Top Fed, State & Int’l Hydraulic Fracturing & Energy Development Stories of the Week

HBW Resources: Ollison Hydraulic Fracturing Report

Below is a summary prepared by Bo Ollison, HBW Resources’ Senior Policy Director, 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.  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.  Please contact us if you have any questions or would like additional information.

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

California
House Republicans from California say Gov. Jerry Brown shouldn’t let regulations on fracking and other well stimulation techniques become burdensome. Brown signed a bill in September allowing the state to regulate and permit those processes, but the law “could result in a massive slowdown in permitting,” write Majority Whip Kevin McCarthy (R, CA 23), Oversight Chairman Darrell Issa (R, CA 49), Rep. Dana Rohrabacher (R, CA 48), Rep. Buck McKeon (R, CA 25), Rep. Tom McClintock (R, CA 4), Rep. Doug LaMalfa (R, CA 1), Rep. Paul Cook (R, CA 8), Rep. Devin Nunez (R, CA 22), Rep. Gary Miller (R, CA 31), Rep. John Campbell (R, CA 45), Rep. Ken Calvert (R, CA 42), Rep. Duncan Hunter (R, CA 50), Rep. Jeff Denham (R, CA 10) and Rep. David Valadao (R, CA 21). The GOP members suggest the law’s implementation ‘be done in consultation with oil and gas industry experts and other stakeholders to ensure the regulations are reasonable,’ and argue the rules “must not impose significant barriers to the potential development of the Monterey shale formation, nor require oil and gas companies to disclose confidential trade secret information to their competitors.” For more information, please contact us.

The oil production technique known as hydraulic fracturing is more widespread and frequently used in the offshore platforms and man-made islands near some of California’s most populous and famous coastal communities than state officials believed. In waters off Long Beach, Seal Beach and Huntington Beach — some of the region’s most popular surfing strands and tourist attractions — oil companies have used fracking at least 203 times at six sites in the past two decades, according to interviews and drilling records obtained by The Associated Press through a public records request. Just this year in Long Beach Harbor, the nation’s second-largest container port, an oil company with exclusive rights to drill there completed five fracks on palm tree-lined, man-made islands. Other company’s fracked more than a dozen times from old oil platforms off Huntington Beach and Seal Beach over the past five years.

Colorado
Colorado State University announced the launch of a “groundbreaking” study that will track natural gas processing facilities’ methane emissions. Methane leaks from natural gas wells have joined a long list of public and industry concerns around gas extraction. But little to nothing is known about how much of the potent greenhouse gas escapes from Colorado’s hydraulically fractured wells, according to experts who spoke at the university’s two-day Natural Gas Symposium in Fort Collins. The six-month project will study more than 100 oil and gas sites in 12 states, and will cost $1.9 million, paid for by the Environmental Defense Fund and Anadarko Petroleum Corp., among others. For more information, please contact HBW Resources.

Colorado oil and gas regulators are scheduled to take their first enforcement measures against companies for their suspected failure to fully comply with a rule requiring disclosure of chemicals used in hydraulic fracturing. The move follows criticism over a lack of regulatory action since the rule was passed a year and a half ago. The alleged violations against at least 11 companies to date mostly involve a handful of wells, or in some cases a single well, per company. At its meeting at the end of this month, the commission is scheduled to take action against Noble Energy, Bill Barrett Corp., Marathon Oil, ConocoPhillips, Kerr-McGee, Gunnison Energy, Laramie Energy II, McElvain Energy, Synergy Resources Corp. and Orr Energy for cases involving wells in western Colorado and elsewhere. It is expected to take action later against Encana. Commission staff have reached settlement agreements with most of the companies under which they would pay $1,000 fines per each well, rather than the $10,000 fine per well that is possible, if the commission approves the agreements.

Gov. John Hickenlooper said he welcomes the increasing production of natural gas in Colorado while holding the oil and gas industry to “highest standards” to prevent any negative effects of fracking. “I know horizontal drilling works for us, not against us,” said the governor. Hickenlooper made the comments during a two-day forum on shale energy co-hosted by him and Oklahoma Gov. Mary Fallin. Fallin, a Republican, is the chairwoman of the National Governors Association, and Hickenlooper, a Democrat, is NGA vice chairman.

Noble Energy Inc. and Anadarko Petroleum Corp. have closed on an acreage exchange in the greater Wattenberg area of northern Colorado, with each party contributing 50,000 net acres. The consolidation of acreage in key operating areas will improve efficiency with centralized field facilities, streamlined operations, and reduced land work. Anadarko reimbursed Noble $202 million for capital spent to drill and complete wells on the conveyed acreage, partially offsetting other adjustments in determining the $105 million of cash Noble received at closing. Noble said the exchange will lower net production from recent levels by 8,000 boe/d—almost entirely related to the recently drilled wells—but it is expected to be offset by operational efficiencies and cost savings. Noble said its DJ basin volumes are still expected to increase by at least 20% in 2014. For more information, please contact us.

Florida

Jacksonville’s port has long ranked as the nation’s busiest for exporting automobiles around the globe. Now, JaxPort wants to stake the same claim regarding the fuel that’s increasingly being used to fuel trucks, ships and trains — liquefied natural gas. So far, no port has really taken the inside track on that export commodity. But with production of natural gas soaring in the United States, the country is moving to a point at which natural gas is liquefied and can be sold for use abroad, which means putting it into ships. “We’re not always first, but maybe this is one time we can be first,” said George Gabel, who heads the North Florida Logistics Advisory Group. Jacksonville already will be at the cutting edge of using liquefied natural gas to power ships when Sea Star Line deploys LNG-powered cargo container ships. Those ships are under construction and will be delivered by the end of 2015 for voyages between Jacksonville and Puerto Rico. For more information, please contact HBW Resources.

