Top Stories & Events Affecting the Use of Hydraulic Fracturing for Oil & Gas Development

HBW Resources: Ollison Hydraulic Fracturing Report

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


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

The oil industry recently completed hydraulic fracturing operations for six more oil wells inside the boundary of the Los Padres National Forest. They are the twelfth and thirteenth oil wells to be fracked in this area since June 2012. During that same time period, 23 wells have been fracked throughout the entire tri-county area (Ventura, Santa Barbara, and San Luis Obispo counties). With more than half these fracks located in the Sespe Oil Field, the area has quickly become the epicenter of this extraction technique throughout the entire central California coast. For more information, please contact HBW Resources.

Hydraulic fracturing will be the topic of the next Civic Luncheon Lecture at Kansas State University at Salina, scheduled for noon Thursday in the College Center conference room. Rex Buchman, interim director of the Kansas Geological Survey, will present “Hydraulic Fracturing in Kansas: The Process and the Challenges.” For more information, contact Greg Stephens at 819-6887, or visit luncheon/.

New York
A Democratic senator has asked for an investigation of state Republican Chairman Ed Cox for his campaign supporting hydraulic fracturing while he has a personal stake worth millions of dollars in a gas drilling company. Sen. Timothy Kennedy of Buffalo asked the state Joint Commission on Public Ethics to investigate Cox for “unethical or potentially illegal” actions based on a report by The Associated Press. Cox is criticizing Democratic Gov. Andrew Cuomo’s indecision over whether to allow hydrofracking and the upstate jobs it could provide. The commission “should investigate whether or not Mr. Cox is using his position as a chair of one of the state’s major parties to shill for the billion-dollar gas industry and his own financial benefit,” Kennedy stated in a letter. Cox and his wife hold up to $4.25 million in stock in Houston-based Noble Energy. Records also show Cox collected $250,000 to $350,000 in 2012 alone for his longstanding role as a member of the company’s board of directors, according to state records. Cox said the company has no plans to operate in New York. For more information, please contact us.

North Dakota
A divided North Dakota Industrial Commission soon will decide whether to designate special places subject to development restrictions that would protect them from oil drilling or other development. Public hearings and opportunities for public comment are included in the rule-making process. Some conservation advocates have complained that the process of designating special places so far has not been open to public participation. Restrictions could include requiring wells to be located a long distance from special places or requiring pipe placement to avoid flaring natural gas, he said.

The three-person board of Stark County commissioners, during regular session, leased county-owned land located near the Factory of Terror on Louisville Street in Plain Township to Ohio Valley Energy Systems Corp. for regular gas and oil drilling. The lease limits drilling to 300 feet below the top of the Shale formation, and the county reserves all rights below that restriction, meaning it does not allow for hydraulic fracturing, which is drilled below the Shale formation. According to Rick Flory of the commissioners’ office, the land is 0.63 acres of dedicated road right-of-way at Clifmont Avenue and Louisville Street, which runs along the edge of an 80-acre unit leased by Ohio Valley Energy for drilling. A unit of land must consist of approximately 640 acres to be developed for hydraulic fracturing. The lease states the county will be paid 15 percent of the proceeds realized by the gas and oil company on all the oil and gas sold commercially from the 80-acre unit. No well shall be drilled on the property, and no surface installation of any kind will be installed on the property. A lump sum of $950 will be paid to the county within 30 days of the execution of the lease, which has a five-year duration.

Geology researchers at the University of Cincinnati will present information at the Carroll County Concerned Citizens meeting at 7 p.m. Thursday on a new study on hydraulic fracturing taking place in Carroll County. The meeting will be held at the Christian Disciples Church, 353 Moody Ave., Carrollton. This event is free and open to the public. University of Cincinnati assistant professor of geology Amy Townsend-Small is leading a study to examine methane and other components in groundwater wells in Carroll County during the onset of drilling for natural gas in the region. Townsend-Small and her team are monitoring about 25 groundwater wells at varying distances from fracking sites in the Utica Shale region of Ohio. For more information, please contact us.

