HBW Resources: Ollison Fracking Report
Below is a summary of publicly available activities currently underway at the federal, state and international levels that could impact the use of hydraulic fracturing for oil and gas extraction. With numerous state legislatures now in session, HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.
The Bureau of Labor Statistics released the March unemployment numbers, which showed the creation of just 88,000 jobs in the month of March, well below expectations. The unemployment rate fell to 7.6% based mainly upon the drop in labor force participation, which fell to a 34-year low of 63.3%. Within the “Mining, quarrying and oil and gas extraction” sector, the number of unemployed persons was 72,000 up from 62,000 a year ago, while the unemployment rate is 6.1% down from 6.3% a year ago.
A recent study, prepared by Oklahoma City University, estimates complying with the proposed BLM fracking rule could cost each well on public lands as much as $175,000, or $370 million annually.
Senator Ron Wyden (D, OR), Chairman and Senator Lisa Murkowski (R, AK), Ranking Member announced that the Energy & Natural Resources Committee will hold three public roundtable meetings in May to discuss natural gas and fracking. The meetings are:
- · May 16 – Pipeline infrastructure, natural gas use in transportation sector
- · May 21 – Domestic supply estimates, implications of gas exportation
- · May 23 – Best practices and environmental concerns regarding shale development
A recent study in Geology, has renewed interest in the ties between wastewater injection and earthquakes. Opponents of hydraulic fracturing hope to use the connection to slow the use of the technique for oil and gas development. Proponents point to other factors that can increase seismicity and note that the incidents are not the result of directional drilling or hydraulic fracturing per se, but rather the EPA approved method for storage of waste water.
The Brookings Institution has a new report out that focuses on the importance to U.S. industry and the nation of the often over-looked natural gas liquids that are found in shale formations. The report states that maintaining domestic oil and gas production is critical for U.S. natural gas liquids production and for the U.S. industrial sector.
A number of recent polls related to energy have been published over the past few weeks. A Pew Research Center poll, conducted March 13-17, with a sample size of 1,501 adults nationwide stated that 48% approve of the “increased use of fracking, a drilling method that uses high-pressure water and chemicals to extract oil and natural gas from underground rock formations” while 38% oppose.
Petroleum geologist Ed Duncan, president and CEO of Great Bear Petroleum LLC, is betting big that Alaska’s North Slope geology will yield bountiful untapped resources as vast as the unconventional oil plays at Texas’ Eagle Ford and North Dakota’s Bakken shale fields. Great Bear leased 500,000 acres back in 2010. According to a 2012 U.S. Geological Survey report, the source rock could contain up to 2 billion barrels of technically recoverable oil and up to 80 trillion cubic feet of natural gas. In 2011 testimony before the Alaska Legislature, Duncan boldly predicted that the unconventional oil fields on his leases could produce 200,000 barrels of crude per day by 2020. He expects production to peak at 600,000 bpd in 2056. The region enjoys some unexpected benefits of working in Alaska, while at the same time struggling with serious long-term problems. Great Bear has plenty of water on hand to frack its underground wells and Alaska also has ample supplies of sand suitable for fracking. The challenge is a scarcity of rigs and a lack of trained workers.
The Los Angeles County Board of Supervisors voted 3-2 in favor of proposed state regulation of hydraulic fracturing to access oil and natural gas, Senate Bill 4. The bill would mandate water quality testing and another independent study to address health and safety issues raised by opponents of fracking. It would also direct the state’s Division of Oil, Gas and Geothermal Resources to adopt regulations by Jan. 1, 2015, requiring oil companies to disclose what fluids they use in fracking, while providing trade secret protection for the chemical formulas for slurries.
House Bill 1269, introduced by Rep. Mike Foote (D, District 12) which would eliminate language in state law requiring the Colorado Oil and Gas Conservation Commission to foster the production of oil and gas in balance with environmental and public safety concerns and would bar any commissioners from working for the oil and gas industry was passed in the House Transportation and Energy Committee by a 7-5 vote.
Governor John Hickenlooper (D) debated Boulder County Commissioner Elise Jones on the impact of natural gas drilling and the chemicals used in the process. 96% of Colorado’s natural gas and oil wells depend on hydraulic fracturing. The Governor stated that if you ban hydraulic fracturing, you ban all drilling in the state. “To ban fracking essentially denies someone access to what they paid money for,” Hickenlooper said. “Someone owns those mineral rights.” Press reports also suggested that the Governor did not explicitly state he would veto proposed House legislation, HB 1269, that would change the mission of the Colorado Oil and Gas Conservation Commission to emphasize environmental protection over the development of natural gas and oil. “Changing the mission of the Colorado Oil and Gas Conservation Commission – that’s something you don’t do lightly.”
