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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N.J. Pressures River Panel to Adopt Gas Rules

- N.J. Pressures River Panel to Adopt Gas Rules

Friday, July 15, 2011
The Philadelphia Inquirer
by Sandy Bauers

New Jersey is playing hardball with an interstate commission considering rules on natural gas drilling affecting the Delaware River.

At two recent meetings of the Delaware River Basin Commission (DRBC) -- one of them Wednesday -- the New Jersey representative, John Plonski, said the state might withhold payments to the financially strapped commission if it failed to vote on the rules at its next meeting, in September.

Critics said the state was improperly engaging in strong-arm tactics.

"It's shocking that a state would pull this kind of bullying tactic that amounts to extortion," said Tracy Carluccio of the Delaware Riverkeeper Network, an environmental-advocacy group.

A spokesman for the New Jersey Department of Environmental Protection, where Plonski is the assistant commissioner for water resources management, said Plonski merely wanted the commission to act.

"All we're doing is putting a little pressure on the DRBC, saying let's make sure that you don't sit on this issue, that you assess it properly and come to a decision," said Larry Ragonese.

"The No. 1 complaint about government is that it does not act," he said. "We're trying to have government be responsive in a timely fashion."

The industry has consistently urged the commission to act so that drilling can proceed.

The DEP comments struck Jeff Tittel of the New Jersey Sierra Club as disingenuous. "Then how come they don't act" on other environmental measures, Tittel said. "Want me to go down the list of things they're holding up?"

When it comes to environmental protection, the DEP waits, he said, "and when it comes to what polluters want, they think, we've got to hurry up and do it."

The commission, an interstate agency formed by a federal compact, regulates water quality and quantity in the area drained by the Delaware River and its tributaries, which collectively provide drinking water to Philadelphia and New York City.

Its five members are states with land in the basin -- Pennsylvania, New Jersey, New York, and Delaware -- plus a representative from the Army Corps of Engineers.

Most of the upper basin is atop the Marcellus Shale formation, rich in natural gas. Thousands of drilling leases have been filed in northeastern Pennsylvania within the watershed.

The commission has enacted what amounts to a moratorium on gas drilling in the basin until regulations are in place, and that has led to a tug-of-war not only about the regulations but also how fast the commission should adopt them.

In December, the commission proposed a set of regulations that environmental groups said were weak and the industry said were onerous and unnecessary.

A public comment period that would have ended March 15 was extended to April 15.

By then, the commission had received nearly 70,000 submissions. Now, the staff is categorizing them and preparing a document to respond to them, DRBC spokesman Clarke Rupert said.

Next, revisions might have to be made to the proposed rules.

Rupert said that he could not speculate how long this would take, but that for months the commission staffers have been saying that the earliest they could have something ready for the commission to vote on would be its September meeting.

Whenever the staff work is completed, the commission has a number of options. It could vote on what is presented. Or, if significant revisions are proposed, it could vote to seek more comment.

"Shouldn't the timing of the release of the natural gas rules be based on a careful review and scientific analysis of the comments that were received by the commission?" Carluccio said. "Not when one state arbitrarily sets a deadline."

Ragonese said that New Jersey also wants the regulations to be based on science and fact, and that DEP Commissioner Bob Martin has always said he wants to protect the river.

"We think a lot has been brought to them," Ragonese said. "They have had good time to consider it. We would really like to get something moving."

Pennsylvania and New York officials declined to comment. A spokesman for the Army Corps said its representative would be prepared to vote at the September meeting; he did not say what the vote would be.

The Delaware representative on the commission, Kathy Stiller, water director for the Department of Natural Resources and Environmental Control, said: "We are still looking at the deadline issue and haven't taken a position on it yet. Delaware's goal is to make sure we get the regulations technically correct. We do recognize that some guidance needs to be in place sooner rather than later."

If New Jersey were to withhold funds, the commission could be in a tight spot.

Under the compact, each of the five members pays a "fair share" of the annual budget. For the fiscal year that began July 1, the amounts were $893,000 each for Pennsylvania and New Jersey (25 percent of the total each), $626,000 for New York (17.5 percent), $447,000 for Delaware (12.5 percent), and $715,000 for the federal government (20 percent).