Consumer Energy Alliance-Florida and Florida House Energy & Utilities Subcommittee Chairman Rep. Jose Felix Diaz (R, District 116) are hosting an “Overview on Natural Gas and Hydraulic Fracturing and its Impact on Florida” event on November 5, 2013 from 12:00pm – 1:30pm in Room 216-C in the Florida State Capitol. For More Information and to RSVP, Contact Kevin Doyle of Consumer Energy Alliance-Florida at kdoyle@ConsumerEnergyAlliance.org.

Kansas
The Kansas Corporation Commission approved a request for three new oil drilling-related wells in Douglas County. R.T. Enterprises of Kansas has been authorized to inject 300 barrels of water per day into the Squirrel formation near Baldwin City. The Squirrel formation is a sandy zone in the upper part of the Cherokee Shale, which stretches from Oklahoma into northeast Kansas and Missouri, according to the Kansas Geological Survey’s website. The Squirrel has been a valuable source of natural gas in Johnson, Leavenworth and Wyandotte counties, KGS said. For more information, please contact HBW Resources.

Michigan
The Michigan Department of Environmental Quality announced that it is developing new rules dealing with the natural gas development process known as hydraulic fracturing. Fracturing was first employed in Michigan in 1952 and has been used by oil and gas companies on more than 12,000 wells throughout the Lower Peninsula with no recorded incidents of contaminating groundwater. Director Dan Wyant says they’re intended to protect the state’s fresh water supplies while giving the public more information about fracking operations. The new rules would require companies to use a state computer system to make sure they don’t withdraw so much water for fracking that they damage rivers or streams. They’d also have to disclose information about chemicals they use. Wyant says the DEQ expects to complete the rules in six to nine months after getting comments from the public. The proposed changes focus on four key areas:
1. Water withdrawal assessment and monitoring.  Permit applicants will be required to use the state’s water withdrawal assessment tool. Withdrawals will not be approved if the tool or a site-specific review indicates the withdrawal may cause an adverse impact to rivers or streams. While use of the tool is required now by department policy to obtain a permit, several stakeholder groups asked that it be codified in regulations. In addition, if there is a water supply well within 1,320 feet of a proposed withdrawal, the operator must install a monitor well and report water levels.  The rules will set specifications for water storage pits.
2. Water quality sampling.  Oil and gas operators will be required to collect baseline samples from up to 10 water supply wells within 1,320 feet of gas and oil wells, six months or less before drilling operations begin. Many companies do this voluntarily now.
3. Monitoring and reporting.  Operators will be required to:
·         Identify whether high volume fracturing is expected to be utilized in permit applications for new wells;
·         Submit separate applications for HVHF operations on existing wells;
Notify the DEQ at least 48 hours before starting the operation; and,
·         Monitor and report fluid pressures and volumes for all HVHF operations.
4. Chemical additive disclosure.  Operators will be required to submit information on chemical additives in a HVHF operation using the internet-based FracFocus Chemical Disclosure Registry. The information must include chemical constituents and maximum concentrations. The chemical family and trade name may be used for chemicals with trade secret protection under federal law.

Minnesota
The state’s Environmental Quality Board is asking for public input to draft standards designed to help local governments regulate frac sand mining. The oversight board is developing rules for mining, processing and transporting silica sand. Last month, the board stepped back from its draft standards after activists complained they were looser than some existing local rules, lacked scientific underpinnings, and would undermine local efforts to protect the environment. Comments can be emailed to silicasand.eqb@state.mn.us or mailed to Jeff Smyser, Principal Planner, Minnesota Environmental Quality Board, 520 Lafayette Road North, St. Paul, MN 55155-4194. The public input period runs through November 12. For more information, please contact us.

New Mexico
San Miguel County residents are continuing to push for a ban on fracking as their County Commission considers a draft land development ordinance that sets aside the eastern part of the county for oil and gas development. The proposed ordinance creates a special development overlay on 1,782 square miles of the county, allowing oil and gas developers to apply for drilling permits in areas within the north and west escarpment of the Canadian River.

Sen. Tom Udall (D, NM) is pushing for the U.S. to speed up the process for exporting liquefied natural gas, which could reverse the local trend of declining natural gas production. New Mexico natural gas production has steadily declined in recent years as the cost of natural gas has decreased. In 2005, the U.S natural gas wellhead price was $7.33 per thousand cubic feet, and, in 2012, the price was $2.66 per thousand cubic feet, according to the U.S. Energy Information Administration. The Rio Grande Foundation, an Albuquerque-based economic policy advocacy group, reported in a study that if the U.S. started to export natural gas to countries without free-trade agreements, such as Japan, it would provide an immediate $200 million boost to the state’s economy and create 2,000 jobs. “It’s a big opportunity for us to be able to export natural gas,” said Udall, D-N.M., at WPX Energy. “There are a lot of applications that are pending, and we urged (U.S. Energy Secretary Ernest Moniz) to look at them and move those along.”

New York
A pipeline under the West Village and Chelsea has won federal government approval to start pumping up to 800 million cubic feet of Marcellus Shale natural gas each day. The Federal Energy Regulatory Commission granted permission for the pipeline, built by Texas-based Spectra Energy, to be put into service on Nov. 1, according to a letter from commission director Lauren O’Donnell. The companies behind the pipeline have “adequately stabilized areas disturbed by construction” and “restoration is proceeding satisfactorily,” O’Donnell wrote. For more information, please contact HBW Resources.

