and will keep producing for as many as 40 years, Aranguren said yesterday in an interview at his Buenos Aires office. Vaca Muerta, the world’s second-largest shale gas and the fourth-largest shale oil formation, is in Neuquen province in southwestern Argentina. For more information, please contact us.

Australia
The State Government has been reworking the laws guiding companies, to strengthen reporting and environmental monitoring requirements. Jason Medd, from the Department of Mines’ petroleum division, says the proposed changes will be released for public comment early next year. “What we’re looking at in these guidelines and regulations is we’re looking at, where does the company drill a water well to monitor the groundwater? How long do they have to monitor before, after and during an activity? What do they test for? Where are the wells located?” he said.

Canada
Encana Corp said it would increase natural gas liquids production by 30 percent in 2014 as part of its plan to focus spending on five regions rich in gas liquids and oil. Canada’s largest natural gas producer will focus three-quarters of its planned $2.4 billion to $2.5 billion capital spending in 2014 on the Montney, Duvernay, DJ Basin, San Juan Basin and the Tuscaloosa Marine Shale regions. For more information, please contact HBW Resources.

Royal Dutch Shell will test new engines running on liquefied natural gas for its mining operations in Canada’s oil sands fields, the company said. Shell will team up with Caterpillar to deploy the new technology in its mining trucks by 2016, running them mostly on natural gas instead of diesel. The engines will still use some diesel. The switch will slash fuel costs while also having the benefit of lowering emissions in oil sands operations, which involve higher emissions than other forms of oil production.

China
China plans to pit itself against the rapid development of the U.S. shale gas industry and has set a target for 6.5 billion cubic meters of shale. It will be carried out by CNPC and Sinopec, which together control about 80% of shale gas resources. The Ministry of Land and Resources is certain that China can reach the national goal by 2015, especially with CNPC’s predicted production capacity of 2.5 billion cubic meters and Sinopec’s 5 billion cubic meters by the time. According to the China ministry’s estimate made in November 2012, China has potential reserves of 2.5 trillion cubic meters of shale gas. China has conducted two rounds of bids for shale gas exploration. In July 2011, two state firms won the right to explore shale gas in two blocks. In 2012, 16 companies, including two private firms, won the right to explore 19 blocks for shale gas.

Libya
Libya plans to allow foreign investor’s greater stakes in shale gas than in its closely held conventional hydrocarbons industry, part of a bid to create jobs and stability there. National Oil Corporation (NOC) foresees granting foreign partner’s joint venture stakes of about 40 per cent, twice the share of existing contracts signed under the former Muammar Qaddafi regime, said Bashir Garea, the company’s exploration manager. Unleashing fracking on Libya’s estimated 122 trillion cubic feet of shale gas – double the nation’s conventional gas reserves – could help to boost fuel security and create jobs, as it already has in North America. For more information, please contact HBW Resources.

Mexico
Mexico’s bill that ends a 75-year state oil monopoly will be sent to President Enrique Pena Nieto for enactment after a majority of states ratified the proposal. San Luis Potosi, Puebla and Yucatan were among states that approved the legislation over the weekend, bringing the number of those that have endorsed the plan to 17 of 31. Mexico’s most significant economic overhaul since the North American Free Trade Agreement was enacted in 1994 had been approved by Congress on Dec. 12. The bill ends the monopoly held by Petroleos Mexicanos, or Pemex, and will allow companies such as Exxon Mobil Corp. and Chevron Corp. to develop the largest unexplored crude area after the Arctic Circle. Production is on the decline and the state-run Pemex hasn’t had the finances or expertise needed to tap the country’s vast deep-water and shale reserves. The measure that passed allows them to share in the production, or to contract independently of Pemex. The changes could bring an additional $20 billion in foreign direct investment and strengthen the peso, according to Carlos Capistran, chief Mexico economist at Bank of America Corp. The measure passed the Senate on a 95-28 vote, and the lower house passed the bill with a vote of 354-134. With final approval by the states, triggers a deadline the federal lawmakers imposed upon themselves, giving them 120 days to write legislation codifying the overhaul. For more information, please contact us.

