EPA Proposes First Federal Air Standards for 'Fracked' Wells

- EPA Proposes First Federal Air Standards for 'Fracked' Wells

Thursday, July 28, 2011
Dow Jones Newswires
WASHINGTON
by Tennille Tracy

The Obama administration has proposed the first national air standards for wells that are drilled using a controversial practice known as hydraulic fracturing.

The Environmental Protection Agency announced Thursday it was proposing new rules to reduce the amount of air toxins and smog-forming gases that are released into the air when oil and natural gas is produced.

The rules are expected to reduce cancer risks and help reduce ozone levels in areas where oil and natural-gas production occurs, the EPA said. The standards should also lead to lower emissions of methane, a greenhouse gas that is more than 20 times as potent as carbon dioxide.

A lot of the emissions the EPA has targeted escape into the air when natural-gas wells, drilled using hydraulic fracturing, or fracking, are being prepared for production.

The EPA is proposing to reduce the emissions by requiring the use of special equipment to separate oil and gas from a mix of fracking fluids and water that flows to the surface during one stage of well completion.

Certain states, such as Wyoming and Colorado, already require the use of this equipment.

The EPA says these proposed standards will eventually save the oil and gas industry about $30 million a year. That's because the standards will force companies to collect the hydrocarbons, which they can then sell.

Hydraulic fracturing already receives a lot of scrutiny from lawmakers, regulators and environmental groups because of its possible impacts on drinking water.

The proposed rules announced Thursday would apply to more than 25,000 wells a year, as well as to storage tanks and other pieces of equipment used by the oil and gas industry.

The EPA estimates the proposed rules will reduce smog-forming volatile organic compounds emitted by the oil and gas industry by 25%. They should also reduce methane emissions by 26% and air toxins by nearly 30%.

The EPA undertook this new rule-making after a pair of environmental groups successfully sued the agency to update clean-air standards for the oil and natural-gas industry. The agency is under a court-ordered deadline to finalize the rule by February.

"We are seeing oil and gas development take a tremendous toll on clean air," said Jeremy Nichols, director of the climate and energy program for Wild Earth Guardians. "Our health and environmental safeguards are woefully outdated."

The American Petroleum Institute, a group representing the oil and gas industry, asked the EPA to postpone the finalization of the rules by six months.

"API will review these proposed rules to ensure that they don't inadvertently create unsafe operating conditions, are cost effective and truly provide additional public health benefits," said Howard Feldman, API's director of scientific and regulatory policy.

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

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Vantage Proposes Senior Notes Offer

- Vantage Proposes Senior Notes Offer

Friday, May 20, 2011
Vantage Drilling Co.

Vantage announced that its wholly-owned subsidiary Offshore Group Investment Limited (the "Issuer") intends to offer, subject to market and other conditions, $225.0 million in aggregate principal amount of 11 ½% Senior Secured First Lien Notes due 2015. The Notes will be offered as additional notes, commonly referred to as a "tack-on bond," under the indenture pursuant to which the Issuer previously issued $1.0 billion of 11 ½% Senior Secured First Lien Notes due 2015 in July 2010. The Notes will be guaranteed by Vantage and each of Issuer's existing and future subsidiaries and by certain of Vantage's other subsidiaries, and will be senior secured obligations of the Issuer and the guarantors.

The Issuer expects to use the net proceeds from this offering, if completed, to purchase from Vantage the wholly-owned subsidiaries of Vantage which own the Aquamarine Driller and related drilling contracts (the "Acquisition"), as well as for general corporate purposes. Vantage expects to use the proceeds from the Acquisition to (i) repay and terminate its outstanding term loan secured by the Aquamarine Driller, (ii) make the initial payment to Daewoo Shipbuilding and Marine Engineering Co., Ltd under Vantage's recently announced construction contract for an ultra-deepwater drillship, to be named the Tungsten Explorer and (iii) for general corporate purposes.

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State Senate Proposes Impact Fee on Gas Drillin

State Senate Proposes Impact Fee on Gas Drillin

Friday, April 29, 2011
Knight Ridder/Tribune Business News
by Brad Bumsted and Andrew Conte, The Pittsburgh Trib

The ranking Republican in the state Senate today proposed an impact fee on Marcellus shale gas drilling, of which an estimated 60 percent would go to counties and municipalities with deep wells as well as townships and boroughs neighboring drilling production sites.

The fee would be used to help cover damage to roads and bridges, maintenance and improvement costs for water and sewage systems and emergency responder costs, said Senate President Pro Tempore Joe Scarnati, R-Jefferson County.

