The ‘States First’ earthquake primer, even lower natural gas prices, US oil & gas glut still growing, et al.
from rjs's own blog:
http://focusonfracking.blogspot.com/2015/10/the-states-first-earthquake-primer-even.html
There was quite a bit of news coverage this week on the release of a 150 page "earthquake primer" by Ohio and 12 other fracking states which was supposedly issued to offer guidance to regulators on how to handle earthquakes caused by fracking or wastewater injection wells...the report was the final output of a working group on induced seismicity that was formed by said states in late March of 2014, just about the same time the Ohio Department of Natural Resources discovered that earthquakes that struck Poland Township were caused by a fracking operation with 7 laterals at the same depth at the same time and location as the earthquake, and this working group was in fact co-chaired by ODNR Oil & Gas Chief Rick Simmers, who was responsible for shutting down that Hillcorp Poland operation, and who issued new Ohio seismic drilling guidelines at that time...
No doubt there's a lot of useful information in the report (148 pp pdf), since it includes contributions from experts from universities, industry, federal agencies, and NGOs, but we want to caution against seeing this as being the beginning of any positive action against such fracking induced quakes, which is what many of the news headlines on the report implied....to start with, the participants in the group include the same oil & gas regulators from Texas, Oklahoma, and other states who have long & deep ties to the energy industry and who've been on the forefront of the attempts to sweep the fracking / earthquake relationship under the rug...furthermore, the report was released by "States First Initiative," a lobby organization formed against federal regulation of the industry...indeed, in their fact sheet they make it clear that their Seismicity Primer is an informational document, and its not intended to offer or recommended rules or regulations...so it seems like this is just an effort by industry friendly regulators to get out in front of the fracking earthquake issue and head off any regulations by appearing that they have the situation under control...
The Week in Oil and Gas: Storage Glut Growing
The near term contract price for natural gas fell by nearly 10% this week, apparently due to a change in the near term weather forecast....the contract for natural gas for November exchange at the Henry Hub in Louisiana had closed up at $2.672 per mmBTU on Monday on a weekend forecast that temperatures in the Midwest and Northeast would be normal or below normal, but they fell midweek as forecasts were revised to show above-normal temperatures for large parts of the country over the first two weeks of October...the weekly natural gas in storage report on Thursday showed inventories in underground storage rose by 98 billion cubic feet as of September 25th to 3,538 billion cubic feet, putting stockpiles 4.5% higher than the 5 year average for the 4th week of September, and although that was what traders had been expecting, prices continued to fall anyway, to close Thursday at $2.433 per mmBTU, before finally steadying on Friday to close the week at $2.451 per mmBTU...meanwhile, oil prices stayed in a narrow range near $45 a barrel, close to where they've been since August....so you can get a visual perspective of the gas price change, we'll include below a one year chart of the near term contract price for natural gas, which is probably a better indicator of the likelihood of drilling in our region than is the price of oil...
The graph above shows the benchmark contract price for natural gas based on the price per mmBTU at Henry Hub, Louisiana, daily over the past year....(note gas is also sometimes quoted in mcf = thousand cubic feet = 1.028 x mmBTU = million BTU)...even though natural gas prices were not affected by the OPEC driven global glut like oil prices, they've been down similarly, largely due to North American overproduction...two years ago, it was widely believed that the breakeven price for shale gas in Pennsylvania was over $4 mmBTU, and that those that continued to produce below that price were surviving by selling liquid bi-products...it's obvious from that graph that gas producers have continued to produce a surplus even as gas prices fluctuated between $2.80 and $3.20 mmBTU most of this year, although as we pointed out, most of them lost money doing so in the 2nd quarter...
this is not the first time natural gas prices have crashed to this level...in 2005, before fracking became widespread, US spot prices for gas fluctuated in the $10 to $15 mmBTU range, but after more than 1000 gas rigs began to produce a glut of gas they fell below $5 mmBTU in 2009 and ultimately crashed below $2 mmBTU after the mild winter of 2012, at which time fracking has its first major shakeout and the number of working natural gas rigs was cut in half...we'd suggest there are signs a similar shakeout may be underway now, and that at these prices, some operators don't even want to produce from some already producing wells...recall that in August, Chesapeake Energy, the operator of more than half of Ohio's wells, announced announced that they were putting their Ohio natural gas production on hold until such time as the Ohio Pipeline Energy Network is completed, when they'd be able to ship it to the Gulf coast for exports....a week ago, Stone Energy, a Marcellus producer, shut in their West Virginia natural gas production...so it's clear that natural gas prices have reached a level where the producers of it don't even want to sell what they can easily produce, and a lot are holding what they have off the market...so it's unlikely that any new exploration not already contracted for will go forward if prices remain near these levels...