Duck Creek Energy, a firm that manufacturers a road deicer and dust suppressant processed from brine water produced from oil and gas wells recently settled a lawsuit after the court issued a ruling against two individuals who had made false and defamatory statements about the product. Duck Creek Energy, based in Brecksville, Ohio, created AquaSalina™ in 2003 and received approval for its use as a deicer and dust suppressant from the Ohio Department of Natural Resources in 2004. The liquid deicer and dust suppressant, AquaSalina™ is natural seawater that is a byproduct of oil and gas well production processed to clean water standards except for the salt content into a new commodity and is used by snow removal contractors and municipalities in Ohio. Applying AquaSalina™ to rock salt reduces salt used and chloride run off into our lakes and streams. In early 2012, Duck Creek brought the defamation suit against Tish O’Dell and Michelle Aini, who are also members of a group that oppose oil and gas drilling, because they described AquaSalina™ as frac water and frac waste. The case was settled in September 2013 with the defendants agreeing to an injunction preventing them from further defaming Duck Creek Energy and also paying the company damages. The defendants are prohibited from referring to AquaSalina™ as fracwater, fracking waste, frack waste, fracking fluid, fracking by-product, toxic, carcinogenic, cancer causing, poisonous or radioactive or any synonym thereof. For more information, please contact HBW Resources.

The Marcellus Shale Coalition (MSC) and the Pennsylvania Independent Oil and Gas Association (PIOGA) are set to team up to analyze Naturally Occurring Radioactive Material (NORM) and Technologically Enhanced NORM (TENORM) in shale production. The study will complement a study by the PA Department of Environmental Protection (DEP) which is currently underway.

Rep. Jesse White (D, District 46) announced that he is looking for local residents to participate in his Marcellus Shale Citizens Advisory Council, an effort to increase public awareness of detailed issues related to natural gas drilling and to provide feedback for policymakers at the state and local levels. White is seeking approximately 10 to 15 local citizens with a strong interest in Marcellus shale policy and a wide range of viewpoints and backgrounds. The advisory council will focus on shale-related issues that are timely and important, and hold public forums to help further educate local residents and solicit public comment.

The Pennsylvania Department of Environmental Protection will give the city of Lancaster nearly $30,000 toward the purchase of six vehicles fueled by compressed natural gas. The grant, one of 33 the DEP is making statewide, was announced last week. The six will be the first natural-gas vehicles in the city’s 115-vehicle fleet. The six new vehicles are expected to save the city about $30,000 in fuel costs annually and improve air quality by reducing pollution, the mayor said. The grant amounts to half the difference between the purchase price of six natural-gas-fueled vehicles and that of comparable gasoline-fueled vehicles, said Charlotte Katzenmoyer, the city’s public works director. Pivotal to the city’s initiative is the installation of a new compressed-natural-gas fueling station at Lancaster County Solid Waste Management Authority’s Harrisburg Avenue Transfer Station. The $2.5 million fueling station is being funded, in part, by a $350,000 grant LCSWMA received in May. That grant also is helping pay for 14 new compressed-natural-gas trucks. Those trucks will replace diesel trucks that currently haul trash from the transfer station. For more information, please contact us.

proposed pipeline project would move natural gas liquids from western Pennsylvania to Texas, opening a new market for gas producers in the Utica and Marcellus shale plays. Kinder Morgan Energy Partners LP and MarkWest Energy Partners LP said they have formed a joint venture to construct the pipeline at a still-to-be determined cost. The project would involve converting over 1,000 miles of Kinder Morgan’s Tennessee Gas Pipeline system from Mercer, PA, to Natchitoches, LA, and building approximately 200 miles of new pipeline from Natchitoches to a proposed processing facility at Mont Belvieu, TX, on the Gulf of Mexico. The Kinder Morgan pipeline now transports natural gas from Mercer in western Pennsylvania through eastern and southern Ohio, Kentucky, Tennessee, and Mississippi to northwest Louisiana. It would be converted to move natural gas liquids, which contain hydrocarbon compounds such as ethane, propane and butane.

San Antonio isn’t the only South Texas city that is experiencing explosive economic growth from the Eagle Ford Shale — Corpus Christi is reaping the benefit of the 24-county oil-and-gas play. More than $3.8 billion in projects are now under construction at the Port of Corpus Christi and another $12 billion are in permitting phase, according to port officials. For more information, please contact HBW Resources.

Trafigura AG, a firm dealing in international commodities trading and logistics, has signed a pipeline agreement with Energy Transfer Partners for crude oil and condensate transportation capacity. The 82-mile pipeline system from McMullen County to Corpus Christi will include the conversion of existing Energy Transfer natural gas pipelines to liquids service and have the capacity to transport approximately 100,000 barrels of crude oil and condensate per day. The South Texas pipeline system is expected to be operational in the next nine to 12 months.