North Dakota
The Bureau of Land Management’s North Dakota office is sitting on more than 500 oil and gas drilling permit applications, the White House told Sen. Heidi Heitkamp’s (D, ND) office. Heitkamp said the logjam will hurt federal government revenue streams. About a month ago, BLM’s permit backlog was 450, North Dakota Petroleum Council Vice President Kari Cutting said in an email. NDPC spokeswoman Tessa Sandstrom said the shutdown will only add to delays.

North Dakota Petroleum Council task force on flaring has met 11 times since forming last month, spokeswoman Tessa Sandstrom said. While working to find ways to reduce Bakken flaring of natural gas, the group will also work to inform stakeholders of the effort companies have already made to reduce flaring — including investing $6 billion in infrastructure for getting gas from the wellhead to the marketplace, according to a release. A big goal of the group is getting more pipeline in the ground. The task force, of more than 30 oil and gas companies, will report any “workable solutions” for reducing flaring to the North Dakota Industrial Commission later this year, Sandstrom said.

North Dakota mineral owners filed 10 lawsuits seeking damages from oil drilling companies for natural gas that is lost when it is burned instead of being captured as a byproduct of oil production. The lawsuits against 10 oil companies in the Bakken oilfields seek class-action status to represent other western North Dakota mineral rights owners. It argues the mineral owners have lost millions of dollars in royalties because oil drilling companies burn off large quantities of gas instead of capturing and selling it. Derrick Braaten, a Bismarck lawyer representing the mineral rights owners, said the lawsuits seek to force oil drilling operators to comply with state law and pay royalties to mineral owners for the value of flared gas going back six years. He noted that state officials have said more than 30 percent of the gas produced from the Bakken wells is being burned off. North Dakota law allows limited flaring in an oil well’s first year of production, Braaten said. After that, a producer must apply for a written exemption for future flaring, but must pay royalties and state taxes if it fails to do so, he said. The lawsuits were filed against Burlington Resources Oil and Gas Co. LP, Continental Resources Inc., Crescent Point Energy U.S. Corp., HRC Operating LLC, Marathon Oil, Samson Resources Company, SM EnergyCompany, Statoil Oil and Gas LP, WPX Energy and XTO Energy Inc. For more information, please contact us.

Ohio
A Belmont County Common Pleas judge Frank Fregiato has ruled that one oil and gas company cannot hold a lease in perpetuity. The case of Oxford Oil verses the West family is one of many lawsuits in Belmont County courts over oil and gas issues. In October 2011, Oxford Oil filed a lawsuit against the West family for the breach of contract and other issues. The family then filed a counter claim in December 2011. The West family claimed that the lease Oxford Oil has on their land was in perpetuity and therefore void. According to the ruling, Fregiato found that the West lease was being held in perpetuity and that Oxford’s rights to the lease were forfeited and the lease was rescinded. The West family was ordered to return to Oxford all money that have received as result of the void lease. Fregiato said in his decision that the lease was for a period of five years and “so much longer” if production or the capacity to be productive in Oxford’s opinion. However, the judge said that it is the public policy of the state of Ohio to encourage oil and gas production when it can be accomplished without undue threat or safety to citizens. He said production is the issue in this case and there wasn’t enough in his opinion.

Groups in the anti-fracking movement are asking Gov. John Kasich to ban underground injection of drilling and fracking waste in Ohio, saying the state is a regional dumping ground for the oil and natural gas industry. Some 35 groups, led by the Food & Water Watch public-interest organization in Washington, D.C., signed a letter that was presented to the governor’s office. Among them were Buckeye Forest Council, Frack Free Ohio and Frack Action Columbus. In the letter, the groups claim underground injection wells are causing earthquakes and dispose of fracking fluids that contain undisclosed chemicals. They also say toxic heavy metals and radioactive material are present in fracking waste, and they claim casings and cementing of disposal wells degrade over time, threatening underground drinking water sources.

Hydraulic fracturing in the Utica shale has not created any major problems with Ohio’s drinking water, says the Ohio Department of Natural Resources. The Division of Oil and Gas Resources Management has investigated 183 water well complaints filed by Ohio landowners from 2010 through mid-October. A total of six water supplies were impacted by drilling over the nearly four-year period, said state spokesman Mark Bruce. But all of those problems stemmed from old, vertical only wells, not today’s big horizontal wells that rely on fracking to free up natural gas, oil and other liquids from rocks deep underground, he said. To date, Ohio has approved 927 horizontal wells in the Utica shale, of which 577 have been drilled, as of Oct. 12. A total of 164 Utica wells are in production. Thirty drilling rigs are in Ohio.

Crosstex Energy Inc. and Devon Energy Corp. want to combine their natural gas pipelines, processing plants and other midstream assets in a deal involving companies with interests in Ohio’s Utica and Marcellus shale plays. The companies said the merged assets will trade publicly, with expected earnings before interest, taxes, depreciation and amortization of approximately $700 million in 2014. The transaction is expected to close in the first quarter next year. For more information, please contact HBW Resources.

Pennsylvania
The Allegheny County Airport Authority Board of Directors approved its 2014 budget. The $ 95.8 million operating budget anticipates a significant decrease in airline rates while assuming passenger levels remain steady.  The reductions were made possible in part by a portion of the lease bonus payment the Authority received from CONSOL Energy in exchange for the rights to drill for natural gas on airport land. The cost per enplaned passenger will drop from $14.11 to $13.92, which takes effect in January. This is in addition to a $0.55 reduction made in July. This rate is also the lowest for the airlines since 2008. For the airlines under the airport’s airline operating agreement, landing fees, ramp fees and terminal lease rates will decrease. For more information, please contact us.
According to October’s Energy Stat of the Week report from analysts at Raymond James a particular statistic stood out. The analysts crunched the numbers, and between 2005 and 2012 almost 90 percent of the job growth in Pennsylvania at that time came from oil and gas jobs in the upstream and midstream. That’s the highest percentage of any state, according to analysts Pavel Molchanov and J. Marshall Adkins, who based the math off data from the Bureau of Labor Statistics. Behind Pennsylvania, the next highest percentages were Louisiana and New Mexico at about 70 percent. According to the Pennsylvania Department of Labor and Industry’s latest data, statewide hires in core Marcellus Shale industries were up 35 percent in the second quarter of 2013 compared to the second quarter of 2010.