while natural gas will soon be seeing the time of year when it's being withdrawn from storage for use in heating, the opposite is true of oil, as refineries are slowing down at the end of the driving season, while crude output remains largely unchanged....but while an increase in oil inventories was to be expect, the near 4.0 million barrel increase from last week in this week's report was more than anyone expected...US stocks of crude oil in storage, not counting the government's Strategic Petroleum Reserve, rose to 457,924,000 barrels as of September 25th, from 453,969,000 barrels as of September 18th...that was the largest one week jump in oil inventories since the week ending April 17th, and left us with 28.4% more oil in storage than we had in the 4th week of September a year ago...that was also the most oil we ever had stored in late September in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...moreover, our end of week supply of gasoline in storage rose almost as much, from 218,756,000 barrel last week to 222,010,000 this week, and those supplies are now very near the upper limit of the average range...in addition, the weekly Petroleum Status Report (62 pp pdf) indicates that propane/propylene inventories rose 1.7 million barrels last week and are also well above the upper limit of their average range, while distillate fuel inventories decreased by 0.3 million barrels last week, but are still in the middle of the average range for this time of year...thus we have not only a glut of crude oil, but are developing a glut of refined products as well...
the bulk of the increase in crude inventories came not from new production but from additional imports of crude oil, which were up by 378,000 barrels per day to 7,554,000 barrels per day in the week ending September 25th...that was 3.7% higher than the same week last year, but our 4 week average of imports was still at 7.3 million barrels per day, 1.7% below the same four-week period last year...our field production of crude was down a bit, from 9,136,000 barrels per day for the week ending September 18th to 9,096,000 barrels per day during the week ending September 25th, after it was up slightly last week...that's now about 5.3% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this year, and only 2.9% above our production rate of 8,837,000 barrels per day in the 4th week of September a year ago...we should point out though, that as we cover the weekly stats provided by the EIA, the EIA also releases monthly oil production data that is considered revised and hence more accurate, which showed oil output for July at 9,358,000 barrels per day in the latest report, up 1% from 9,264,000 barrels per day in June, and 7% ahead of a year earlier...
while our supply of oil was thus up due to the increase in imports, the demand for it fell, as refinery inputs of crude oil fell below 16 million per day for the first time since April, as refineries used just 15,962,000 barrels per day during the week ending September 25th, down from 16,203,000 barrels per day in last week's report...refinery utilization was even weaker, as the refinery utilization rate fell to 89.8%, down from 93.1% of capacity just two weeks ago, and the first time that refinery capacity utilization had dropped below 90% since March...even so, gasoline production still increased over last week, averaging about 9.7 million barrels per day, as output of distillates and other products were down slightly...
Latest Rig Counts
meanwhile, according to Baker Hughes, this week saw the largest reduction of drilling rigs since April 17th, and the largest drop in oil rigs since the week before that...there were 29 fewer rigs operating in the 50 states in the week ending October 2nd than the week before, with total oil rigs down by 26 to 614, net gas rigs down by 2 to 195, while the single miscellaneous rig started last week also shut down...3 rigs that had been working in offshore waters were among those shut down this week; two from the Gulf of Mexico and a widely opposed Shell oil rig in Alaska...that left 30 rigs still in operation offshore; 29 in the Gulf and one off the shore of California, down from a total of 61 a year earlier...two rigs that had been operating on inland lakes were also idled, leaving just 3 on inland waters, down from 11 a year earlier...
horizontal drillers again saw the largest reduction, as the net count for that type of rig was down 20 to 609, and down from the 1341 horizontal rigs that were operating in the same week last year...active vertical rigs were also reduced, from 123 to 117, now well down from the 372 vertical rigs that were drilling a year ago...and directional rigs fell also, down by 3 to 86, also down from the 211 directional rigs that were deployed last year at this time...
