Federal Review Calls for Changes in State Oil Regulations

- Federal Review Calls for Changes in State Oil Regulations

Wednesday, August 31, 2011
The Bakersfield Californian
by John Cox

A recent federal review calls for tightening California's oversight of certain underground injection activities common in Kern County oil fields.

Saying more should be done to protect underground sources of drinking water, the U.S. Environmental Protection Agency-commissioned review recommends several measures that could make it harder for oil companies to get permission to inject steam, wastewater and other materials underground.

The review comes at a sensitive time for California local oil producers. For months the industry has howled about the more cautious, time-consuming approach that Sacramento has taken to regulating underground injection projects over about the last year and a half. Trade associations say delays cost jobs and worsen California's dependence on foreign oil.

Industry representatives said Tuesday it is unclear what exactly will be the impact of the review, a summary of which was posted online Friday by the state Division of Oil, Gas and Geothermal Resources. Oil industry spokespeople noted that DOGGR officials have not officially responded to the review.

Rock Zierman, CEO of the California Independent Petroleum Association, said he saw no "red flags" raised in the report. The most important question, he said, is how the recommendations are implemented by the state, if it comes to that.

"Keep in mind that much of what they're raising is a paperwork problem," Zierman said.

A DOGGR spokesman wrote in an email Tuesday that some of the review's findings are reflected in regulatory changes already instituted at DOGGR over the last three years. Spokesman Don Drysdale indicated that this point will be discussed in meetings tentatively set to begin next month between State Oil and Gas Supervisor Elena Miller and David Albright, the San Francisco-based manager of the EPA's Pacific Southwest Ground Water Office.

Drysdale added that any new rules would have to be drafted by DOGGR and then go through a public review process before being reviewed by the state Office of Administrative Law.

Since 1983, DOGGR has regulated underground injection projects under a "primacy" agreement with the EPA. The agreement requires periodic reviews such as the one posted in summary form Friday.

Three specific issues

In a letter to Miller dated July 18, Albright made specific mention of three issues discussed in the review, which was conducted by Horsley Witten Group, an East Coast environmental science and engineering firm:

• Unlike federal rules, DOGGR regulations do not clearly require the agency to protect water containing up to 10,000 milligrams per liter of dissolved solids. State rules define "fresh water" as containing no more than 3,500 milligrams per liter of dissolved solids;
• State regulators are approving underground injection projects based on reviews that extend a quarter mile around the proposed injection well. "Whereas the fixed radius approach may be appropriate for some injection wells," Albright wrote, other wells may require a wider area of study;
• Federal and state laws say that the maximum surface injection pressure must not exceed a level capable of fracturing the area's underground geology. DOGGR regulators, however, often use only estimates of the fracturing pressure, and that when they perform a more detailed pressure study, then fail to gather "the more accurate combination of surface and bottom-hole measurement."

Albright's letter to DOGGR made brief reference to several other matters raised in the Horsley group's review. These range from the professional qualifications of DOGGR's underground injection control staff and the frequency of project reviews to well plugging and abandonment requirements.

A theme raised repeatedly in the review is that DOGGR has lacked adequate staffing to address various regulatory challenges. It also notes that DOGGR has recently received approval to hire more staff.

DOGGR wrote Tuesday that in fiscal year 2010-11 it received approval to fill 17 underground injection control positions statewide. That brought DOGGR's total payroll to 157, not all of these related to underground injection.

The DOGGR district that includes Kern County performs more underground injections than any other district, comprising 86 percent of the state's active underground injection wells.

The specific uses of Kern injection wells range from cyclic steam (58 percent of all California's active underground injection wells) and steam flooding (14 percent) to water disposal (3 percent).

Cathy Reheis-Boyd, president of the Western States Petroleum Association, said she and her staff were anxious Tuesday to get a copy of the full EPA-ordered review, which was not available on DOGGR's website. She said the goal of WSPA, which represents the state's largest oil producers, was to begin work with DOGGR to address the federal government's concerns as quickly as possible and then return to the business of producing oil.

"From a bigger policy perspective," she said, "we really need to come to agreement on how we're going to proceed with all parties."

Copyright (c) 2011 The Bakersfield Californian (Bakersfield, Calif.)