The La Plata County Commission decided against moving forward with a moratorium on drilling in the Mancos Shale. The commission did however leave open the possibility of making smaller changes to drilling rules within the county. The vote was previously scheduled to be taken at the March 12, 2013 meeting but was postponed until this week.
The Jackson County Board’s legislative committee recommended the board send a letter to state lawmakers asking for the power to ban, tax or further regulate horizontal hydraulic fracturing, a gas and oil extraction process.
The Michigan Department of Environmental Quality (DEQ) received an application from Rosetta Resources to drill a well in Ravenna Township designated for hydraulic fracturing. The application is to drill vertically and horizontally and to use a fracking technique on the well. The application was received March 12 by the Michigan DEQ. The DEQ is reviewing Rosetta Resources’ application for 30 days beginning March 12 to determine if it is complete. The agency then has 20 more days after declaring the application complete to decide whether to issue a permit.
HF 1367, introduced by Representative Tim Kelly (R, District 21A) which provides silica sand project regulation assistance to local governments was referred to the Environment and Natural Resources Policy Committee. The bill would establish a “Silica Sand Technical Advisory Council” to provide assistance to ensure the protection of human health and the environment. The Advisory Council would be responsible for creating a report on local government ordinances and permits that have been approved for regulation of silica sand projects. The Advisory Council would also be available to provide advice in evaluating a silica sand project and developing proper conditions to be included in any local government approval.
HF 1336, introduced by Representative Rick Hansen (DFL, District 52A), was referred to the Taxes Committee. The bill would impose a fracturing sand extraction tax of $1 per ton and a processing tax of 3% of the market value of the fracturing sand processed. The revenues generated from the extraction tax would be credited to a special account within the general fund and would be appropriated to the Environmental Quality Board to be used for environmental oversight of the fracturing sand mining industry. The revenue generated by the processing tax would be distributed in the following manner: 1/3 to the commissioner of transportation to be allocated equally amongst counties with active mines; 1/3 to the commissioner of natural resources to acquire land or interests in land as scientific and natural areas; and 1/3 to the Board of Water and Soil Resources to acquire permanent easements that will prevent commercial fracturing sand mining in wellhead protection areas. Also, anyone who extracts or processes fracturing sand within the state must register and provide monthly reports showing the amount of fracturing sand extracted or processed.
Former Pennsylvania Gov. Ed Rendell urged New York Gov. Andrew Cuomo to move forward with fracking in the Empire State in a New York Daily News op-ed. “New York has a healthy band of vocal critics right now who continue to push a false choice: natural gas versus the environment. But as the former Democratic governor of a major natural gas-producing state, I know we can enjoy the benefits of gas production while also protecting the environment. Pennsylvania put in place strong oversight while allowing development throughout the Marcellus Shale – and the economic benefits were significant.”
The town of Red Hook, NY’s Town Board agreed to forward a proposed ban on hydraulic fracturing for natural gas on to the town planner for review prior to a board vote. Town officials also proposed to ban the use of hydrofracking brine as a road deicing agent and set penalties for local disposal of hydrofracking fluid. Officials hope to have draft versions of the local laws ready by the April 9 board meeting and set dates for public hearings two weeks later.
The Independent Oil & Gas Association, New York filed a formal complaint with New York’s lobbying board against Artists Against Fracking. The suit is based upon a media report that Artists Against Fracking and its members are not registered as lobbyists and therefore didn’t disclose their spending in opposition to hydraulic fracturing as required by New York law. Artists Against Fracking responded by stating that its activities are protected as free speech.
The Livingston County Supreme Court rejected Lenape Resources’ challenge to Avon, New York’s one year moratorium on hydraulic fracturing. It held that the state’s Oil, Gas, and Solution Mining Law (“OGSML”) does not preempt local ordinances limiting hydraulic fracturing. Lenape Resources is considering whether to appeal the decision, which was the third to allow municipal bans. Judge Robert Wiggins wrote that he believed that the OGSML does appear to preempt Avon’s moratorium, but that a prior case, Frew Run, compelled him to reject the suit. Two earlier cases upholding local bans (in Middlefield and Dryden) on the use of hydraulic fracturing are on appeal to the Appellate Division in New York.