Oman
UK energy giant BP and the Omani government have announced a new 30-year deal, which will see the oil company invest $16 billion in a shale gas project in Khazzan, Oman. Reuter’s reports that the deal, which will see around one billion cubic feet (bcf) of gas extracted a day from the depths of Oman, will be vital to the economic stability of the country. BP will have a 60 percent operating stake in the project, which involves a 15-year program of drilling into sandstone thousands of meters below the surface to extract gas using hydraulic fracturing technology developed in the United States. Construction is expected to begin in 2014, with first gas expected in late 2017 and plateau production of around 1 bcf, or 28.3 million cubic meters, per day expected in 2018.

Poland
U.S. energy major Chevron will join forces on shale gas exploration in south-eastern Poland with local state-controlled gas firm PGNiG to lower costs and speed up the work, PGNiG said in a statement. The agreement is the first example of cooperation between a Polish firm and a foreign investor in the shale gas sector, move keenly awaited by international players. U.S. or Canadian firms would bring expertise in shale gas exploration, while local firms would contribute access to exploration licences and can help smooth relations with Polish authorities. “The initiative is part of PGNiG’s new policy of openness to opportunities that might come from working with other companies interested in Polish shale gas deposits,” PGNiG said in a statement. The companies said that if the cooperation is successful, they may set up a joint company in which both will hold a 50 percent stakes. A joint venture would bring together four licenses in south-eastern Poland: two from PGNiG, and two from Chevron.

United Kingdom
British Energy Minister Michael Fallon said shale natural gas is part of his country’s energy future but it must be extracted responsibly. Fallon published a regulatory roadmap outlining ways in which oil and natural gas, including shale deposits, could be exploited in the country. “The government is keen to explore the potential for shale gas in the U.K., which could bring major benefit in terms of growth, jobs and energy security,” he said in a statement. “However we must develop shale responsibly, both for local communities and for the environment.” The British Geological Survey estimates there may be enough shale gas inland to last the country more than 40 years though only a small fraction of land is open for exploration. Britain will launch its latest licensing round to allow companies to explore for shale gas in early summer and it forecast high interest, showcasing Britain as one of Europe’s main contenders in the race to exploit shale gas resources. Geological studies show Britain to have large shale reserves that could reverse a rising dependency on energy imports, but more drilling is needed to see whether the deposits are economic as gas has not yet been proved to flow from the rocks. Unveiling an environmental assessment on the impact of further shale drilling in Britain, Energy Minister Michael Fallon told reporters he expected strong demand for the licensing round scheduled for mid-2014. For more information, please contact us.

Britain should press ahead with fracking, the chairman of the Government’s climate change advisory board said. Lord Deben dismissed claims by green groups that fracking would cause significant damage to the environment, adding that Britain needed to drill shale wells to reduce reliance on foreign imports of fossil fuels. Lord Deben, who as John Gummer served as Environment Secretary in John Major’s Government, told The Times, “It just isn’t true that fracking is going to destroy the environment and the world is going to come to an end if you frack. And yet to listen to some people on the green end, that’s what they say.” Lord Deben said that shale gas, which has helped the U.S. to cut emissions because it is cleaner than coal, could give Britain greater energy security and should be exploited as quickly as possible. “I’m in favor of it. The carbon budgets have already assumed that we are going to use gas well on through the 2020s and into the 30s. There will be a need for gas [and] much better to have it from us and as soon as we can because I do genuinely think people ought to be worried about the security of our energy supplies.” 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

HBW Resources Contact Information

If you have any general questions, please contact us anytime. Previous versions of the HBW Ollison Hydraulic Fracturing Report, the HBW Greenfield Offshore Energy Report, the Forsgren Environmental Report, and Washington updates can be viewed at the new Intelligence Tab on the HBW Resources website at: https://hbwresources.com/intelligence/.

Thanks,

Michael Zehr
HBW Resources
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