Gas Drillers Have Work To Do To Address Environmental Concerns

- Gas Drillers Have Work To Do To Address Environmental Concerns

Thursday, August 11, 2011
Dow Jones Newswires
WASHINGTON
by Ryan Tracy

Regulators should require the oil and gas industry to disclose the contents of the fluid used in a drilling technique that has helped unlock vast reserves of U.S. energy resources, a panel convened by the U.S. Energy Department recommended Thursday.

The Natural Gas Subcommittee, in a report issued Thursday morning, also said the industry has to expend effort to fully address environmental concerns related to the drilling technique, known as hydraulic fracturing, and other aspects of the drilling process, including wastewater management and well design.

Energy Secretary Steven Chu convened the subcommittee to identify ways to improve the safety of gas drilling. Neither the panel nor the Energy Department have regulatory authority over the industry, but the recommendations come as operators face increasing scrutiny from the media and environmental groups along with the prospect of tighter regulation from states and other federal agencies, including the Environmental Protection Agency.

The panel noted that a recent boom in gas drilling that has quickly transformed the U.S. into a production giant has brought economic benefits and "enhanced national security," but added that "the growth has also brought questions about whether both current and future production can be done in an environmentally sound fashion that meets the needs of public trust."

The EPA is conducting its own study on the impact of hydraulic fracturing on drinking water, while planning to regulate air emissions from gas operations and the use of diesel fuel in the fracturing process. New York is moving toward allowing more drilling to tap what are thought to be considerable reserves within its borders, but regulators are still evaluating the environmental consequences.

The Energy Department panel recommended more research into possible methane leakage from gas wells--a problem that, according to Pennsylvania regulators, has tainted water supplies in dozens of homes. It said operators should develop best practices for well design and regulators should inspect wells at crucial points during the drilling process.

In addition, the panel said regulators should "immediately develop rules to require disclosure of all chemicals used in hydraulic fracturing fluids," addressing a longstanding complaint from environmentalists who say that without that information, they cannot hold companies accountable for potential contamination. The panel said there should be an exception for information that was "genuinely proprietary."

Federal agencies should make a joint effort to evaluate the emissions of heat-trapping greenhouse gases from natural gas drilling as part of a look at the "life-cycle use of natural gas as compared to other fuels," the panel said.

Proponents of natural gas have long argued that gas is cleaner-burning than oil or coal, but recent research has suggested that extracting the gas may release more greenhouse gases than previously thought, raising questions about whether it is an effective way to mitigate climate change.

Environmental groups have questioned the panel's objectivity, saying that some of its seven members have been paid to do research for the oil and gas industry. The industry, meanwhile, has griped that it has no direct representatives in the panel. The members include academics, consultants, and the president of an environmental advocacy group.

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

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Gas Driller Opposes Pipeline Rules, Asks Landowners to Raise Concerns

- Gas Driller Opposes Pipeline Rules, Asks Landowners to Raise Concerns

Tuesday, August 09, 2011
Knight Ridder/Tribune Business News
by Laura Legere, The Times-Tribune, Scranton, Pa.

New permitting requirements affecting natural gas pipelines in Pennsylvania have raised the ire of Chesapeake Energy, which is encouraging natural gas leaseholders to join it in protesting the rules.

In a recent letter sent to landowners in the Northern Tier, Chesapeake's vice president for government relations, David J. Spigelmyer, called the updated requirements enacted by the U.S. Army Corps of Engineers on July 1 "unnecessary, time consuming and redundant."

Delays caused by the new permit reviews have stranded 128 of the company's drilled and completed Marcellus Shale wells without pipelines and are "costing Pennsylvanians royalty income," he wrote.

The new rules replace federal regulations that expired in June controlling pipeline construction and other surface-water impacts in Pennsylvania. A change in the regulations requires companies to detail all of the streams and wetlands to be crossed by a pipeline project -- some of which stretch for hundreds of miles -- rather than outlining only the impacts of each stream crossing individually.

The new permits allow regulators to consider the cumulative surface-water impacts of the projects, which are increasingly spiderwebbing the commonwealth to tie new Marcellus Shale wells to interstate pipelines that bring the gas to market.

Army Corps of Engineers spokeswoman Stacy A. Ouellette said the permit "streamlines the process for activities throughout the state of Pennsylvania" and within multiple Army Corps of Engineers boundaries. The permit also allows Pennsylvania "to issue permits for activities having minimal impact to waterways and wetlands, reducing redundancy between the corps and state," she said.

In a description of the regulations published in the Pennsylvania Bulletin in May, Pennsylvania Department of Environmental Protection Secretary Michael Krancer said that the revised permit incorporates federal and state standards in one process and "continues a streamlined process for permit applicants without compromising comprehensive environmental protection."

PennFuture president Jan Jarrett said the cumulative review offered with the new permit is "a good thing." The need for additional regulatory oversight of pipeline construction was highlighted in recent weeks when two failures at a pipeline project in Susquehanna County dumped drilling mud into a high-quality waterway, she said.