But although the commissioners commit to these amounts, they may never be funded.

With the exception of one year since 1996, the federal government's amount has never been appropriated. The U.S. government is more than $9 million in arrears.

New York's fiscal year began April 1, and it appropriated $355,000, slightly more than half its share.

Pennsylvania, Delaware, and New Jersey have budgeted their full amounts.

Even with that, the commission had to make up a shortfall of more than $400,000 this year, Rupert said, from "undesignated reserves."

Meanwhile, even as the Christie administration is pushing for the DRBC to act, state legislators want to put the brakes on the industry.

On June 29, the Assembly and Senate overwhelmingly passed legislation to prohibit a gas-extraction method known as hydraulic fracturing -- or "fracking" -- in the state. In effect, it would ban most drilling in the state.

Gov. Christie has a 45-day window to act on the legislation.

Copyright (c) 2011, The Philadelphia Inquirer

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Stronger Offshore Safety Rules Are Looming

- Stronger Offshore Safety Rules Are Looming

Thursday, June 23, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The government is poised to propose new rules that aim to boost the safety of offshore drilling and tighten standards for emergency equipment guarding subsea wells, a top regulator said Wednesday.

The looming rules will build on already broad changes that the Bureau of Ocean Energy Management, Regulation and Enforcement has imposed since last year's Gulf oil spill, agency director Michael Bromwich said in a speech before the World National Oil Companies Congress in London.

For instance, regulators are planning to add teeth to a workplace safety rule they imposed last October requiring oil and gas companies to identify risks at every stage of offshore exploration and take steps to minimize human errors and operational hazards. That rule for the first time is forcing companies in U.S. waters to have safety and environmental management systems like those required in the North Sea.

The rules will require additional safety procedures, training programs and strengthened third-party auditing procedures, Bromwich said. The bureau is also readying new mandates for the blowout preventers, a last line of defense against un-expected oil and gas surges.

"Our goal will be a further set of enhancements that will increase drilling safety and diminish the risks of a major blowout," Bromwich said. "It will address weaknesses and necessary improvements to blowout preventers, as well as many other issues."

The regulations may include mandates governing the design of offshore wells and new standards for cement barriers.

For months, Bromwich has signaled that the new regulations are coming but insisted that they will go through a lengthy federal rule-making process, with time for public comment and guidance from interested stakeholders.

Industry leaders have complained about the shifting regulatory landscape since last year's spill and insisted companies need more certainty to plan investments. Many industry representatives objected to the pace of changes .

Copyright (c) 2011, Houston Chronicle

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Under New Rules, Chevron Ramps Up Activities in US Gulf

- Under New Rules, Chevron Ramps Up Activities in US Gulf

Thursday, June 02, 2011
Dow Jones Newswires
by Isabel Ordonez

Within the maze of gray tanks, pipes and machinery that make up this gigantic oil platform rising from the sea is a small red rectangle about the size of a wine bottle, with a rapidly clicking numeric panel. Rick Bullock, who runs Chevron's deep-water production operations, calls it "the cash register."

The instrument counts every barrel of oil the Tahiti platform, located 190 miles south of New Orleans, pulls from miles beneath the sea floor. During a visit last Friday, the meter showed the field was producing oil at the tune of about 109,000 barrels a day. With oil prices hovering at $100 per barrel, that's about $10 million a day flowing into the coffers of Chevron, which owns 58% of the field, and its partners Total and Statoil.

Making sure the money keeps rolling out of Tahiti is crucial for Chevron, at a time when oil prices are high and the company has ambitious growth projections to meet. The company aims to grow worldwide output this year by 1% to 2.79 million barrels of oil equivalent per day and to 3.3 million barrels of oil equivalent by 2017, or 19% more than it produced last year. That's a prodigious ramp up, especially as it navigates an array of new regulations that have slowed drilling in the U.S. Gulf of Mexico, one of its main theaters of operation. The regulations came in the wake of last year's massive oil spill, which also resulted in a nine-month-long drilling suspension.