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Magnum Hunter Makes Management Changes in Finance Dept.

- Magnum Hunter Makes Management Changes in Finance Dept.

Wednesday, July 27, 2011
Magnum Hunter Resources Corp.

Magnum Hunter announced several management changes in the Company's finance department. Victor Ponce de Leon is being transferred in a lateral position and will now work at two of the Company's wholly-owned subsidiaries, Eureka Hunter Pipeline, LLC and Energy Hunter Securities, LLC.

Mr. Ponce de Leon has over 15 years of experience in the energy sector, with the last two years having served as Vice President of Finance and Treasurer at Magnum Hunter. He has previous experience as an Investment Banker with Morgan Keegan and West LB, having worked on numerous energy related transactions, including structured and corporate financings, mergers and acquisitions and fairness opinions. Mr. Ponce de Leon has also worked as an equity research analyst covering the exploration and production sector for CIBC World markets, Credit Lyonnais and Jeffries & Co. He received a B.B.A. in Finance from the University of St. Thomas and a Certificate in Accounting from the University of Houston.

Additionally, the Company has promoted E. Gabe Scott to Assistant Vice President of Finance and Assistant Treasurer of the Company. Mr. Scott has been an employee of Magnum Hunter since January 2011. He has five years of corporate finance experience with increasing management responsibilities in the energy sector, having spent the last year as a Financial Analyst for the Company. His work related experience include four years in Senior Financial Analyst positions with an upstream energy company, an energy sector focused private equity firm and with a multinational global financial services provider. Mr. Scott was a full scholarship recipient and four year letterman in baseball at the University of Alabama receiving numerous honors and recognition such as serving as team co-captain for several years, being named an ESPN Academic All-American, recognized as the Outstanding Finance Undergraduate Student for two years, a Paul Bear Bryant Student Athlete of the Year Finalist in 2005, a National Collegiate Baseball Writers Association All-American in 2005, and a First Team All Southeastern Conference choice in 2005 amongst many other awards for both his academic and athletic achievements.

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NOAA: US Unprepared for Changes in Arctic Ice

- NOAA: US Unprepared for Changes in Arctic Ice

Tuesday, June 21, 2011
Knight Ridder/Tribune News Service.
by Renee Schoof

The National Oceanic and Atmospheric Administration is being inundated with requests for weather and ice forecasts as well as navigation information about the Arctic, but isn't able to provide all of the information that the Coast Guard, industries and native Alaskans need, NOAA chief Jane Lubchenco said Monday.

The NOAA chief, the commandant of the Coast Guard and the chief of naval operations spoke at a symposium about challenges ahead for the United States as summer Arctic sea ice declines, opening the Arctic to oil and gas extraction, fisheries, tourism and shipping.

Lubchenco, a marine ecologist, said her agency doesn't have nearly the same capacity for Arctic weather forecasting, oceanography and navigational charting that it has in other regions.

"It's a matter of insufficient observing, insufficient information to do the modeling and forecasting. So there's a huge disconnect between what is expected we will be able to deliver and what we are actually able to provide," she said.

Lubchenco said NOAA needs more funding for this work, despite current pressure to cut the federal budget.

As the ice retreats, the need for information will increase, she said. She cited needs for weather and sea ice forecasts for the Navy and Coast Guard, Alaska native communities, shipping companies and the fossil fuel industry, which wants permits for exploration in Arctic Alaska next year.

NOAA also needs better models to be able to show how the loss of sea ice and rising ocean temperatures will affect pollock, cod, salmon and crab, as well as other species such as ice seals and whales, she said.

The commandant of the Coast Guard, Adm. Robert J. Papp Jr., said the Coast Guard doesn't have a base or the ships it would need to respond to a cruise ship in distress or an oil spill.

Towns in northern Alaska have hotel rooms for only a few dozen people. During last year's oil spill in the Gulf of Mexico, the Coast Guard needed rooms for 3,000 people. In all, the government sent in 30,000.

"How do you place people up in the Arctic in those conditions is just the start," Papp said. "Then it's pre-staging equipment. It's having facilities you can operate out of. And right now we have nothing."

Papp said new icebreakers would be expensive to build and operate, but the United States nonetheless needs them.