Gov. Kasich recently proposed his Executive Budget to the Ohio House of Representatives, HB 59. The proposal’s changes include changing the way oil and gas is taxed at the wellhead (including changes to severance tax, ad valoreum tax and sales tax) and current Ohio oil and gas law (including changes to brine disposal, disposal of drilling mud and drill cuttings, well reporting for horizontal wells, etc.). Ohio’s severance tax rate was doubled in 2010, and the new proposed rate equals a 1,500 percent increase in the current rate on oil. Ohio’s severance tax rate was doubled in 2010, yet the administration says it’s antiquated. However, the rate it has proposed equals a 1,500-percent increase in the current rate on oil. Ohio’s severance tax rate was doubled in 2010, yet the administration says it’s antiquated. However, the rate it has proposed equals a 1,500-percent increase in the current rate on oil.Ohio’s severance tax rate was doubled in 2010, yet the administration says it’s antiquated. However, the rate it has proposed equals a 1,500-percent increase in the current rate on oil.The proposal currently sits before the Finance and Appropriations Committee. The Ohio Oil and Gas Association has come out in opposition to the proposal as introduced.
Ohio Representative Tim Ryan (D, OH 13) during a recent visit to Germany for the annual Congress-Bundestag Seminar of the Congressional Study Group on Germany met with Chancellor Angela Merkel in the hopes of convincing her to import liquefied natural gas from the U.S. Since a free trade agreement doesn’t exist with Germany, the U.S. government, through the Department of Energy, must find natural gas shipments to be in the national interest under federal law. Currently, DOE has only approved one proposal while 19 are under consideration.
The Athens Community Bill of Rights Committee announced that it would lead a petition drive to get a ban on hydraulic fracturing on the November 2013 ballot. The ban would be in Athens County and include an area within a twenty mile radius of the city. The proposed ban conflicts with state regulations on mineral extraction and related business.
Governor Mary Fallin sent the White House Office of Management a letter to acting Chief Jeff Zients detailing the costs associated with the Bureau of Land Management’s in-consideration fracking rule. The letter included a report by the Oklahoma City University (See above) and stated, “I encourage your review of this study and urge your reconsideration of the proposed rule.”
General Electric announced that it would spend $110 million on a research lab in Oklahoma City to study ways to improve extraction of hard-to-reach oil and gas deposits, including hydraulic fracturing and horizontal drilling. GE researchers also will investigate how to meet oil and gas wells’ electricity needs, reduce the environmental impact of unconventional drilling and help manage water usage in petroleum exploration. The facility is scheduled to hire as many as 125 engineers and scientists.
Penn State University announced the creation of the Institute for Natural Gas Research, which it says will conduct, “independent and rigorous scientific research” on the resource at the center of the Marcellus Shale natural gas boom. Enrollment in petroleum and natural gas engineering, which bottomed out at 30 students in 1999, now exceeds 500 undergraduates. Along with creation of the institute, Penn State is committed to hiring 12 new faculty members over the next four years to expand its research and course offerings on gas.
The Pennsylvania Department of Environment is allowing two eastern Pennsylvania high schools to stage a boy’s swim meet in a swimming pool filled with fracking fluid. The meet is sponsored by the American Oil and Gas Council and will involve the teams from Allentown Senior High School and Jefferson High School. The event is being held to demonstrate the safety of the liquid.
A baseline health survey of nine counties in the Marcellus Shale gas drilling region of Northeast Pennsylvania has determined that tobacco use, obesity and a lack of health insurance are common in the area. Funded by the state Department of Public Welfare, the study looked at a broad range of chronic and acute health conditions of a sample of 458 people in Bradford, Lackawanna, Luzerne, Lycoming, Sullivan, Susquehanna, Tioga, Wayne and Wyoming counties. The state-funded survey by the Northeast Regional Cancer Institute is being viewed as a first step toward helping track possible future health impacts from the hydraulic-fracturing drilling method known as fracking.
Oil and gas operators who use the process of hydraulic fracturing in South Dakota in the future will be required to report the data to a national website, FracFocus, under a state regulation that received final clearance from the Legislature’s rules review committee. The panel voted 6-0 to proceed.
The Senate Natural Resources Committee debated SB 873, which was introduced by Sen. Glenn Hegar (R, District 18). The bill would allow local groundwater authorities to require oil and gas companies using water for fracking to get permits. Current state law exempts water wells used for rigs’ “drilling or exploration” operations from permitting requirements. But that language was written more than a decade ago, before the spread of fracking, and the legal debate centers on whether fracking falls into the categories of drilling and exploration.
