Officials Plan to Go Slow on O&G Drilling on Public Lands

- Officials Plan to Go Slow on O&G Drilling on Public Lands

Thursday, June 23, 2011
The Columbus Dispatch, Ohio
by Jim Siegel

A bill allowing oil and gas drilling in state parks and some other public lands is on its way to Gov. John Kasich for his signature, but state officials say it will be a year, and likely longer, before anyone starts putting holes in the ground.

"This will be a very deliberate, very measured process. There will be nothing happening fast," said Laura Jones, spokeswoman for the Ohio Department of Natural Resources.

Over Democratic objections, the House voted 57-38 to give final approval to House Bill 133, which would create a new five-member Oil and Gas Drilling Commission -- four gubernatorial appointees and a Natural Resources official -- to oversee drilling on state-owned land and grant leases.

While critics highlight potential hazards, supporters point to the $128million that Pennsylvania got in 2010 from leasing state lands for drilling, and the $178million collected by Michigan -- money they say is sorely needed to make a dent in the nearly $500million in backlogged maintenance projects at Ohio's state parks.

"Nobody ever comes up with another solution for closing the half-billion dollar shortfall the state has on taking care of their properties," said Tom Stewart, executive director of the Ohio Oil and Gas Association. "The park experience is degrading before our very eyes."

Stewart said it "would be wonderful if, within a year's time, we have some discoveries on state-owned property." Jones called that a very optimistic time frame.

No one is certain when the money will start flowing to the state.

Rep. John Adams, R-Sidney, the sponsor of the bill, said that while rules are being written, Natural Resources officials can immediately begin researching titles on land parcels to determine whether there are restrictions.

"The bill has been designed to allow the process to get moving as quickly as possible as the rules are promulgated," Adams said.

While the commission would have broad authority to lease public land where the state fully owns the mineral rights, Jones said much of the land under control of the Department of Natural Resources has some level of restriction that must be worked out. For example, she said, federal funds used to purchase and operate wildlife areas must be taken into account.

"We as the landholder will have an awful lot of say on what lands would not be available, or what restrictions would be on those lands," Jones said.

Eventually, drilling companies will nominate parcels of land for drilling. But Stewart expects that during the first year, the state will do the nominating.

The Ohio Environmental Council, among others, has expressed concern that the bill would give the commission, rather than state agencies that own the land, too much authority to grant drilling leases.

Sen. Teresa Fedor, D-Toledo, said drilling on public lands "remains unnecessary, unwanted and unsafe," echoing concerns about how drilling could impact the natural beauty of parks and about the use of a hydraulic fracturing technique on deep shale that could harm groundwater supplies.

Stewart said there is no evidence of "a direct correlation between groundwater contamination and the act of hydraulic fracturing."

As Ohio drillers plan to ramp up production, millions of barrels of toxic wastewater from natural-gas wells in Pennsylvania are coming into Ohio despite efforts by officials here to keep its injection wells open for Ohio brine.

The brine is a byproduct of hydraulic fracturing, or "fracking." Pennsylvania sewage plants dumped so much of it that it became a threat to drinking water, and state officials ordered plants to stop dumping brine.

Stewart said the Pennsylvania imports are a definite concern for Ohio-based drillers. "My members need someplace to properly dispose of their water."

In other legislative business:

• The House passed House Bill 25, which increases penalties for repeated convictions of cruelty to animals. Rep. Courtney Combs, R-Hamilton, said the current penalties are "no more than a slap on the wrist."
• The House voted 84-12 for House Bill 116, which would require schools to educate students and parents about their anti-bullying policies.
• The Senate moved to abolish or consolidate 85 state boards and commissions through Senate Bill 171, which adopts recommendations of the bipartisan Sunset Review Committee.

Copyright (c) 2011, The Columbus Dispatch, Ohio

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Platts Survey: OPEC Pumps 28.84 Million Barrels of Oil Per Day in April

Platts Survey: OPEC Pumps 28.84 Million Barrels of Oil Per Day in April

Tuesday, May 10, 2011
Platts

The 12-member Organization of the Petroleum Exporting Countries' (OPEC) pumped an average 28.84 million barrels per day (b/d) of crude oil in April, down from 29.17 million b/d in March, a Platts survey of OPEC and oil industry officials and analysts showed May 9.

Excluding Iraq, which does not participate in OPEC output agreements, the 11 members bound by quotas (OPEC-11) pumped an average 26.18 million b/d during the month. This is down 340,000 b/d from the March estimate of 26.52 million b/d.

Lower volumes from Saudi Arabia, Libya and Angola accounted for almost the entire drop.