"It's unfortunate to see a company coming out opposing updated regulations that address natural gas pipelines," she said. "We would rather see them doubling down and working with the regulations that are clearly aimed at protecting Pennsylvania's water resources rather than stirring up and scaring the landowners who they work with."

Chesapeake said the potential review of all stream and wetland crossings increases the average review time for a project from 45 days to nearly 300 days and unfairly singles out Pennsylvania projects for extra layers of review.

Along with the letter written by Mr. Spigelmyer, Chesapeake provided landowners with a form letter to send to their senators and congressmen that says, "At a time of great economic uncertainty in this country, it seems unproductive that the federal government would take such a drastic step to limit the ability of landowners like me to benefit economically from natural gas production."

In a statement Monday, Mr. Spigelmyer said the Baltimore District of the Army Corps of Engineers began applying aspects of the permit change over the last year and "the delays are already evident."

"This is obviously of great concern to landowners who've had wells drilled on their land and who are wondering why their wells are not yet producing and marketing gas," he said. "It is of equal concern to Chesapeake as each of our wells represents the investment of millions of dollars in capital that can't begin to produce a recovery of investment, let alone a return on investment, if we cannot predictably plan for the development of pipelines necessary to get gas to market."

Copyright (c) 2011, The Times-Tribune, Scranton, Pa.

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Commodity Corner: Oil Settles Lower on Demand Concerns

- Commodity Corner: Oil Settles Lower on Demand Concerns

Monday, June 06, 2011
Rigzone Staff
by Matthew V. Veazey

Crude oil for July delivery ended the day at $99.01 a barrel Monday.

Monday's $1.21 day-on-day decline stems from pessimism about the prospects for crude oil demand, thanks in part to recent unimpressive economic data showing higher unemployment in the U.S. In addition, some analysts expect OPEC to raise its production ceiling when the cartel meets later this week.

Oil peaked at $100.68 and bottomed out at $98.64 Monday.

The futures price for natural gas moved in the opposite direction Monday, gaining 12 cents to settle at $4.83 per thousand cubic feet. Providing some of the momentum for gas was an International Energy Agency (IEA) report that projects a "golden age" for the fossil fuel. According to the IEA, natural gas use worldwide could exceed 2010 levels by more than 50 percent by the year 2035.

In the nearer term, more summerlike temperatures are expected to prevail in the Northeast and Midwest through this week. As a result, demand for cooling—and natural gas—is expected to increase in these key electricity markets.

July natural gas traded within a range from $4.74 to $4.855 Monday.

July gasoline slipped four cents to end the day at $2.95 a gallon. It fluctuated from $2.94 to $3.02.

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Change in Oil Funding Priorities Concerns Western Legislators

Change in Oil Funding Priorities Concerns Western Legislators

Thursday, April 28, 2011
The Bismarck Tribune, Bismarck, North Dakota
by Rebecca Beitsch, The Bismarck Tribune, N.D.

Lawmakers have passed a bill that changes the way oil money will be allocated amid cries from some western legislators that it will short the oil producing counties.

House Bill 1451, which now goes to the governor for signature, eliminates the Permanent Oil Trust Fund, where most oil revenue goes now, and disperses it into other funds --mainly the state's general fund -- while all setting the stage for locking more of it away in the Legacy Fund down the road.

Some legislators' problem with the Permanent Oil Trust Fund was one of semantics -- they complained there was nothing permanent about it and the fund should be dissolved and dispersed into more project-specific funds.

The bill does just that, putting more money from oil revenue into the general fund to cover projects that would've likely been funded by oil money anyway. The rest of the money funnels into funds, hitting an upper limit before moving into the next one like a line of dominoes.

After the first $200 million goes into the general fund, the next $341 million would fund property tax relief. Then comes more money into the general fund, allotments into the newly-created Strategic Investment and Improvements Fund, then into disaster relief, and then back to the Strategic Investment and Improvements Fund before 25 percent of whatever is left over goes into the Legacy Fund. Created by voter referendum in 2010, the Legacy Fund locks some of the oil revenue away, untouchable by the Legislature until 2017.

As the bill came to a final vote Tuesday in the Senate, some expressed concern about putting even more money in the Legacy Fund, though money is not projected to reach that fund this biennium.

Sen. John Andrist, R-Crosby, said investing in infrastructure, particularly in the western part of the state, should be a No. 1 priority.

"I'm afraid we're going to get short changed because we'll be trying to save money rather than invest it in infrastructure in the oil producing counties that supplied those funds," Andrist said, adding that the infrastructure money from this session had been scattered through the state rather than targeted at the west.

Other discussion surrounded eliminating the Permanent Oil Trust Fund.

Sen. Dwight Cook, R-Mandan, said centralizing spending from one source would be more transparent. Others argued the opposite, saying it made it unclear to what extent oil was funding state projects.

"I think it's always good to know when the state is spending oil money," said Sen. Jim Dotzenrod, D-Wyndmere.

Sen. John Warner, R-Ryder, said much of the state's spending is due to oil, but he's concerned transferring more to the general fund will tempt legislators to spend.

"We can only put so much in the general fund or we'll overspend," Warner said.