the most active shale basin, the Permian basin of west Texas, saw the largest reduction of rigs, as the count there was down by 5 to 245, which was also down from 556 rigs a year earlier...three more basins saw reductions of 3 rigs each; the Eagle Ford of southeast Texas was down to 82, and down from 210 in the same week last year; the Niobrara Chalk of northeast Colorado and southeast Wyoming was down to 26, and down from 64 rigs a year ago, and Oklahoma's Cana Woodford, which was down to 37 and down from 42 a year earlier, thus marking the first time rigs in that basin fell below their year ago level...also in Oklahoma, the Ardmore Woodford saw 2 rigs idled, leaving 2, down from 4 last week and 4 a year ago...2 rigs were also stacked in the Marcellus, which now has 47, down from 82 in the first week of October last year...1 rig was also pulled from the Williston, leaving 66, down from 198 last year, while 1 rig was added in the Fayetteville of Arkansas, which now has 4, still down from 9 last year, and 1 rig was added in Ohio's Utica, which is back up to 21, but still down from the year ago 43...
the state totals appear to have followed the basin totals fairly closely this week...Oklahoma, down 8 rigs to 97 and down from 212 a year ago, saw the largest drop; they were followed by Texas, down 6 to 357, which was down from last year's 895...both Louisiana and New Mexico had 4 fewer rigs to deal with, with Louisiana down to 66 from last year's 113, and New Mexico down to 46 from last year's 99...3 rigs were idled in both Colorado and Pennsylvania, with the former down to 30 from 76 a year ago, and the latter down to 30 from 57 a year ago..although Alaska saw a reduction of two rigs, they still had 11 remaining, which was up from 9 last year, leaving them with the dubious distinction of being the only state to see a year over year rig count increase..two states saw reductions of 1 rig each: California, which at 13 was down from 46 a year earlier, and North Dakota, whose 65 rigs was down from last October 2nd's 189 rigs...rigs seeing an increase of 1 rig included Arkansas, up to 4 this week but down from 12 a year ago, Kansas, which was up to 10 but down from last year's 24, West Virginia, which was up to 18 this week but down from 30 a year ago, and last but not least Ohio, which was up to 20 rigs this week but down from 20 in the first week of October a year ago...rig counts in all other states remained unchanged from last week...
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Ohio Lawmakers Want To Indefinitely Freeze The State’s Renewable Portfolio Standard -- When Ohio Gov. John Kasich (R) signed a bill freezing his state’s renewable portfolio standard, it was widely accepted that he was offering the legislature — dominated by his own party — an opportunity to rethink destroying the policy. Now, a year later, the committee tasked with considering the RPS, which requires that a certain amount of Ohio’s energy come from renewable sources such as wind and solar, has come back: They still want a freeze. This puts Kasich, who is running for his party’s presidential nomination, in an awkward position. The freeze hurt Ohio’s nascent wind industry and turned off attractive investors, supporters say. Moreover, most Republicans actually support policies that encourage clean energy, and the governor might not be able to afford positioning himself in opposition to those voters. In fact, he responded quickly Wednesday to the committee’s proposal. “A continued freeze of Ohio’s energy standards is unacceptable,” Joe Andrews, a spokesman for the governor, told ThinkProgress in an email. The Energy Mandates Study Committee recommended freezing the renewable energy and energy efficiency standards — under which utilities were required to reduce consumption by 22 percent and get 12.5 percent of electricity from renewable sources — “indefinitely,” according to a draft of the report provided to ThinkProgress on Wednesday.
No action in Ohio fracking tax standoff as deadline arrives - WOWK (AP) - Compromise is still eluding members of the Ohio Legislature on Republican Gov. John Kasich's (KAY'-siks) proposed tax hike on oil-and-gas drillers. The extra time granted by legislative leaders to strike a deal with the powerful energy lobby is set to expire Thursday. In pulling the tax issue from the state budget in June, Senate President Keith Faber (FAY'-bur) and House Speaker Cliff Rosenberger said Oct. 1 was a "hard deadline" for resolution, not a stall tactic. Faber more recently cited market factors in complicating extended talks. The tax increase has been a priority for Kasich for years. The 2016 presidential contender says Ohio's severance tax on oil, natural gas and natural gas liquids is too low and proceeds of a tax increase could help reduce income taxes.