The country's two heavy icebreakers, Polar Star and Polar Sea, are both out of service. The Polar Star is being decommissioned, and the 30-year-old Polar Sea is being refurbished. It's expected to return to service in 2013. Another icebreaker, the Coast Guard cutter Healy, is now on an Arctic research mission.

Adm. Gary Roughead, the chief of national operations, said the Navy sees its role expanding as it includes the Arctic in its mission. He noted that 22 percent of oil and gas reserves are thought to be in the Arctic. In addition, new northern shipping routes are expected to open in about 25 years, he said.

(c) 2011, McClatchy-Tribune Information Services. Distributed by Mclatchy-Tribune News Service.

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Cairn Energy CEO Steps Down amid Sweeping Board Changes

- Cairn Energy CEO Steps Down amid Sweeping Board Changes

Thursday, June 16, 2011
Dow Jones Newswires
LONDON
by Alexis Flynn

Cairn announced a sweeping overhaul of its senior management team, as the company looks to strengthen its exploration emphasis following the expected completion of a delayed transaction in India.

Cairn said its founder and long-standing chief executive, Sir Bill Gammell, will relinquish his position at the helm of the Edinburgh-based oil and gas explorer in favor of Legal and Commercial Director Simon Thomson. Gammell will in turn replace Norman Murray as chairman, who leaves to take up the same position at oil and gas services company Petrofac Ltd. (PFC.LN).

Two other board members will also step down. The company will retain some other figures, including Deputy Chief Executive Mike Watts, a leader in its exploration venture.

The changes come amid expectations that Cairn will soon close a deal to sell a majority stake in its India unit to Vedanta Resources. The time-frame of the Vedanta deal, worth about $9.6 billion in cash, has been delayed amid a royalty dispute with the Indian government. Indian Oil Minister Jaipal Reddy said recently the matter could be discussed at a cabinet meeting later this month.

Following the reorganization, Gammell, 58, will retain his position as chairman of Cairn India, tasked with overseeing the successful conclusion of the company's India deal.

In addition to the change to the firm's top leadership, Cairn said two other board members would be stepping down. Chief Operating Officer Malcolm Thoms and Engineering and Operations Director Philip Tracy will also depart, said Cairn.

Finance Director Jann Brown will take up the position of managing director, reporting to new CEO Thomson.

"Cairn's key strength of entrepreneurial exploration remains the focus, offering investors significant growth potential in combination with underlying asset value and balance sheet strength," said Thomson.

Cairn shares were lower in line with other U.K. oil producers following the announcement. At 1107 GMT, they were down 8 pence, or 1.9%, at 403p, underperforming the broader FTSE 100 index, which was down 1.1%.

Deutsche Bank said it viewed the changes "to be a constructive step forward that is focused on energizing the group for its next steps of growth."

Deutsche highlighted the fact that Watts will remain as a positive. Watts has been the architect of Cairn's Greenland operations, where the company is currently drilling exploratory offshore wells.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Ithaca Briefs Impact of UK's Fiscal Changes

Ithaca Briefs Impact of UK's Fiscal Changes


Friday, March 25, 2011
Ithaca Energy Inc.

Ithaca clarifies the impact on the Company's near to medium term financial position further to the recent announcement made by the UK government regarding changes to fiscal regulations.

On March 23, 2011, the UK government announced that it would be increasing the rate of supplementary charge from 20% to 32% from 24 March 2011, resulting in a 62% marginal tax rate. The following important factors should be taken into account when considering the specific impact of the tax increase on the Company:

• The Company's tax losses pool at the start of 2011 was approximately US $215 million. This pool, combined with the Company's predicted future capital expenditure program, indicates no taxes are likely to be payable for at least the next five years.
• The Company's revenues from future field developments with approximately less than 25 million barrels of oil equivalent, such as the Athena field, will continue to benefit from the Small Field Allowance sheltering up to US $120 million of field profits from the 32% supplementary charge.
• The Company has limited decommissioning liabilities, which minimizes its exposure to the announced differential tax treatment of decommissioning costs.

The Company is continuing with its development of the Athena field and the core Stella hub. A review of the Company's portfolio of existing appraisal and development opportunities will be conducted as details of the draft tax change legislation emerge.