Gas well drilling companies and related industries will be able to explore and drill for natural gas in Peters, within a set of guidelines approved. Although the township established a mineral extraction policy last year, some of it conflicted with the state’s Act 13 and needed to be adjusted. Council also hadn’t addressed the concept of seismic testing until recently, when a Texas company requested permission to chart the Marcellus Shale formation in the eastern part of the township. After two public hearings, council voted 4-0-1 for the modified ordinance, which establishes ground rules and limits for seismic testing companies and other industries. Councilmen Frank Arcuri, James Berquist, Robert Lewis and David Ball voted in favor, while Councilman Gary Steigel Jr. abstained. Members Monica Merrell and Michael McCaig were absent. For more information, please contact HBW Resources.

The Pennsylvania’s Environmental Quality Board proposed changes to the structure of oil and gas well permit fees, including increased flat fees for unconventional well permits. The Independent Regulatory Review Committee is currently studying these proposed changes which would replace the current sliding fee structure based on wellbore length with flat fees. The current average fee for a Marcellus Shale well is $3,200. The proposed flat fees would be $5,000 for horizontal unconventional wells and $4,200 for vertical unconventional wells – an average fee increase of $1,000 to $1,800 per well or an average 60% increase per well. The Pennsylvania Department of Environmental Protection has stated that the permit fee increases are needed to maintain current staffing levels and to support permit reviews and other regulatory oversight obligations because of a 22% decrease in the number of new wells permitted since 2010. Some energy companies have expressed opposition to the permit fee increases, stating that Pennsylvania’s gas industry will be adversely affected. They dispute whether the increases are necessary to maintain staff for permit reviews, pointing to the 22% decrease in well permits and the likelihood that this decline will continue with the fee increases and Pennsylvania’s stringent regulatory oversight.

Former Chesapeake Energy Corp. Vice President David Spigelmyer will be the new president of the Marcellus Shale Coalition. Spigelmyer is no stranger to the coalition. He was a founding member when it started in 2009 and had been chairman until August. His job at Chesapeake as vice president of government relations for the Eastern Division had been cut in a corporate restructuring. For more information, please contact us.

Texas
The Texas Department of Transportation could fund 70 highway maintenance and repair projects — including those in the Eagle Ford Shale counties — that the agency was unable to obtain money for during the last legislative session. TxDOT has identified an additional $250 million in vehicle registration fees to fund state highway projects, including some in the shale counties of Atascosa, Duval, Guadalupe, Karnes, La Salle, Live Oak, McMullen and Webb. During the its most recent session, the Texas Legislature approved $225 million for 39 state highway projects, which was short of the funding TxDOT originally sought to cover highway repairs. TxDOT on Oct. 9 requested the Legislative Budget Board to approve its use of the vehicle registration funds.

BHP Billiton plans to sell roughly half its oil and gas acreage in the Permian Basin in Texas and New Mexico, an area revived by the shale boom, to focus on its most lucrative assets there. BHP, already a significant oil and gas player, moved heavily into U.S. shale in 2011, acquiring Fayetteville assets from U.S. energy group Chesapeake and months later Petrohawk Energy, spending almost $17 billion – $20 billion, including debt – just before a major downturn in U.S. natural gas prices. According to a request for proposals from adviser Scotia Waterous and dated Oct. 16, BHP is selling 250,000 net acres in west Texas – 165,000 net acres in the Delaware Basin and the remainder in the Midland Basin.

West Virginia
Legislators need to reconsider a key part of Gov. Earl Ray Tomblin’s natural gas drilling law if they want to provide adequate public health protections for residents in the Marcellus Shale region, a West Virginia University researcher told lawmakers. Michael McCawley, interim chairman of WVU’s Department of Occupational and Environmental Health Sciences, said language that prohibits drilling sites within 625 feet of occupied dwellings does not make sense for protecting the public. McCawley explained that the so-called “setback” provision measures the 625-feet prohibition from the center point of drilling permits, wrongly assuming that emissions all come from sources at that center point. For more information, please contact HBW Resources.

Wisconsin
A new bill, SB 349, introduced in the Wisconsin Senate by Sen. Thomas Tiffany (R, District 12), would stop municipalities from regulating non-metallic mining within the state, including sand used for hydraulic fracturing. Sand mining has rapidly expanded in Wisconsin, growing from 10 mines and processing facilities in 2010 to 170 today. Municipal governments have sought to regulate the mines, citing potential health concerns. The bill would overturn a Wisconsin Supreme Court decision from last year that upheld the town of Crooks Valley’s power to restrict sand mining through zoning ordinances. Proponents of the bill argue that the industry needs relief from a patchwork of inconsistent and multi-layered government regulations.

Wyoming
The Wyoming Supreme Court is scheduled to hear oral arguments Nov. 20 over whether the public has the right to obtain lists of chemicals used in hydraulic fracturing or if those ingredients are corporate trade secrets that may be shielded. The Wyoming Oil and Gas Conservation Commission adopted its first-in-the-nation fracking chemical disclosure rule three years ago. The rule requires companies that frack in Wyoming to provide the commission with lists of the chemical ingredients in the fracking fluids they use. In 2011, the Powder River Basin Resource Council, Wyoming Outdoor Council, Earthworks and Center for Effective Government filed an open records request to obtain fracking chemical lists submitted to the Wyoming Oil and Gas Conservation Commission. The commission didn’t supply the lists, prompting the groups to sue. Natrona County District Judge Catherine Wilking sided with the commission in March. She ruled that the state oil and gas supervisor, who directs the commission staff, didn’t overstep his authority in determining that the lists were trade secrets that needed to be kept out of the public eye.