Range Resources Corp.’s lawsuit against Texas landowners who accused it of fouling their water by hydraulic fracturing should go back to the trial court, a state appeals court in Ft. Worth said after the judge who originally let the case proceed stepped down from the bench.
West Virginia Department of Environmental Protection (“WVDEP”) will be increasing inspections of drilling sites after an agency report found that WVDEP citations had not stopped improper handling of wastewater from hydraulic fracturing operations. WVDEP’s report cited Raven Ridge Energy, Chesapeake Appalachia, Patriot Energy, and EQT Corp. as companies with histories of violations. WVDEP’s Office of Oil and Gas is adding eight new inspectors and has threatened to issue stop work orders and suspend permits. WVDEP has also proposed updated oil and gas regulation, which remain to be approved by the state legislature.
The Wisconsin Land and Water Conservation Board hosted a forum, “Impacts of Frac Sand Mining on County Staffing and Administration,” April 2.
The European Commission adopted a Green Paper on “A 2030 framework for climate and energy policies“. The document launches a public consultation lasting until July 2. Within the “Legislative instruments implementing the headline targets of the climate and energy package and main policies supporting their achievement” is “Regulation (EC) No 715/2009 of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005.” At the same time, Europe’s commissioner for energy, Guenther Oettinger urged the continent to avoid new energy taxes or tax increases, reflecting that competition from inexpensive U.S. produced shale gas is making energy more affordable in the international market.
At a recent campaign appearance, New Brunswick Premier David Alward mentioned that he anticipated that New Brunswick was about to enact some of the most strict fracking environmental rules in the world.
A new policy aimed at boosting domestic output of fossil fuels, companies will be allowed to extract oil and gas from shale rocks in more than 250 blocks the Indian government has already given out. India is attempting to reduce the amount of imported energy by 50 percent in seven years and to zero by 2030. The new policy will emulate the U.S. where a boom has reinvigorated industry and is leading the world’s largest economy towards energy independence. The oil ministry plans to take the new shale gas policy to Prime Minister Singh’s cabinet for approval likely within the next week.
The Japan Daily Press reported that the U.S. Department of Energy is at the concluding stages of approving shale gas exports to Japan. “It is expected that America’s Energy Department will give conditional approval for the time being, and then it will proceed to examine Japanese companies and their shale gas export projects. The approval is expected to come as early as this April.”
MicroSeismic Inc., of Houston, said it has installed equipment to monitor, map, and analyze hydraulic fracturing of an undisclosed customer’s exploration and field development program in Poland.
Protestors gathered in Dobrich, Bulgaria to protest against the potential use of hydraulic fracturing in neighboring Romania. A moratorium on the exploration and exploitation of shale gas through the use of hydraulic fracturing in Romania expired April 4, 2013. Protestors are calling for not only an extension of the moratorium but on a ban on the procedure. The Bulgarian Parliament adopted an indefinite moratorium on hydraulic fracturing on January 18, 2012.
Horizontal drilling and hydraulic fracturing are beginning to being used to unlock “Red Lenin,” the oilfield in West Siberia that is at the cutting edge of efforts to harness Russia’s vast reserves of unconventional crude potential. TNK-BP and Gazprom Neft are both putting together drilling programs for the field. Estimates are that the Bazhenov region, which is the source rock for some 85 per cent of West Siberia’s conventional reserves, has around 2 trillion barrels of oil in place, five times more than the Bakken’s in-place number. In order to stimulate the necessary investment, the Russian government has proposed a 100 percent waiver of mineral extraction tax for the Bazhenov region.
Saudi Arabia has signaled that it will push ahead this year with exploratory drilling of shale and other unconventional gas reserves partly by exploiting new technology. Aramco has averaged 9.9 billion cubic feet per day of natural gas output in 2011 and they plan to drill seven natural gas exploration wells.
Spain is set to enact its first regional ban in the Cantabria region, on producing natural gas using hydraulic fracturing, yielding to objections from environmental groups that so-called fracking risks polluting drinking water. Parliament plans to vote April 8 on suspending the drilling technique “as long as current doubts on technology remain.”
For additional information, contact Bo Ollison with HBW Resources. His contact information is below.
2211 Norfolk Street, #410
Houston, TX 77098
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