Ohio Senate president expects paper from panel studying Ohio fracking tax: (AP) — A tax policy commission studying Ohio’s oil-and-gas severance tax is likely to have a report with various recommendations in time to meet its deadline — even though at least some members were only just formally appointed, Senate President Keith Faber said Wednesday. Faber told reporters a “concept document” from the 2020 Tax Policy Study Commission could come on the deadline Thursday or on Friday. “They are going to produce what we asked them to do,” he said. Faber’s comments came the same day he first formally appointed Senate members to the commission, which was created in the state operating budget passed this summer. He said the group had been meeting informally since July, however. Advertisement Faber declined to say whether the document would call for increasing Ohio’s drilling tax, as Gov. John Kasich has advocated, or to hint at any other potential recommendations. He said the report would contain a review of the market environment for oil and gas, which is not the same as it was six months ago. The tax increase has been a policy priority of Kasich’s for years now. The Republican governor and 2016 presidential hopeful says Ohio’s severance tax on oil, natural gas and natural gas liquids is too low. He proposes raising it and using proceeds to reduce Ohio’s income-tax rate. The hike’s omission from the two-year, $71 billion state operating budget came as the latest political blow to Kasich on the issue. The increase he initially proposed early in his first term, which began in 2011, would have come amid a boom made possible by then-new hydraulic fracturing, or fracking, technology. Drilling in eastern Ohio’s mostly Utica Shale deposits is less rigorous now.
Ohio report on fracking tax misses deadline, work continues - A group studying Ohio’s oil-and-gas severance tax will miss a state budget-imposed deadline for releasing its report even after the state Senate president initially called it a “hard deadline” and told reporters it was likely coming this week. Ohio Senate spokesman John Fortney said Thursday that work continues on the report and the group is making progress. He didn’t know when a report would come, but cited a desire to “get this right.” The tax increase has been a priority of Gov. John Kasich for years. Kasich says Ohio’s tax on oil, natural gas and natural gas liquids is too low, and proceeds of an increase could help cut income taxes. In June, Senate President Keith Faber described Oct. 1 as a “hard deadline” for striking “meaningful compromise.”
Akron's drinking water supply surrounded by oil wells, a cash cow for the city - -- Akron earns hundreds of thousands of dollars each year from oil royalties thanks to over 216 oil and gas wells drilled on city-owned land, including the watershed that provides Akronites with drinking water. No fewer than nine oil wells ring the city's municipal water supply at Lake Rockwell, where the city leases to Texas-based drilling and oil production company GonzOil. The wells have been a cash cow for the city, depositing an average of nearly $375,000 per year in city coffers since 1997, but have offended environmentalists opposed to drilling and concerned citizens worried about what effect an accident at a well may have on surrounding areas. Since the Ohio Legislature revoked local authority over oil and gas drilling in 2004, Akron has signed at least 36 new oil and gas leases. As the city signed new leases under former mayor Don Plusquellic, new oil and gas money started flowing into the city after falling nearly $250,000 between 1997 and 2001. Besides the lake property, other leases signed in that period include a 4,100-foot-deep well drilled on about four acres at Firestone High School and a 3,000-foot-deep well on two acres at Stan Hywet Hall and Gardens. (Scroll down to see a full list)
Industry's investment in oil, gas could be better spent - Columbus Dispatch - The Sunday letter “ Oil, gas industry boosts local economy” from Rhonda Reda showed she represents her organization, the Ohio Oil and Gas Energy Education Program, well. However, it ignored the fact that clean air, clean water, and safe soil are our mutual, inherited, priceless resource, and that to risk them or pollute them for short-term private gain is immoral and shortsighted. If the same amount of money were invested in building community solar arrays, wind farms, homes upgraded for more energy efficiency and training local workers to do this work, we would be building a better long-term future for ourselves, our communities and our air, water and soil. Instead, fracking leads to financial gains for some, while disrupting communities and taking precious drinkable water permanently out of the watershed. Fracking is a boom-and-bust business, in which not everyone even benefits from the boom. For instance, when there is a boom in an area, lots of outside workers come in. Some landlords profit handsomely from higher rents, thereby causing hardship for local working people whose wages have not increased to cover higher rents. A study of drilling in Pennsylvania, West Virginia and Ohio, comparing counties with low, moderate and high levels of drilling, found higher rents, more traffic accidents, more sexually transmitted diseases and more crime in counties with high levels of drilling: www.multistateshale.org/shale-tipping-point. This is not surprising, as many workers from outside, away from their families, come to an area where they are doing dangerous work, are being exploited for rent, and are not connected to the community.