National
The U.S. energy sector’s carbon dioxide emissions fell last year to their lowest level in almost two decades. The nation’s energy-related CO2 emissions dropped by 3.8 percent in 2012 as Americans drove fewer miles, cars continued to become more fuel efficient, power companies increasingly switched from coal to natural gas and the U.S. economy as a whole got more bang for each unit of energy, the federal Energy Information Administration reported. The world is heading in the opposite direction. In 2011, the world carbon dioxide emissions jumped 3 percent, because of a large increase by China, the No. 1 carbon polluting country. For more information, please contact us.

Respondents to the biannual survey, funded by the university’s McCombs School of Business and conducted Sept. 5-23, were evenly split on the use of hydraulic fracturing to extract oil and natural gas. Thirty-eight percent said they were opposed to the technology, and the same percentage said they supported it — down from 45 percent support in April. But a majority of the poll’s 2,144 participants said job creation, lower energy costs, increased energy security, improved energy efficiency, advantages for the manufacturing sector and lower carbon emissions are all benefits of U.S. natural gas production. Eighty-two percent of respondents said the federal government should focus on developing gas, second only to 89 percent support for renewable technology development.

Increases in domestic natural gas production combined with expanding infrastructure will help meet consumption needs this winter, according to a report, “Winter 2013-14 Energy Market Assessment Report to the Commission,” released by the Federal Energy Regulatory Commission (FERC). The surge of cheap gas and sufficient storage is expected to meet demand and keep both gas and electricity prices low during a winter of above-normal temperatures, according to predictions from the National Oceanic and Atmospheric Administration that FERC staff cited.

The Center for Biological Diversity accused the Obama administration of illegally allowing oil companies to keep drilling on public lands during the government shutdown, even as officials erect barricades around national monuments and close park gates to visitors. The group argues that continuing to allow oil and gas drilling on federal lands violates the Anti-Deficiency Act, citing a 19th century law that bars the government from incurring new financial obligations in the absence of congressionally appropriated funding. The group has threatened to file a lawsuit seeking an end to “these lawless extractive activities on our public’s lands,” absent an end to the government shutdown or a change in Interior Department policy.

The Center for Biological Diversity and other environmental groups filed suit to block the Export-Import Bank of the United States from funding two LNG export terminals in Australia. Ex-Im Bank authorized a $2.9 billion direct loan to the Australia Pacific LNG export terminal for engineering services provided by Bechtel Power Corp. and invested $1.8 billion in the Curtis LNG export terminal. The groups argue that, even though the projects are outside of the United States, Ex-Im Bank must perform an environmental impact analysis under the National Environmental Policy Act, as well as evaluate the projects’ impact on the Great Barrier Reef under the National Historic Preservation Act, before funding the projects. The groups claim various alleged environmental impacts should cause Ex-Im to withdraw its funding. For more information, please contact HBW Resources.

Hydraulic fracturing has been around for years and the same technique could open up new vistas for tapping an abundant, clean energy source – geothermal energy. The technology, which is under development could potentially turn a marginal power source into a major source of carbon-free electricity and heat in the US. The key part of the technology, which is being developed U.S.-based geothermal energy firm Alta Rock was demonstrated, earlier this year near the Newberry Volcano in Oregon. The new technology is aimed at releasing heat trapped in underground shale formations by pumping high pressure liquids. Heat from the hot rocks turns water into steam, which is then pumped up to the surface, to drive a turbine generating electricity. According to some estimates, the U.S. could tap around 2,000 times its current annual energy use of roughly 100 exajoules via enhanced geothermal technologies. According to the DoE at least 500 gigawatts of electric capacity could be harvested from such EGS systems.

The Energy Information Administration began issuing monthly reports to provide region-specific information on production trends, new well productivity, rig efficiency and decline rates at existing wells in shale gas and oil areas. The “Drilling Productivity Report” will focus on the Bakken, Niobrara, Permian, Eagle Ford, Haynesville and Marcellus Shale plays. Natural gas production from the Marcellus Shale region is growing faster than expected. Marcellus production has now reached 12 billion cubic feet a day. That’s the energy equivalent of about 2 million barrels of oil a day, and more than six times the 2009 production rate. For perspective, if the Marcellus Shale region were a country, its natural gas production would rank third in the world, after Russia and the rest of the U.S. For more information, please contact us.

Now that the land grab of U.S. shale oil and natural gas acreage has ended, the oil and gas industry faces a new question – how it will fund the commercialization of unconventional resources. To date, 60,000 unconventional oil and gas wells have been drilled in the United States, but 500,000 drilling locations remain, meaning the industry has drilled a little more than 20 percent of this inventory, given current spacing and conditions. The development of shale resources might prove the exception to the ability of companies to raise funds in capital markets. Estimates of the amount of capital needed range from $2 trillion to $5 trillion, but the market capital of shale participants is less than $1 trillion. Companies currently are needing to go to capital markets for $40 to $50 billion a year of capital now and have been spending beyond cash flow, but some suggestions indicate that spending may double or triple. Fundamentally, the industry could face a $2 trillion gap in funding. A company may lease land in a perspective play at $2,000 an acre, but if it fully develops that land with 40-acre spacing and $8 million wells, that company will need $200,000 an acre, a ratio of 100 to 1.