National industry associations have encouraged their membership to support proposed legislation related to hydraulic fracturing. HR 2728, the “Protecting States’ Rights to Promote American Energy Security Act” introduced by Rep. Bill Flores (R, TX 17) and HR 2850, “EPA Hydraulic Fracturing Study Improvement Act” introduced by Rep. Lamar Smith (R, TX 21) may be going to the floor for a vote this month.

The oil & gas production industry is consistently failing to report measurable reductions of its impacts on communities and the environment from hydraulic fracturing operations, according to a scorecard report released today by As You Sow, Boston Common Asset Management, Green Century Capital Management, and the Investor Environmental Health Network. The report, “Disclosing the Facts: Transparency and Risk in Hydraulic Fracturing Operations,” benchmarks 24 companies engaged in hydraulic fracturing against investor needs for disclosure of operational impacts and mitigation efforts. No firm succeeded in disclosing information on even half of the selected 32 indicators related to management of toxic chemicals, water and waste, air emissions, community impacts, and governance.

President Obama is tapping a former aide to Senate Majority Leader Harry Reid (D, NV) to direct the Interior Department branch that regulates oil-and-gas drilling, green power development and conservation on huge swaths of federal land. Neil Kornze, the nominee to formally head the Bureau of Land Management (BLM), is BLM’s principal deputy director and has been leading the bureau on an acting basis for eight months. Kornze has been a senior official at BLM since 2011, and from 2003-2011 worked in a variety of roles for Reid, including senior policy adviser. For more information, please contact HBW Resources.

Dan Utech, a long-time Washington insider on environmental issues, will become President Barack Obama’s top adviser on energy and climate change, a White House official said, a role that will involve tough decisions on power plants and TransCanada Corp’s Keystone XL pipeline. Obama set a June 2014 deadline for the Environmental Protection Agency to propose limits on existing power plants, one of the top U.S. greenhouse gas sources. The rules need to be finalized a year after that.

BHP Billiton plans to spend two-thirds of its petroleum budget on U.S. shale in coming years, but the Australian natural resources giant knows that the biggest returns come from replicating low-cost production over and over. Though it has the financial muscle of a behemoth company, BHP Billiton wants to compete with smaller, more nimble companies to squeeze as much money as possible out of its U.S. shale assets, said Tim Cutt, BHP Billiton’s president for petroleum and potash. To do that, the company is focused on driving costs down – and keeping them down – with technology-driven efforts to improve the efficiency of well drilling and completion. “I’d say our focus over the next few years will be less about mergers and acquisitions and a whole lot more about productivity and improving the margins on every single well we’re drilling,” Cutt said. BHP Billiton, which entered the U.S. shale game in 2011, saw its oil and gas production from shale grow 15 percent last year. Its liquids production grew 75 percent and is expected to keep growing. For more information, please contact us.

In Texas, the fracking boom began around 2009, just as the state fell into years of drought. Especially hard-hit were South and West Texas, where rock formations have proven to be rich sources of oil and gas. Residents who were told to cut back on lawn watering and car washing grumbled about drillers hogging water supplies. Similar issues have arisen in arid parts of Wyoming, North Dakota, New Mexico and Colorado. Farther east, states such as Pennsylvania, Ohio and West Virginia, face different issues. There, water is relatively plentiful but disposal of wastewater has been bureaucratically difficult and expensive, while the sites that can collect it are scarce. States are scrambling to draft regulations for the new recycling systems. In Texas, requests for recycling permits rose from fewer than two a year in 2011 to 30 approved applications in fiscal year 2012. So the Texas Railroad Commission, the agency that oversees oil and gas operations, revamped the rules in March, eliminating the need for drillers to get a permit if they recycle on their own lease or on a third-party’s property. Commission spokeswoman Ramona Nye said in an email that the new rules are designed to “help operators enhance their water conservation efforts” and encourage recycling. In Ohio, disposing of drilling wastewater has hit some obstacles. Activity at a deep injection well near Youngstown was tied to one in a series of earthquakes, and a former officer of the firm that ran the operation has been indicted in connection with a separate dumping incident that allegedly violated the Clean Water Act. That led to a temporary moratorium on disposal sites in that region, stricter rules and an EPA review. Pennsylvania, meanwhile, has few dumping sites, and operators once paid large sums to haul wastewater to Ohio. Recycling has now become cheaper, and transports to Ohio have dwindled.