"With oil prices taking center stage, many pundits have dismissed fundamental supply and demand as a factor in the recent increases," explains Platts Global Director of News John Kingston. "One need go no further than these latest statistics to see one reason as to why the price of crude has risen so sharply. It's nice to point to an easily-understood concept like excessive speculation, but losing one million barrels per day of supply over the last two months in a market where demand has been climbing is having the result economic supply/demand theory would suggest it should have."

Some participants in the survey revisited their March estimates for Saudi Arabia after oil minister Ali Naimi said last month that the kingdom had slashed production by some 700,000 b/d to 8.29 million b/d in March because the oil market was oversupplied.

But some industry sources wondered whether the minister's figure might not have been intended as an average for the month, noting that the kingdom had submitted a figure of 8.655 million b/d to the International Energy Forum's Joint Oil Data Initiative, or JODI, for March.

In early March, Naimi said Saudi Arabia had increased production to 9 million b/d to make up for the loss of Libyan output and had even created a special blend of crude similar in quality to the lighter, lower-sulfur content Libyan grades. Refiners have shown little appetite for the new Saudi concoction, however.

The survey showed Libyan output dropping further in April, to just 200,000 b/d from 460,000 b/d in March.

In the United Arab Emirates (UAE), the 200,000-barrel-per-day drop in production from the offshore Upper Zakum field does not appear to have had an impact on overall output for the month. Industry sources said Abu Dhabi kept supply steady by amending production levels at other fields and tapping into storage to meet export commitments.

Angolan production fell 100,000 b/d to 1.6 million b/d, as maintenance and repair work continued on Greater Plutonio.

Qatari production also dipped slightly due to the production shut down at a platform of Denmark's Maersk Oil at the offshore Al-Shaheen field following a fire on April 21.

The 470,000-barrel-per-day decreases more than offset the increases of 190,000 b/d. Higher Nigerian output accounted for the bulk of the increases, but volumes also rose in Ecuador, Iraq, and Kuwait.

The latest estimates leave the OPEC-11 overproducing its official target of 24.845 million b/d by 1.385 million b/d.

There had been a suggestion earlier this month that OPEC kingpin Saudi Arabia might want to see OPEC raise its official output target at the upcoming June 8 meeting to a level closer to actual production. Subsequent soundings would appear to rule out such a move, however.

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Offshore Officials Get In-Depth Look

Offshore Officials Get In-Depth Look

Thursday, April 14, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The top U.S. officials in charge of offshore oil and gas exploration on Wednesday got a close-up look at the first deep-water drilling project approved since last year's oil spill.

Interior Secretary Ken Salazar and his chief offshore regulator, Michael Bromwich, spent two hours examining new safety systems -- including one spurred by the spill -- on the Ensco 8501 rig that is about to begin drilling a bypass well for Noble Energy in the Gulf of Mexico.

They touched drilling fluids hauled from pits on the semisubmersible rig, interviewed workers about their jobs and studied the systems used as a last line of defense against surging oil and gas.

Afterward, Salazar said he was impressed that "testing capabilities have been significantly enhanced since a year ago."

"We're starting to see the beginning of a significant change in the culture that holds great promise," Salazar added.

Within days, the Ensco 8501 is set to begin drilling the well in Noble Energy's Santiago prospect 70 miles southeast of Venice, La., resuming work that started just four days before the blowout of BP's Macondo well and destruction of the Deepwater Horizon drilling rig last April 20.

Houston-based Noble drilled more than 7,000 feet below the seafloor in 6,500 feet of water before it was forced to plug the well under a moratorium on deep-water drilling that took effect weeks after the Macondo blowout.

The new bypass drilling is meant to get around the plugs in the original well.

Although Noble Energy is the operator of the project, with a 23.25 percent working interest, BP owns 46.5 percent of it. The other partners in the project are Red Willow Offshore and Houston Energy Deepwater Ventures.

Noble Energy secured its permit to resume work at the site on Feb. 28, becoming the first of 10 deep-water projects blocked by last year's ban that now have gotten the green light. So far, drilling has begun on just one: a well in Shell Oil's Cardamom Deep discovery 137 miles off the Louisiana coast.

One hundred twenty-three people now are working at the Noble Energy well, including 78 who work for Ensco and others employed by about a half-dozen other contractors.

Workers on the rig -- built as a collaboration between Ensco and Noble two and a half years ago -- stressed the safety practices onboard. At one point, an Ensco worker reminded Salazar and Bromwich to don protective glasses and earplugs.

 

Blowout preventer

Inside the drilling shack at the heart of the rig, the two officials pressed workers to answer questions about the blowout preventer designed as a final barrier against loss of well control. A four-month examination of the blowout preventer used at BP's well concluded it was unable to slash through off-center drill pipe, seal the well hole and trap oil underground.