Ohio, 12 other states working to mitigate quake risks - Drilling - Ohio - – Thirteen states partnered through a multi-state initiative called StatesFirst this past year to share and summarize current knowledge related to earthquakes potentially caused by human activity, otherwise referred to as induced seismicity. Today, the work group comprised of members of state oil and natural gas and geological agencies and other advisory experts from academia, industry, non-profit organizations and federal agencies released a Primer to provide a guide for regulatory agencies to evaluate and develop strategies to mitigate and manage risks of injection induced seismicity. The Primer also outlines how states can best provide information to the public in a transparent and effective manner. “Induced seismicity is a complex issue where the base of knowledge is changing rapidly,” according to Rex Buchanan, work group co-chair and interim director of the Kansas Geological Survey. “State regulatory agencies that deal with potential injection induced seismicity should be prepared to use tools, knowledge, and expertise, many of which are offered in this Primer, to prepare for and respond to potential occurrences of induced seismicity.” The primer primarily focuses on potential induced seismicity associated with Class II disposal wells. Injection wells are currently regulated under the Safe Drinking Water Act through the Underground Injection Control Program (UIC). The UIC program through primacy delegation by the U.S. EPA, is administered by certain states due to their in-depth knowledge of local industry operations and geology. In its assessment, the work group observed that the majority of disposal wells in the United States do not pose a hazard for induced seismicity; however most cases of felt injection-induced earthquake activity has generally been associated with direct injection into basement rocks or injection into overlying formations with permeable avenues of communication with the basement rocks, and in proximity to faults of concern.
WKSU News: A more definitive word on earthquakes: They are linked to disposal wells: Disposal wells can cause earthquakes. That’s the word from this week’s gathering of state regulators and scientists in Oklahoma. The “StatesFirst Initiatve” -- a pooling of efforts by regulatory agencies of Ohio and the other big energy producing states — met in Oklahoma City and issued a primer on “human-induced seismicity.” It follows a more than year-long study and provides scientific data and best-practice suggestions for dealing with what amounts to man-made quakes. And, after the release, Oklahoma’s Secretary of Energy and Environment Michael Teague made the most definitive statement yet about controversial disposal wells. "We’ve had a huge increase here in the number of earthquakes above 3.0. And, we do think that they are tied to disposal wells. That may not be the case in all states, but certainly in Oklahoma, it is the cause.” The primer stresses that the facts and practical actions it lists must be applied case-by-case because geology differs greatly around the country. Ohio, with nearly 200 injection wells, organized the cooperative study idea and got kudos’s from Michael Teague, whose state has 4,200 such wells.“It’s really the result of a year and a half worth of work, and great leadership by Rick Simmers of Ohio, pulling this thing together. It was ...I think started with six states; and ended up with 13 states, and universities from across the country, and industry folks from across the country." Richard Simmers heads the Oil & Gas Division of the Ohio Department of Natural Resources.
US Drilling States Guided on Handling Quakes - A working group of U.S. drilling states, seismologists, academics and industry experts has issued guidance to state regulators for handling human-induced earthquakes caused by hydraulic fracturing or the disposal of fracking wastewater. The StatesFirst initiative's 150-page report was released Monday. It represents perhaps the most candid discussion on the topic since tremors across the mid-continent were first linked to fracking-related activity around 2009. But it stops short of suggesting model regulations. Ohio Oil & Gas Chief Rick Simmers, who co-chaired the effort, tells The Associated Press that's because each state's regulatory framework, laws and geography are unique. He described the report as a primer, providing states with up-to-date scientific and technical data, case studies and several suggested approaches for detecting and managing quakes potentially tied to human activity.
U.S. Drilling States Issue Report On Handling Human-Induced Earthquakes — A group of U.S. drilling states, seismologists, academics and industry experts issued guidance Monday in a frank new report onhandling human-induced earthquakes caused by hydraulic fracturing or the disposal of fracking wastewater. The 150-page report, produced by the StatesFirst initiative, represents perhaps the most candid discussion on the topic since tremors across the mid-continent — including in Texas, Oklahoma, Colorado and Ohio — began being linked to fracking and deep-injection wastewater disposal around 2009. It includes descriptions of how states handled various seismic incidents around the country, including their public relations strategies, and matter-of-factly references links between fracking or deep-injection wastewater disposal and earthquakes. Previously, public admissions had been fuzzy in some cases. The group stopped short of suggesting model regulations, however. That’s because each state’s laws and geography are unique, Ohio Oil & Gas Chief Rick Simmers, who co-chaired the effort, told The Associated Press. The report says “a one-size-fits-all approach would not be an effective tool for state regulators.” Simmers said the report is in the form of a primer, providing states with up-to-date scientific and technical data, case studies and several suggested approaches for detecting and managing the quakes. In Texas, a state inquiry found that an oil and gas company’s disposal well operations likely did not cause a series of North Texas earthquakes. The findings directly contradict a study published by Southern Methodist University geologists, pinning the earthquakes to the XTO well and a well operated by Houston-based Enervest.