Looking beyond terms such as ‘renaissance’ and ‘revolution,’ plastic packaging producers believe the industry is in prime position to size a big opportunity due to a shale gas advantage. “One clear benefit is the addition of numerous jobs,” Dow Chemical’s Greg Jozwiak, commercial VP for North America packaging, said at the inaugural joint SPI/IHS Global Plastics Summit in Chicago. For instance, a 1% growth in PE requires 28 plastic processing lines. He said 4.5% PE growth would equate to 770 KT lb of resin processed at a convertor, which can create 1400 new direct line jobs. A new IHS study projects U.S. shale energy development to be responsible for a 10% increase in production for the plastics industry and will be responsible for adding close to 15,000 jobs by 2020.

Economies around the world are improving, with North America in particular improving as new supplies of shale gas feedstock come on stream. Shale gas and oil development also are reducing U.S. dependence on foreign energy, according to Bill Sanderson, vice president of downstream research and consulting for IHS. Imports of crude oil soon will fall below pre-1970 levels and are expected to stay there through 2025, he said. The U.S. additionally is benefiting through manufacturing work coming back to the region — primarily from Asia — in a practice that’s come to be known as reshoring. One industry survey estimated that almost 40 percent of firms with annual sales of more than $1 billion are planning or considering moving production from China to the U.S., according to Michael Taylor, senior director of international affairs and trade for SPI. Taylor also cited a recent MIT study that showed that 14 of 108 multinational companies polled were reshoring as well. The U.S. now offers lower energy costs and a relatively weak dollar, Taylor added. For more information, please contact us.


International development of unconventional resources of all kinds has been stymied by a range of above-ground factors, and EOG Resources does not expect their development to impact global markets for at least five years. The Energy Information Administration’s latest estimates suggest that countries such as Russia, China, Argentina and Libya may hold vast unconventional oil resources. But there are several reasons why their development may not proceed at the same pace that analogous formations in the US have, such as strong environmental opposition – sometimes at the government level – as well as lack of oil and gas infrastructure, skilled labor and necessary equipment, and high barriers to entry for new players. For more information, please contact HBW Resources.

Two years after dismissing North America’s shale-oil boom as “marginal,” OPEC changed its tune, acknowledging new extraction technology could sharply cut the need for the group’s own oil. In its annual World Oil Outlook, the Organization of the Petroleum Exporting Countries said new oil supply from Canada and the U.S. would reach 4.9 million barrels a day within five years. That is more than double last year’s forecast of 1.7 million barrels a day by 2018. As a result, global needs for the group’s own crude will be one million barrels a day less by 2018, OPEC said. OPEC, which groups some of the world’s biggest producers, has been slow to recognize the scale of North America’s oil boom. In the same report in 2011, it said “shale oil should not be viewed as anything more than a source of marginal additions” to global supply.

China and India are increasingly driving world energy demand as the United States’ production boom puts it on track to become independent of the global market, the International Energy Agency said. China is close to becoming the world’s largest oil importer, while India will turn into the leading importer of coal in the next decade to lead the Asian surge, the Paris-based IEA said in its 2013 World Energy Outlook. “The dominance of Asia will be more and more visible,” IEA executive director Maria van der Hoeven told The Associated Press. “Asia will be the clear center of the global energy trade.” While per capita energy consumption will not be as high in Asia as in North America and Europe, “the demand and the thirst for energy (in Asia) in all its forms will be tremendous.” For more information, please contact us.

An IHS CERA report, “Critical Questions for the Canadian Oil Sands” on oil sands issues and environmental regulations got a signal boost from House Energy and Commerce Committee Republicans, who blasted it out with a statement touting GOP legislation related to Keystone XL and other cross-boundary energy infrastructure projects. The IHS report, which updates a 2009 paper, concludes that Canadian oil sands petroleum will be critical to U.S. crude supply, despite growing U.S. production, and that oil sands have more regulation and oversight than four years ago. The report also concludes that oil sands crude doesn’t pose a greater pipeline risk than other oil, and that aggregate greenhouse gas emissions ‘are lower than often perceived.’

A new estimate of marketable resources in Canada’s Montney Shale spanning Alberta and British Columbia suggests that the play holds enough gas to meet the entire country’s 2012 demand for well over a century. “Total Canadian natural gas demand in 2012 was 88 billion m3 (3.1 Tcf), making the Montney gas resource equivalent to 145 years of Canada’s 2012 consumption,” says the report, The Ultimate Potential for Unconventional Petroleum from the Montney Formation of British Columbia and Alberta.