Now Chevron, the second-largest U.S. oil company after ExxonMobil, has to cram more work into less time to meet its expectations even as its engineers try to grasp the new rules, a scramble that underscores how oil and gas producers in the Gulf's deep water are adapting to a new legal environment.

The San Ramon, Calif., oil giant is so concerned about the sluggish pace that it is considering contracting more drilling ships than it originally intended in order to meet its 2013 deadlines for the Tahiti expansion and the 2014 start up of two massive ultra deep-water fields, Big Foot and Jack/St. Malo, located 35 and 140 miles south of Tahiti, respectively.

"It's probably a fact that we are going to have to bring additional drill ships into the Gulf of Mexico to be able to meet that schedule," Warner Williams, Chevron's vice president for the Gulf of Mexico Business Unit, said in an phone interview. Williams didn't specify how many more rigs the company could add. Chevron currently has three rigs doing development and exploratory drilling in the Gulf.

With the arrival of hurricane season, which started Wednesday and lasts through November, Chevron and other companies face even more pressure as the presence of a storm could result in lengthy evacuations and lost work days.

Chevron was among the first oil companies to receive government approval to drill back in the Gulf's deep water, including here, where the Transocean's Discovery Clear Leader drillship can be seen floating a few miles from the platform, doing work that will allow the field to increase production to 150,000 barrels a day in 2013. But the company still has 10 development and exploration plans and approximately 15 drilling permit applications pending approval elsewhere in the Gulf.

"The pace of the permitting process has been slow. It's clear we are not where we need to be," Williams said. "We would like the process to go a little bit faster." The federal government says it is approving permits as fast as it deems safe.

Energy consultancy Wood Mackenzie said the drilling suspension, along with a new, more time consuming permitting process, will result in the loss this year of about 375,000 barrels of oil a day--or 20% of previously estimated production levels.

"Nobody really knows when things in the Gulf are going to be back to what we called a new equilibrium," said Mohammad Rahman, Wood Mackenzie's analyst for the Gulf of Mexico. "Our previous assumption was it will be some time in 2012, but now it could be 2013 when we see a more stable, consistent level in permitting process."

The main reason for the slowdown in the permitting process is that the Department of Interior's Bureau of Ocean Energy Management, Regulations and Enforcement--the federal agency on charge of offshore operations--doesn't have enough regulators to handle the backlog of projects, Rahman said.

The bureau, which was created after the oil spill, is still in the midst of a reorganization, Rahman said.

Melissa Schwartz, a spokeswoman for the agency, said the government "is working as expeditiously as is safely possible to approve exploration plans and permits."

It began approving permits in February, when two oil deep-water oil spill containment systems were deemed operationally ready by the authorities.

Tahiti, discovered in 2002, is one of the largest fields in the Gulf, with 400 million to 500 million barrels of oil equivalent in recoverable resources. Oil production, which began two years ago, accounts for about 64% of Chevron's total output in the Gulf.

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

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New Fracturing Disclosure Rules May Take Awhile

- New Fracturing Disclosure Rules May Take Awhile

Wednesday, June 01, 2011
Houston Chronicle
by Tom Fowler

Texas lawmakers have passed a bill requiring disclosure of most of the chemicals used in hydraulic fracturing, a natural gas and oil production technique that has been a source of contention in some communities over the past year.

A final version of the bill sent to Gov. Rick Perry on Tuesday requires oil and gas well owners to file online forms detailing the chemicals that are mixed with sand and water and then pumped into wells at high pressure to break apart dense shale formations.

Opponents say the materials, often called frac fluids, can contaminate ground water supplies -- a worry the industry says is unfounded.

It may be up to two years before the law takes full effect, as the Texas Railroad Commission has to write the rules and submit them to public comment.

Commission Chairman Elizabeth Ames Jones said Tuesday the agency will begin crafting the rules soon, but the law gives it until July 1, 2013, to approve them. The Railroad Commission is the state's chief oil and natural gas regulator.

"A commonsense frac fluid disclosure policy will balance the Railroad Commission's dual mission to prevent the waste of Texas' energy resources, and to protect the environment and the public's health and safety," Jones said.