How to limit man-made quakes: Drilling experts offer best practices - A new report from a coalition of industry experts and academics conclusively links hydraulic fracturing and fracking wastewater disposal to local seismic activity, but stops short of prescribing model regulations. The 150-page report from the StatesFirst initiative – a group of seismologists, academics, and industry experts in American drilling states – matter-of-factly links both hydraulic fracturing and wastewater disposal to earthquakes near drilling areas.Previous research into tremors in mid-continent drilling states like Texas, Oklahoma, Colorado, and Ohio had only tentatively identified fracking as a cause. The paper released today represents an unusually candid discussion of the topic, acknowledging both that the issue exists and that it will be difficult to solve. Ohio Oil & Gas Chief Rick Simmers, who co-chaired the group that issued the report, says that state-specific differences in drilling laws and geology meant uniform national regulations would be ineffective. Mr. Simmers says the report serves mostly as a primer for states, providing up-to-date scientific and technical data, along with suggested approaches for detecting and managing earthquakes. The US Geological Survey reports that within the central and eastern United States the number of earthquakes has “increased dramatically” along with an increase in wastewater injection activity. The USGS also reported some larger events, including an M5.6 in Oklahoma and M5.3 in Colorado. Simmers said that both fracking and deep-injection wastewater disposal do create some seismicity, but added that relative to the amount of drilling activity tremors are “very rare.” “State regulatory agencies that deal with potential injection-induced seismicity should prepare to use tools, knowledge, and expertise – many of which are offered in this primer – to prepare for and respond to [any] occurrences,” he added.
Pennsylvania will monitor for earthquake activity linked to fracking - Pennsylvania plans to increase monitoring of seismic activity as tremors linked to hydraulic fracking in other drilling states spur calls for stepped up strategies to deal with human-induced earthquakes. The state Department of Conservation and Natural Resources and the Department of Environmental Protection said Tuesday they will spend $531,000 on a network of seismic activity monitors at 30 stations across the state for three years. Many of the stations will be on park lands and the equipment will include five mobile units for quick deployment to areas of concern. Despite a boom in drilling that has made Pennsylvania the No. 2 natural gas producer in the country, the state has not had earthquakes connected to fracking or the deep wastewater injection wells blamed for tremors in states such as Ohio. “This seismic monitoring network will give the state a better baseline understanding of the state's geology — for all DEP decisions, not just oil and gas,” The monitors will help the Bureau of Topographic and Geologic Survey map underground activity, including unnatural events such as tremors caused by quarry blasting or activities connected to the oil and gas industry, resources agency Secretary Cindy Adams Dunn said in a statement. Seismologists, academics and state regulators in recent years have drawn connections between increased earthquakes in some states and drilling activities such as storing wastewater in deep underground wells. StatesFirst Initiative, a multi-state group, issued a 150-page report this week that discussed how regulators have handled human-induced earthquakes in 13 drilling states. Pennsylvania was not part of the report. Gas production from shale wells in Pennsylvania increased to 4.1 trillion cubic feet in 2014, up from 1.1 trillion cubic feet in 2011. But it has few wastewater injection wells.
Fracking Earthquakes "Appear" To Be A Thing - The internet has been buzzing with news that several oil and gas producing US states are finally responding to the issue of fracking earthquakes — but don’t hold your breath for any significant regulatory shift. These particular states are organized under the banner of the appropriately named States First Initiative, which launched in 2013 to lobby against tighter federal regulation of oil and gas operations. Before we take a closer look at the news from States First, let’s clarify that when we say “fracking earthquakes” we’re doing shorthand for earthquakes caused by the disposal of fracking wastewater underground. Earthquakes that have been directly linked to the fracking operation itself are a rarity. The States First “response” consists of a newly released manual for regulators titled “Potential Injection-Induced Seismicity Associated with Oil & Gas Development: A Primer on Technical and Regulatory Considerations Informing Risk Management and Mitigation.” Basically that’s fancyspeak for what we just said — the immediate concern is oil and gas wastewater injected into disposal wells. To be clear, States First does not offer any specific guidance aimed at improved regulation. In its Fact Sheet for the Induced Seismicity Primer, States First offers this description: “The Induced Seismicity Primer will be an informational document, and is not intended to offer recommended rules or regulations.” Okay, so that’s pretty clear. The fact sheet also makes it clear that States First is not entirely convinced by the definitive findings by seismologists (these guys, too) that the practice of injecting fluid underground has caused earthquakes. The impetus for creating the Primer is described with a large “appear” hedge in the middle: “Recently, the frequency of seismic events that appear linked to underground injection of fluids has increased.” It’s not just us. Our friends over at Reuters also picked up on the hedge. The news agency reported on the release of the Primer earlier this week with the headline, “More research needed on U.S. earthquakes possibly tied to oil and gas work: report.”