Natural gas companies and other groups launched a coalition called “Our Energy Moment” to highlight the market for U.S. LNG exports. Members include Cheniere Energy, Sempra LNG, the Louisiana Mid-Continent Oil and Gas Association and the Louisiana Oil & Gas Association. The coalition kicked off at the annual Louisiana Gulf Coast Oil Exposition in Lafayette, and anticipates future events in Washington, Texas and elsewhere. DOE has recently approved several facilities to export LNG to non-Free Trade Agreement nations, and observers expect more approvals in coming months. For more information, please contact HBW Resources.

U.S. exports of natural gas liquids, already at a record amid surging output from shale deposits, are poised to quadruple by 2020 as the expansion of the Panama Canal cuts shipping costs to Asia. Deliveries of the fuels to foreign buyers averaged 555,000 barrels a day in July, the most in U.S. government data going back to 1981. China’s imports of propane, butane and isobutane, with uses as varied as home heating, chemical manufacturing and refrigeration, jumped 23 percent in August from a year earlier, customs data show. The Panama Canal expansion, slated for completion in 2015, will allow the transit of large tankers and put costs to ship U.S. gas liquids to Asia on a par with deliveries from the Middle East, according to Sanford C. Bernstein & Co. U.S. exports would jump to 20 million metric tons by 2020 from the current 5 million tons, making the country the world’s largest exporter of those fuels, ahead of Qatar and Saudi Arabia, Bernstein said. Hydraulic fracturing, a drilling technique in which water, sand and chemicals are blasted underground to force out natural gas and crude trapped in layers of rock, has led to a surge in U.S. production of hydrocarbons including NGLs. For more information, please contact us.

The shale-gas boom in the United States won’t keep pushing U.S. carbon-dioxide emissions down in the decades ahead. That’s because, in addition to killing off coal-fired plants, cheap gas will also crowd out cleaner energy sources like wind, solar, and nuclear. On the other hand, the glut of natural gas from fracking will make the country a bit wealthier and clean up other harmful air pollutants from power plants. Those are the conclusions of a new report, “Changing the Game?: Emissions and Market Implications of New Natural Gas Supplies” from Stanford’s Energy Modeling Forum, which convened 50 experts and 14 different modeling teams to look at how the surge in natural-gas production will transform the U.S. economy. The four key points include:
1) The shale-gas boom will provide a modest boost to U.S. economic growth. 
2) The shale-gas boom won’t do much to solve climate change. 
3) Natural gas will, however, help clean up other air pollutants.
4) There’s a fair bit of disagreement between forecasts.

House Energy and Commerce Committee Chairman Fred Upton (R, MI 6) and Rep. Gene Green (D, TX 29) formally introduced bipartisan legislation to modernize and reform the approval process for energy infrastructure projects that cross the borders of the United States. HR 3301, the North American Energy Infrastructure Actwill create a clear regulatory approval process for U.S. cross-border oil pipelines, natural gas pipelines, and electric transmission lines, replacing the current system set forth in a series of Executive Orders created in an ad hoc fashion over multiple administrations. It will bring much-needed certainty to the process for constructing or modifying cross-border projects and help encourage investment in new job-creating energy infrastructure projects needed to transport North America’s growing energy supplies. The bill specifically addresses how current pending applications shall be handled and creates an effective date for the legislation of July 1, 2015.

International
The closure of nearly two thirds of Europe’s gas-fired power generation facilities by 2016 will lead to regional price hikes and make outages inevitable, Cap Gemini has warned. UK households are already feeling the squeeze of soaring energy bills but a particularly cold winter this year could mean that 1970s style blackouts start to become a more regular occurrence again. The consultancy’s annual European Monitoring Centre for Energy Markets briefing encapsulates much of the crisis in European energy policy – one almost entirely of its own making. So why is Europe turning off its gas, just when it needs it more than ever? A gas plant needs to be operating at 57 per cent capacity to be economically viable, but EU regulations introduced to reduce CO2 emissions relegate them to standby duties, in favour of much more inefficient and costly renewable energy plants. This means keeping a gas plant open is uneconomical for the operator. Research outfit IEA, cited by CapGemini, reckons 60 per cent of gas-fired power stations will close by 2016 because they cannot cover their operating costs.

Asia’s large-scale gas importers, long saddled with premium prices, say a cheaper alternative lies several thousand feet below North American soil, where companies are unlocking enormous gas reserves from shale rock. The shale boom has already revolutionized the gas market in the United States and Canada, giving both countries not only a reliable domestic supply but also the ability to sell overseas. Asian utility and gas company executives have said that North America’s gas wealth could prove nearly as transformative across the world, leading to the first significant West-to-East gas trade and driving down prices in a region that consumes two-thirds of the world’s liquefied natural gas (LNG). Lower gas prices would be particularly important for Japan, where utility companies are bleeding money to import fossil fuels while their nuclear plants sit idle. Japan owed its record trade deficit in the first half of this year to the rising prices of fuel, including LNG coming from Australia and Malaysia.

The energy ambassador for the Czech Republic, Vaclav Bartuska, and his Hungarian counterpart Anita Orban penned an op-ed in the Washington Post, “Central Europe is a ready market for U.S. gas,” noting that the U.S. is now in a position to export gas and Central Europe is anxiously hoping to be on the receiving end of this largesse. Thanks to the shale gas boom in the US, they write, “this surplus creates opportunities for the United States to again be a geopolitical player in Europe […] Our countries’ commitment to the transatlantic relationship is unwavering. But we remain vulnerable to energy diplomacy because of our overwhelming reliance on Russian gas and oil.” U.S. companies seeking to export gas to countries that do not have free-trade agreements with the United States are subject to lengthy bureaucratic procedures. Almost two dozen export license applications are pending; only a few have been granted in the past three years. For more information, please contact HBW Resources.