Although blowout preventers are built to shear through drill pipe, they can't cut through thick joints connecting pipe. That means drillers must know whether narrow pipe or joints are passing through the device.

 

'Give me comfort?'

Salazar wanted to know what would ensure that pipe joints weren't in the way.

"What will give me comfort that in this rig, that will not happen?" he asked.

Don Williamson, the rig manager, stressed that the driller always knows the position of the pipe.

The Hydril blowout preventer being used at the Noble Energy well is two and a half years old -- the same age as the rig itself.

After last year's spill, the government stepped up testing requirements for blowout preventers, including access points called hot stab panels that allow remote controlled vehicles to operate equipment deep beneath the surface.

On the Ensco 8501, that meant installing new equipment from Oceaneering that allows the workers on the surface to conduct quicker, more efficient tests of the hot stab function.

"It's greatly enhanced our ability to test the stabs on the surface," said Rusty Critselous, a drill site leader for Noble Energy. "With this little unit, our hot stab lines are shorter and the testing process is quicker."

 

'New and better ways'

Bob Bemis, Noble Energy's vice president of environmental, health and safety, said the federal mandate prompted the change.

"That regulation is causing us to develop new and better ways to develop these testing techniques," Bemis said.

Bromwich, director of the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement, observed later that it was gratifying that the federal requirements had spurred innovation, but said he would prefer the industry to have its own incentives for safety improvements.

"What's been missing from the industry over the last several decades has been the drive to innovate for safety without new requirements," Bromwich said.

The backdrop for the visit Wednesday was continuing tension between the oil industry and the Obama administration.

Oil industry representatives have complained that the administration is moving too slowly to restart offshore drilling following last year's spill.

Williams Officials Outline New Gas Pipeline Project

Williams Officials Outline New Gas Pipeline Project

Thursday, April 07, 2011
Knight Ridder/Tribune Business News

by  Elizabeth Skrapits, The Citizens' Voice, Wilkes-Ba

Work should begin this spring on a new natural gas pipeline system that will connect Marcellus Shale wells in the northeast with a route to major metropolitan markets.

Three Williams representatives -- Ryan Savage, general manager for Appalachian Midstream Operations; Tunkhannock-based Manager of Operations Mike Dickinson and Communications Specialist Helen Humphreys -- met with The Citizens' Voice on Wednesday to outline details of the Springville Gathering System project.

"It's clear that a lot of residents don't have a good idea about our projects, and also don't have all of the facts," Humphreys said. "We think it's important that the Springville project, which is Williams' pipeline project, be evaluated on its own merits, and that Williams be evaluated on its own merits."

Tulsa, Okla.-based Williams owns the Transco interstate pipeline that Savage said starts in south Texas and supplies 60 percent of the gas to cities like Philadelphia and New York. The Transco has been in Luzerne County since 1958, and there are currently four metering stations in the county, Savage said.

The company plans to run a new 24-inch diameter gas gathering pipeline that will run approximately 33.5 miles from the Lathrop compressor station at Springville in Susquehanna County to a new compressor station outside Tunkhannock. From there it will connect to the Transco by way of a new metering station in Dallas Township, to be located on private property about half a mile from the Dallas schools.

Williams plans to use the line for natural gas from its own wells, and has an agreement with Cabot Oil & Gas to transport gas from Susquehanna County. Williams also has been talking to other companies about using the new pipeline, Savage said.

Williams will have a hearing at 7 p.m. May 16 in Dallas Township for the proposed metering station.

For the pipeline itself, the company has already started designing the route, buying pipe and lining up contractors, Savage said.

Most requirements, including permits and an archaeological survey, have been fulfilled. After a permit from the state Department of Environmental Protection is granted, work can start in May or June and will be a three- to four-month process, he said.

"It takes a long time to get to this point, and we're in the last throes," Savage said. "Construction's really the short period. It takes a long time to get your right-of-way, and get all your permit applications in, and do all of your endangered species testing and all your other environmental protection work."

Williams' compressor station in Tunkhannock, which is under construction, will be located in a rural area away from the road, he said.

"You'd never know where it was unless somebody pointed it out to you," Savage said.

He said the same will go for the metering station. Williams will build a private, padlocked road to it from Lower Demunds Road. There will be no access from Fairground Road. Truck traffic will not come near the school during construction, Humphreys said.

The metering station will be constantly monitored at a facility in Tulsa, Dickinson said. If there is anything outside normal operating parameters, an alarm goes off and a local operator can be called or the station can be shut down remotely, he said.

Savage said a metering station is one of the most innocuous natural gas facilities, comparing it to a gas meter on a home, but larger.

"On the scale of things, these aren't dangerous facilities," he said.