The other 40 percent would be split between conservation districts statewide and environmental funds for clean up and infrastructure, Scarnati said.

The exact breakdown of revenue from the fee is still subject to negotiation in a bill that Scarnati hopes will be ready for a vote in early June. The bill could be introduced as soon as next week.

The baseline fee is $10,000 per well, but it would be adjusted based on gas volume and the price of gas. The average fee per well would be about $25,000 in 2011, according to Scarnati's office.

The fee would be retroactive for 2010 and raise $45 million for last year. It will bring in $76 million this year and will rise to at least $150 million by 2014, Scarnati said.

The legislation was much anticipated because of Scarnati's stature in legislative leadership and because Republican Gov. Tom Corbett has said flatly he will not consider a tax that brings money into the General Fund.

"I have to believe this is in the sweet spot of where I believe most legislators will be," Scarnati said.

Moreover, he said it would be difficult to pass a state budget without some sort of levy on the burgeoning industry.

"I can't see how we get a state budget done without bringing some dollars in from this industry," he said.

The fees will not be used to balance the budget, which is $4.2 billion in the red. But the political dynamic of lawmakers voting for cuts requires a fee on the industry, he said.

Statewide polls show widespread support for a tax on shale drilling -- 69-22 percent in favor in a recent Quinnipiac University poll.

Scarnati said it is a fee and not a tax because the money does not go to the General Fund. There also are no exemptions as typically exist with shale extraction taxes, he said.

"What's the difference between a fee and tax? Governor Corbett's pen," Scarnati said. "That will be the ultimate test."

He said he had lunch with Corbett on Monday.

"At this point, I have a caution light," Scarnati said today in a phone conference with reporters. "I don't have a red light. I don't have a green light."

Marcellus drillers are open to an impact fee that provides money for local communities as long as it's "clear, straightforward and competitive," Kathryn Klaber, president of the Marcellus Shale Coalition trade group, said in a statement.

"Our industry understands that, while there are tremendous financial opportunities in Marcellus Shale development, there also can be impacts felt by our host communities," Klaber said.

"We support the concept of a fee with portions for local government and conservation and most importantly strong but consistent local regulations as part of this approach," said Matt Pitzarella, a spokesman for Range Resources.

"The devil is and will always be in the details and we eagerly look forward to seeing and reviewing those particulars, but we remain supportive of the concept."

Begich Proposes Federal Coordinator for OCS

Begich Proposes Federal Coordinator for OCS

Monday, March 28, 2011
Alaska Journal of Commerce
by  Tim Bradner

Alaska U.S. Sen. Mark Begich told the Alaska Legislature he will introduce legislation establishing an Arctic outer continental shelf federal coordinator and creating a joint regional lease and permit processing office for Alaska's OCS region, modeled after the federal gas pipeline coordinator position.

The new federal coordinator would have authority to work across many agencies involved in permitting, including the U.S. Environmental Protection Agency, U.S. Army Corps of Engineers and the Interior Department.

The bill would be introduced soon, Begich spokeswoman Julie Hasquet said.

Begich spoke in Juneau in his annual address to the Legislature.

"The federal OCS coordinator would work with the state of Alaska and affected local governments to streamline development in the Chukchi and Beaufort seas, which hold such promise for future oil and gas development," Begich said.

He also urged serious discussion of which federal agency should have jurisdiction over air permitting.

Begich argued for federal air quality permit authority in the Arctic OCS region to be brought under the Department of the Interior, which now has jurisdiction over air permits in the Gulf of Mexico.

This would take away the U.S. Environmental Protection Agency's current authority for air quality permits in the Arctic OCS.

An air quality permit for Shell's proposed exploration in the Beaufort Sea is now bogged down in appeals before the Environmental Review Board, an internal EPA appeals panel.

"We need to address the two different air permitting systems in the country. There are currently two processes and two different federal agencies overseeing air permits -- one for the Gulf of Mexico and one for everyone else -- including the Arctic," Begich said in his speech. "This makes no sense. It's not fair and it puts companies with projects in the Arctic at a competitive disadvantage. We need to level the playing field. It's time to move all air permitting under the Interior Department."

Shell reacted favorably to Begich's suggestions.

"The senator clearly understands the challenges facing responsible operators, like Shell, as well as the need for a regulatory process that is predictable and accountable," company spokesman Curtis Smith said in a statement. "A federal OCS regional coordinator for Alaska could go a long way in making that happen. Shell has already spent five years and over $50 million trying to secure an air permit for our drilling rig but with no success. The Senator's effort to align Arctic air permitting under the Department of Interior, as it is in the Gulf of Mexico, is one Shell supports."