PennEast assures economic boost from proposed pipeline -- Nearly 60 people have filed for interventions against PennEast Pipeline Co. LLC since last Thursday, when company announced its application to start construction on a 118-mile natural gas pipeline that would run from Wilkes-Barre, Pennsylvania to Mercer County, New Jersey. Despite opposition, PennEast emphasized the cost-cutting benefits nearby families and businesses could gain from the billion-dollar project “The PennEast Pipeline Project is set to deliver reduced energy costs to residents and businesses, thousands of good jobs, and a cleaner environment by cultivating clean-burning American energy,” PennEast Pipeline Board of Managers Chairman Peter Terranova said in a statement. “This safe, state of the art infrastructure project will not only help meet the region’s energy demands, it can power New Jersey and Pennsylvania’s economies for years to come.” An analysis from financial advisory firm Concentric Energy Advisers suggests the pipeline could have saved energy consumers in New Jersey and Pennsylvania a grand total of $890 million during periods of record-breaking natural gas prices in the winter of 2013/2014. “The New Jersey State Chamber of Commerce supports the proposed PennEast Pipeline,” shared Tom Bracken, president and chief executive officer of the New Jersey State Chamber of Commerce. “This Project will provide a regional benefit to businesses and citizens, assist in boosting New Jersey’s economy, improve the overall critical energy infrastructure and make our state more competitive, which will lead to job creation.”
Methane leak data in Pa. paints an uncertain picture -- Shale gas companies in Pennsylvania reported leaking 9,681 tons of methane in 2013, a 41 percent increase over the prior year. But the real amount of methane that went into the air may have little to do with that estimate. Leaks, or fugitive emissions, aren’t measured at oil and gas facilities. Those emissions are estimated based on a 20-year-old formula that plugs in the number of components on a well site and the volume of gas flowing through. The increase from 2012 to 2013 reflects only that more wells were producing gas, not necessarily that those were leaking more gas. More than a dozen studies measuring emissions from shale gas sites, in the Marcellus region that underlies much of Appalachia and elsewhere in the country, have come up with varying conclusions about leak rates. But the equalizer has been the finding that a small number of very leaky wells skew the curve. “The type of phenomenon you have is the majority of wells do pretty well and don’t leak much,” said Rob Altenburg, director of PennFuture’s Energy Center in Harrisburg. “But those that do leak, potentially leak a lot.”
Two court cases could upend centuries-old real estate laws -Two oil and gas leasing cases that will be argued in front of the Pennsylvania Supreme Court next week have the potential to either modernize or seriously disrupt centuries-old state real estate laws that have roots in the days when tax collectors still rode horses and much of Penn’s Woods was wilderness. Both of the cases feature old and complicated deeds, confusion about who owned oil and gas rights that had been severed from the surface property, and laws that aimed to sort out such disorder. The first case, Shedden v. Anadarko, challenges a century-old legal principle in the state known as estoppel by deed, which gives a lessee — in this case, an oil and gas company — the benefit of the original agreement if a property owner signs a contract to lease what he owns, finds out he doesn’t own all of it and later acquires it. The Superior Court cited the “well-settled” estoppel by deed doctrine when it sided with Anadarko E&P Co. in its decision last year. But the three-judge panel noted the doctrine had never been applied in Pennsylvania appeals court decisions involving oil and gas leases, although other states’ courts have used it in oil and gas disputes. In the second case, Herder Spring Hunting Club v. Keller, the court will look at a long-retired practice called title washing. In that practice, undeveloped surface property is reunited with its severed mineral rights during a tax sale if the mineral rights had not been registered with county officials and separately assessed for taxes.