Several African countries have potentially viable shale gas deposits, which, if developed, could lead to lower gas prices, increased consumption of natural gas, reduced greenhouse gas emissions from power generation and substantial economic benefits to producer countries, finds a report launched by the African Development Bank (AfDB). “Shale Gas and its Implications for Africa and the African Development Bank” examines both the positive and cautionary lessons that Africa can learn from the “shale gas revolution” – the recent explosion of shale gas production in the United States.

Australia
Icon Energy Limited (Icon) reported that the Geoffrey-1 well in ATP 855 in the Cooper-Eromanga Basin on the eastern side of the Queensland and South Australian border was spud Monday Oct. 14. Geoffrey-1, a vertical exploration well in ATP 855, will be drilled by the Ensign 916 rig to an expected depth of 13,996 feet (4,266 meters) and will further evaluate the shale and basin-centred gas play in the Toolachee, Daralingie, Roseneath, Epsilon, Murteree and Patchawarra Formation intervals within the Queensland portion of the Nappamerri Trough. For more information, please contact us.

Prime Minister Tony Abbott has flagged retrospective legislation to backdate the abolition of the carbon tax to July 1 next year if parliament delays his repeal bills and threatened businesses with fines of up to $1.1 million if they fail to pass on price cuts flowing through from scrapping the tax. The Prime Minister and Environment Minister Greg Hunt released draft legislation detailing the abolition of the carbon tax, which will be the first order of business when parliament resumes on November 12. Prime Minister Abbott said he hoped the Senate would vote on the bills before Christmas and declared they would give Labor a chance to “repent of its massive breach of faith with the Australian people in the last parliament.” The Prime Minister said the abolition of the carbon tax would leave households $550 a year better off. The government estimated that power prices would go down by 9 per cent and gas prices would go down by 7 per cent, making the average power bill $200 a year lower and the average gas bill $70 a year lower.

Canada
When it comes to transporting oil, pipelines are the safest option, trumping trains and trucks, according to a new report, “Intermodal safety in the transport of oil,” from Canada’s Fraser Institute. Pipelines carry the bulk of oil moving across the United States and Canada each day, even though the surge in North American production has pushed more and more crude into trucks and onto trains. Under the current breakdown of crude oil and petroleum product transport In the United States, evaluated on a ton-mile basis:
·         70 percent is shipped by pipeline
·         23 percent is moved by tankers and barges
·         4 percent is shipped via trucks
·         3 percent moves on rail
Thirteen train cars carrying liquefied petroleum gas and crude derailed in Gainford, Alberta, about 50 miles west of the province’s capitol of Edmonton. The train company, CN Rail, has evacuated some 100 people who live in the area. While the incident is smaller than the July disaster in Lac-Megantic, Quebec, that left nearly 50 people dead, critics say the accident only drives home the need to take a closer look at oil-by-rail, a practice that has increased substantially in recent years thanks to booming oil production in Canada and the U.S. For more information, please contact us.

China
Fast-growing oil and gas producers Russia and North America are spending billions of dollars on pipelines and port facilities to supply energy to Asia, intent on grabbing a bigger share of the world’s fastest growing fuel market from Middle East suppliers. China has driven global oil demand growth for a good part of the past decade, galloping ahead of the United States as the world’s top net oil importer last month. The Asian superpower’s surge in consumption has kept prices supported despite a rise in North American shale output and a weak economy in the West. Gas producers in North America and Asian buyers are working on multi-billion dollar projects to liquefy the region’s abundant gas supply and ship the super-chilled fuel to the East. Russia, the world’s largest gas producer, also plans to open up liquefied natural gas (LNG) exports next year to meet growing demand from Asia-Pacific markets. The government plans to submit a bill in parliament on it soon. That comes after Russian producer Rosneft signed one of the biggest deals in the history of the global oil industry in June – a $270 billion pact to supply 365 million tonnes, or 300,000 bpd, of oil for 25 years. That would come on top of the 300,000 bpd Rosneft is already sending to China. For more information, please contact HBW Resources.

China Gas Holdings Ltd., which supplies natural gas to 195 cities in Asia’s biggest economy, expects sales will jump as much as fivefold by 2020 as the nation pushes for wider use of the fuel to replace coal. Deliveries may reach 40 billion cubic meters from an estimated 8 billion cubic meters this year, Chief Financial Officer Eric Leung said during a group interview at the company’s Northwest Management Center in Shaanxi’s Baoji city. Air pollution in China’s northern cities including Beijing and Tianjin exceeded hazardous levels several times this year, prompting the government to take steps to curb the burning of coal. The nation plans to more than double the capacity of gas- fired power plants to 56 gigawatts by end-2015 from 26.4 gigawatts in 2010, data compiled by Bloomberg Industries show.

Israel 
Israel’s Supreme Court rejected petitions appealing the government’s decision to allow the export of 40 percent of the country’s natural gas. The justices ruled against the petitions in a quick vote of 5-2, without releasing an explanation – though said the details would follow after subsequent deliberation. In a deliberation, four of the justices hinted that the petitioners had not managed to prove sufficiently that the government lacked the authority to allow such a decision. The petitions had been submitted by a number of social-legal environmental organizations, claiming that the government was not authorized to bypass the Knesset in such an important decision that would affect the future of Israeli economy. Prime Minister Benjamin Netanyahu’s cabinet in June approved the controversial plan to reserve 60 percent of Israel’s natural gas for domestic use while letting the rest be exported. Ministers also approved a change that will entitle Jordan to start receiving gas exports immediately. Eighteen ministers approved the plan, while three opposed. As a result, Israel will be assured around 540 billion cubic meters of gas over the next 25 years. According to the plan, Israel’s gas reserves, estimated at 900 bcm, should remain at home for use by industry, transportation and consumers.