China plans to launch a third round of tenders to develop its shale gas blocks soon and some of the blocks on offer would be less geologically challenging, the Shanghai Securities News reported, citing unidentified sources. The blocks to be auctioned will be located mainly in the southwest city of Chongqing as well as in the provinces of Sichuan and Hubei, the paper said, citing an industry source close to the Ministry of Land and Resources. For more information, please contact HBW Resources.

Cyprus and French energy company Total have agreed to cooperate on developing a planned natural gas processing facility in the bailed-out country. In a statement, they say a facility that will liquefy gas for export to European and Asian markets will be their top priority as they try to turn a profit on any newfound offshore deposits. Cyprus has already signed a similar deal with U.S. firm Noble Energy and Israel’s Delek and Avner. The three companies are partners in a Cypriot gas field that’s estimated to contain 3.6-6 trillion cubic feet of gas.

Germany’s conservatives and the center-left Social Democrats, in coalition talks to form a new government, would keep a moratorium on hydraulic fracturing, a presumed relief for German brewers and more headache for Exxon Mobil Corp. German beer makers have fretted over fracking, as the technique is commonly known, concerned fracking would pollute waters and taint the country’s beer, subject to a 500-year-old purity law. Members of Chancellor Angela Merkel’s Christian Democrats and the Social Democrats said they want to be sure fracking is completely safe. German politicians had drafted legislation agreeing on fracking under certain conditions and restrictions but the proposal was put on hold ahead of the Sept. 22 elections. For more information, please contact us.

Polish energy company Lotos said it might be willing to explore for shale gas in Lithuania, provided the conditions on offer are improved, after Chevron pulled out as the sole bidder in a tender for a license. For Lotos, the issue is the terms for the early stages of the license before oil is produced, he said. “We don’t want to be obliged to pay much money before production starts. The US Energy Information Administration (EIA) estimated in a report this year that Lithuania holds around 11.3 billion cubic meters of technically recoverable shale gas, a tenth of its previous estimate.

U.S. energy major Chevron said it had filed a civil lawsuit against protesters in Poland who have prevented it from reaching a site where it plans to explore for shale gas. Local people occupied the site near the village of Zurawlow, about 260 km (160 miles) southeast of the Polish capital, when contractors started trying to erect a fence. Chevron said it filed the action on the grounds that the protesters were violating its lawful right of access to the site, one of four shale gas exploration concessions the company has in Poland. For more information, please contact HBW Resources.

South Korea
SK Group, South Korea’s third-largest conglomerate, has decided to step up efforts on the development of shale gas, particularly in North America, describing it as future growth engine for the group — which has a business portfolio ranging from oil and petrochemical production to power generation, construction and shipping — a company source said. The family-run conglomerate recently held a key policy meeting and approved a shale gas-focused growth strategy, the source said, adding that all its business units, including the country’s top refiner SK Innovation, have been informed of the plan. SK Group has divided its shale gas development plan into five stages — exploration/development, plant building, distribution, shipping/terminal and electricity generation — and specified the roles for each of its business units. Under the plan, exploration and development will be led by SK Innovation which is currently involved in several upstream projects overseas. SK Innovation will look to acquire shale gas assets in North America, and process imported volumes, mostly into South Korea. Its wholly-owned petrochemical subsidiary, SK Global Chemical, meanwhile, will build an ethanol-based cracker to produce petrochemical products from shale gas, according to the source, most likely at the company’s Ulsan complex on the country’s south coast. SK E&S, the group’s power and city gas arm, has already signed a contract to import 2.2 million mt/year of US-sourced LNG from the proposed Freeport LNG terminal in Texas for 20 years from 2019. The deal, inked in September, is the first by a privately owned South Korean company to import shale gas.

Royal Dutch Shell Plc (RDSA), which signed a $10 billion shale gas deal with the Ukrainian government this year, expects to start drilling in the Yuzivska field next year. Shell will need to drill as many as 15 wells to complete the initial exploration appraisal of the 8,000 square-kilometer (3,100 square-mile) Yuzivska field in the eastern part of the country, Graham Tiley, the country manager of Shell Ukraine, said in an interview. Separately, the company has also completed drilling its first well in the Kharkiv region and is preparing to drill two more next year, he said. The country could hold as much as 42 trillion cubic feet (1.2 trillion cubic meters) of shale gas, the third largest reserve in Europe, according to the U.S. Energy Information Administration estimate from 2011.

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
Twitter: @BoOllison

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