Under existing rules, companies must list just some of the chemicals used in fracturing on Material Safety Data Sheets, documents kept on worksites to help officials respond to emergencies such as spills or accidental exposures to hazardous chemicals. Some chemicals are exempt if the companies claim they are trade secrets, while others simply aren't covered by the requirements.

The industry voluntarily has begun sharing fracturing fluid information from the data sheets for specific wells through a website, FracFocus.org, in response to public concerns about hazardous chemicals.

The new Texas law makes that reporting mandatory for all wells drilled in Texas, and will require listing of chemicals not currently required on the data sheets.

The new law still exempts chemicals deemed trade secrets, but the landowner where the well is drilled, an adjacent landowner or a state agency can appeal the exemption.

The bill, introduced by Rep. Jim Keffer, R-Granbury, is the result of negotiations among industry, environmental groups and lawmakers.

A version of the bill discussed last week would have made it more difficult for the public to access some of the information by requiring reports be filed just with the Railroad Commission. But an amendment introduced by Rep. Lon Burnam, D-Fort Worth, required disclosure on public websites.

The Texas Oil and Gas Association praised the bills.

"As a result of the state's leadership, Texas will become a game changer when it comes to debunking myths or misconceptions about hydraulic fracturing," said Debbie Hastings, vice president of environmental affairs for the group. "The transparency and accessibility achieved by this legislation will reinforce how and why hydraulic fracturing has been safely used for more than 60 years."

The Environmental Defense Fund gave the bill mixed reviews, saying it's a milestone in some ways but has shortcomings that should discourage other states or the federal government from adopting it without revision.

"It represents a major shift in the debate because for the first time industry and Republican lawmakers acknowledge that disclosure should be mandatory and that it should address all fracturing chemicals that may be harmful to public health and the environment," said Matt Watson, senior energy policy manager for EDF. "Texas and the nation will be better off for it."

But it leaves the decision on disclosure exemptions with the Texas Railroad Commission, which Watson said tends to favor business interests.

The long timetable for new rules is also a concern, Watson said.

Ramona Nye, a spokeswoman for the Railroad Commission, said the commission "has discretion regarding this process for any particular rule-making and may hold workshops, stakeholders meetings or other opportunities to gather information before drafting a rule proposal."

Chairman Jones' chief of staff, Andrew Keefer, said discussions of the new rules may begin in late June.

"The intent is to get it done as quickly as possible," Keefer said, but public comments can drag the process out.

Copyright (c) 2011, Houston Chronicle

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EPA to Shed Light on Fracturing Rules

EPA to Shed Light on Fracturing Rules

Wednesday, April 27, 2011
Houston Chronicle
by Jennifer A. Dlouhy

Federal regulators will soon clarify the rules for natural gas companies that inject diesel fuel into the ground as part of their hydraulic fracturing operations, the head of the Environmental Protection Agency said Tuesday.

The guidance, which EPA Administrator Lisa Jackson says is coming "very shortly," is meant to clear up rules for natural gas producers.

A congressional investigation concluded earlier this year that companies have not secured EPA permits before injecting more than 32 million gallons of diesel fuel and other fluids into the ground in fracturing operations between 2005 and 2009.

States historically have regulated hydraulic fracturing. The technique involves injecting mixtures of water, sand and chemicals including diesel fuel deep underground at high pressures to break up dense shale rock and release gas locked in it. Although Congress exempted most hydraulic fracturing activities from EPA's jurisdiction as part of a 2005 rewrite of the Safe Drinking Water Act, that exception does not apply to diesel -- even though the government only began to regulate it last year.

Jackson insisted that the EPA has authority to regulate diesel fuel in fracturing fluids.

"Our belief is that this is not exempt," she said. "That exception specifically says that diesel is not exempt. So if you are injecting diesel, that is a concern."

Environmental worries

The move comes amid mounting environmental fears about the hydraulic fracturing process, which is being combined with horizontal drilling techniques to extract previously unrecoverable natural gas from shale formations across North America.

Conservationists are concerned about the high water demands of fracturing. Environmentalists warn that natural gas can escape out of poorly designed wells and that chemicals in fracturing fluids can taint nearby water sources.