Mexico
Mexican state oil and natural gas monopoly Pemex voided what was to have been a $1.8 billion tender for a huge pipeline to bring US shale gas south of the border. Pemex said no attempt will be made to invite a new round of bids for Los Ramones II. Instead, an offshore Pemex subsidiary, TAG Pipelines, will take on the job. Only one bid was registered for the project. It came from Spain’s Enagas and Belgium-based GDF Suez.

Northern Ireland
Stormont ministers are set for a fracas over fracking – the process to extract shale gas from deep underground. Environment Minister Mark H Durkan said that fracking would not happen on his watch. But Trade and Industry Minister Arlene Foster called on Mr. Durkan, who recently replaced Alex Attwood on the Executive, to think again. The DUP minister told her SDLP colleague the issue would be for the entire Executive to resolve – and not any single minister. “This is a novel and controversial issue, and therefore… will be a matter for the Executive as a whole to decide on,” she said. It is believed most of the shale gas deposits in Northern Ireland are in the northwest and County Fermanagh. Mrs. Foster said no applications for hydraulic fracturing in Fermanagh had yet been made. However, both ministers confirmed that the company Tamboran planned to drill a deep bore hole to approximately 1,500 meters to obtain a core sample from the shale rock. For more information, please contact HBW Resources.

Romania
Hundreds of Romanians opposed to shale gas extraction in their village have scuffled with police at an exploration site where energy giant Chevron plans to start drilling. The protesters blocked a road and made a human chain in a field where Chevron plans to its operation soon, but police intervened and cleared them from the area. Chevron has permits to prospect for shale gas in Pungesti, two other villages, and on Romania’s Black Sea coast. In response, Chevron has suspended its search for shale gas.
Russia
Russia does not deem it necessary to join the shale gas bandwagon and will not undertake large industrial scale production of shale gas, Alexander Novak, Minister of Energy said at a conference. He said Russia does not see the necessity in producing shale gas both from an economical and environmental point of view and will choose to observe how the shale boom plays out in the U.S. over the next few years.

Russia’s Novatek announced the completion of construction and the start of commissioning tests for the second stage of its gas condensate fractionation and trans-shipment complex at the port of Ust-Luga on the Baltic Sea. Novatek said the second stage includes a stable gas condensate fractionation unit with nameplate capacity of three million tons per annum and an additional deep-water berth. Following the launch of the second stage facilities, overall gas condensate processing capacity at Ust-Luga will increase to six million tons per year. For more information, please contact us.

Russia and China’s largest energy companies announced a “breakthrough” deal paving the way for joint development of massive energy reserves in eastern Siberia, in a sign that Moscow is overcoming its fear of Chinese encroachment on Russia’s Far East. Their preliminary agreement illustrates how Moscow is increasingly looking to Asia for customers for its abundant energy reserves, and for funding to develop them. Russia’s needs tie in with expected long-term demand growth in oil and gas-deficient China and elsewhere in East and South Asia, and slowing energy consumption in many industrialized nations. Russian state oil giant OAO Rosneft and China National Petroleum Corp. said that under a Memorandum of Understanding signed during Rosneft President Igor Sechin’s trip to Beijing they would explore for, and produce oil and gas in eastern Siberia. Rosneft and CNPC would form a joint venture, the companies said Friday in separate statements, with Rosneft taking 51% and CNPC holding the rest. They plan to develop an oil field that Rosneft gained full control of this week by consolidating 100% of the Taas-Yuryakh oil firm, Rosneft said. CNPC said that the two would also collaborate closely to develop several large-scale oil and gas fields.

Ukraine
Ukraine is looking to agree a shale gas production sharing agreement with Chevron. In addition, it hopes to bring in Eni and EDF as partners for a Black Sea exploration project. Officials claim that the new energy deals will attract billions of dollars’ worth of investment. It is hoped that the government will complete negotiations by the end of this year with an ExxonMobil-led consortium to look for hydrocarbons in the country’s western Black Sea coast. For more information, please contact HBW Resources.

United Kingdom
The majority of the public who live within the Bowland Basin license area in northwest England support shale gas exploration, with the numbers of supporters continuing to rise, according to a survey commissioned by UK shale gas explorer Cuadrilla Resources. The survey, published and conducted by independent research firm BritainThinks, was conducted recently among residents in Blackpool, Fylde and West Lancashire following similar surveys in October and December 2012. Cuadrilla said the main findings were that:
·         57 percent of respondents now either strongly support or support shale gas exploration, compared with 44 percent in October 2012 and 50 percent in December 2012
·         The number of people who oppose or strong oppose exploration has fallen from 25 percent in December 2012 to 20 percent
·         Job creation was considered to be the most-important potential benefit of exploration according to 47 percent of respondents
·         Protection of water is viewed as the most-important issue to address, with 30 percent of respondents identifying this as their key concern

French utility firm GDF Suez has signed a deal with UK-based Dart Energy to explore Cheshire and the East Midlands for shale gas. GDF Suez will buy a 25% share in Dart’s 13 onshore licenses for £7.4m ($12m), followed by £16.7m for ongoing costs. The licenses overlay the Bowland Shale area, estimated to contain 1,300 trillion cubic feet of shale gas. For more information, please contact us.

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
Twitter: @BoOllison

Contact Information

If you have any general questions, please contact me anytime. Previous versions of the HBW Ollison Hydraulic Fracturing Report, the HBW Greenfield Offshore Energy Report, daily updates and new Member profiles can be viewed at: https://hbwresources.com/intelligence.  Hope you have a great day.

Thanks,

Michael Zehr
HBW Resources
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Washington, DC 20006
Direct: 202-429-6081
Cell: 202-277-3927
E-mail: mzehr@hbwresources.com
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