EPA hears comments on proposed methane rule for oil and gas - Supporters and opponents of the EPA’s proposed methane rules gathered in Pittsburgh Tuesday for a hearing on federal efforts to cut methane emissions from oil and gas production. Methane is up to 84 times more effective at trapping heat in the atmosphere than carbon dioxide over a 20-year period. The oil and gas industry is the country’s largest single source of methane emissions. In September, the EPA proposed the first federal rules to keep methane from oil and gas out of the atmosphere. The proposed rules are part of a plan that would reduce the industry’s pollution by up to 45 percent. The rule would require increased leak detection and repair of new well pads, pipelines, and gas processing stations, said David Cozzie, group leader of the EPA’s Fuels and Incineration Group, which helped craft the regulations. The rules would also require operators of compressor stations to use ‘low-bleed’ control systems that release fewer emissions, and require plant operators to replace equipment more often, in order to prevent methane from escaping through leaky seals. The EPA focused on well pads and compressor stations, Cozzie said, because they are constructed with equipment that allows methane to escape into the atmosphere. Studies have found that “super-emitters”–a relatively small number of leak sources–may produce the majority of methane pollution from the oil and gas industry.“There’s been lots of literature out there about these super-emitters, which are sites that have large emissions and they tend to be associated with well sites and compressor stations,” Cozzie said. The proposed rules would reduce methane pollution by 400,000 tons per year by 2025, the EPA said — the equivalent of removing 1.8 million cars from the road.
Stone Energy Shuts in Most of their WV NatGas Production - There is a direct connection between lack of pipeline takeaway capacity and drillers’ willingness to either drill more–or even continue producing–gas in the Marcellus/Utica. Although we’re pretty sure this has happened with other drillers, this is the first overt announcement we’ve seen (and hope it’s not a trend) that a sizable driller in the northeast is simply shutting in (stopping) production for a major portion of their operations. Stone Energy, an independent oil and natural gas exploration and production company headquartered in Lafayette, Louisiana and with a large regional office in Morgantown, WV, has just announced they are shutting in production for their Mary Field in West Virginia. Stone drills in two geographies: the Marcellus/Utica, and the Gulf of Mexico. The GOM appears to be their primary focus at the moment. Stone’s announcement, which to us is a pretty big deal, means they will simply stop producing 100-110 million cubic feet equivalent per day (MMcfe/d) of natural gas in the western Wetzel County, WV area… Stone’s stated reasons for stopping production in that area are low prices received for their gas (because they can’t get it to markets outside the region), and high fees for transportation, processing and gathering. It means the profit margins are sliced so thin it’s just not worth keeping the spigot open right now. Stone says they will continue to produce around 25 MMcfe per day from their Heather and Buddy fields in WV (see the map below). There are a number of implications from this momentous action. Below we have Stone’s announcement, followed by several slides from a recent investor presentation along with our comments and observations.
New pipeline route raises questions — Energy giant Kinder Morgan updated the route of a natural gas pipeline proposed to run through New Hampshire, with the new Merrimack route passing through Fidelity Investments and near the Merrimack Premium Outlets. The latest change addressed some environmental and safety concerns in the area, but not all. “I don’t think it’s any better, it’s just different,” Merrimack Town Council Chairman Nancy Harrington said Monday. Harrington said while the new proposed route is farther away from Thorntons Ferry Elementary School, it still passes through an aquifer by Pennichuck Water Works. “It really doesn’t solve the problem,” she said. “The only improvement is the school.” Town and school officials wanted the route 1,000 feet from the school building, which it is at 1,100 feet; but the route is still less than 1,000 feet from the playground. Final approval for the pipeline rests with the Federal Energy Regulatory Commission. New Hampshire residents have been following the process since 2014, notifying FERC and state officials of local environmental and safety worries. Called the Northeast Energy Direct Project, the pipeline would transport gas from the Marcellus Shale formation in Pennsylvania to Dracut, Mass., through New York, Massachusetts and New Hampshire.
Feds want tougher rules for oil pipelines (AP) — U.S. officials said Thursday they want tighter safety rules for pipelines carrying crude oil, gasoline and other hazardous liquids after a series of ruptures that included the costliest onshore oil spill in the nation’s history in Michigan. The U.S. Department of Transportation proposed expanding pipeline inspection requirements to include rural areas that are currently exempt and for companies to more closely analyze the results of their inspections. The agency also would make companies re-check lines following floods and hurricanes, and submit information on thousands of miles of smaller lines that fall outside of existing regulations. The Associated Press obtained details of the proposal in advance of Thursday’s formal announcement. It covers more than 200,000 miles of hazardous liquids pipelines that crisscross the nation — a network that expanded rapidly over the past decade as domestic oil production increased. Other pipeline ruptures in recent years have fouled waterways in Montana, California, Virginia and elsewhere with crude oil and other petroleum products. “This is a big step forward in terms of strengthening our regulations,” said Marie Therese Dominguez, chief of the Transportation Departmen