A blowout at a Chesapeake Energy natural gas well in Pennsylvania last week renewed those fears. The incident prompted the company to temporarily stop hydraulic fracturing in the region.

Easing public concerns about the process is key to natural gas development, said Gene Sperling, the chairman of the White House's National Economic Council.

Speaking at an Energy Information Administration conference, Sperling said the energy industry should embrace "common-sense regulation that builds the public trust" that fracturing does not put at risk clean or safe drinking water.

Industry representatives broadly have argued against federal regulation of hydraulic fracturing and insist state officials are better positioned to oversee the work. Although some oil field services companies and natural gas producers have begun voluntarily providing details about the ingredients of their fracturing fluids, there is no federal mandate for that disclosure.

Backing from Shell

Marvin Odum, the president of Shell Oil Co., said the company "supports regulations that require companies to disclose the chemicals they use in the process ... and adhere to the highest safety standards."

"Responsible operators should have no problem complying," Odum added.

Odum said that Shell is working toward a goal of recycling 100 percent of the water it uses in its hydraulic fracturing operations.

He insisted that hydraulic fracturing techniques can be used to extract natural gas safely.

"Make no mistake," he said. "It can be done without harming the environment. Anything less is unacceptable."

Government Tries to Clarify Offshore Drilling Rules

Government Tries to Clarify Offshore Drilling Rules

Tuesday, March 29, 2011
Houston Chronicle

by  Jennifer A. Dlouhy

 

The federal government on Monday issued a five-page memo meant to clarify rules for offshore drilling, in response to oil and gas industry complaints that new mandates imposed since last year's Gulf spill are muddled.

The federal Bureau of Ocean Energy Management, Regulation and Enforcement also said it would reopen a public comment period to help guide the agency's possible rewrite of a drilling safety rule put in place last October.

"Our goal remains the same as it has been from day one: to ensure that offshore operations are conducted as safely as possible," said Michael Bromwich, the bureau's director. "This guidance document gives deep-water drilling operators additional information to help address some of the recurring issues that have been raised in our ongoing discussions with industry."

The document covers several areas but focuses on a major source of industry complaints: confusion about the wording of the October offshore drilling safety rule. That measure adopted two sets of recommended practices for emergency equipment and well design that had been developed by the American Petroleum Institute.

The problem was that instead of rewriting those mandates in their own words, government regulators simply referenced API documents and specified that any time the API recommended practices said "should" it now meant "must" under the interim drilling safety rule.

Industry representatives complained that the changes affected more than 14,000 discretionary provisions in 80 different standards, and in some cases, those new requirements were conflicting.

For instance, API's recommended well construction practices sometimes offer operators an array of options that might make sense, but the language of the rule seemed to make all of those options mandatory.

"There are areas where it says you should do this or you should do that," said Al Reese Jr., the chief operating officer of Houston-based ATP Oil & Gas. "But I can't turn left and turn right at the same time."

His company navigated the process and received a permit to resume a deep-water pro-ject in the Gulf of Mexico.

A positive step

The new guidance document clarifies that operators are allowed to select "any of the appropriate options," without getting special permission from the bureau.

It also suggests that oil and gas companies maintain documentation demonstrating they evaluated the recommended practices, even when the government's rule doesn't make them mandatory.

Erik Milito, the upstream director at the American Petroleum Institute, called the announcement a positive step.

"Ensuring a clear, consistent and efficient process for offshore regulatory requirements and for approvals of permits is a crucial component to steadily increasing offshore production," he said.

'Departure documents'

With Monday's memo, the ocean energy bureau also formalized a process it has used in approving six deep-water drilling projects in the Gulf of Mexico -- "departure documents" that specify how individual operators are not strictly following the API recommended practices incorporated in the drilling safety rule.

The ocean energy bureau said that whenever oil companies intend to deviate from the recommended practices incorporated in the rule, they must get approval to use alternate procedures or equipment.

The bureau said that it is evaluating potential revisions to the drilling safety rule "in light of comments received from the public and other considerations."

The government said that it will reopen the public comment period, probably within a month, giving people another chance to tell the bureau what works and what doesn't.

Any rewrite of the rule would take months, or longer.