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.
State Legislative Update
Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
Democrats on the California Assembly’s Natural Resources Committee approved three bills, including a moratorium on hydraulic fracturing by oil and natural-gas producers until the state assesses health and environmental concerns. The vote on AB 649, introduced by Assemblyman Adrin Nazarian (D, District 46) would ban fracking and require state regulators to determine whether and under what conditions fracking could be permitted. The Committee also approved AB 1323, introduced by Assemblywoman Holly Mitchell (D, District 54) which would ban fracking and require state regulators to determine under what conditions fracking could be permitted. The third bill approved by the Committee, AB 1301, introduced by Assemblyman Richard Bloom (D, District 50) would amend the “Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006” by halting fracking until oversight rules are in place. All three bills were passed on a party line vote of 5-3 and have been referred to the Assembly’s Appropriations Committee. Within the California Senate, the Environmental Quality Committee approved SB 4, introduced by Sen. Fran Pavley (D, District 27) which would mandate water quality testing and another independent study to address health and safety issues; direct the state’s Division of Oil and 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. The vote was 6-2.
Commissioners in Arapahoe County approved a working agreement with oil and gas drillers that would expedite issuing hydraulic fracturing permits. Under the deal, energy companies could sign a memorandum of understanding holding them to stricter guidelines than state regulations. The agreement states that if a company will agree to certain pre-determined standards contained in the MOU, then that company will be able to utilize a shorter and less costly administrative permitting process. However, if a company does not want to sign the MOU, then they will be subject to the Use by Special Review process.
State officials held public meetings this week in Troy, Muskegon and Traverse City to try and educate residents on what they say are misconceptions about fracking. This outreach is in advance of the upcoming public auction on May 9 to lease oil and gas rights to private companies that want to explore drilling on state-owned land. Up for bid are 5-year leases on 37,652 acres of land in 17 counties.
Governor Bryant signed into law, HB 1698, introduced by Rep. Angela Cockerham (D, District 96) which reduces Mississippi severance tax on hydraulically fractured wells from 6% to 1.25% for the first 2 ½ years of production. The move is meant to encourage development in the state’s Tuscaloosa Marine Shale formation.
The County Commission of Mora County, located in Northeastern New Mexico, became the first county in the United States to pass an ordinance banning all oil and gas extraction. TheMora County Community Water Rights and Local Self-Government Ordinance establishes a local Bill of Rights – including a right to clean air and water, a right to a healthy environment, and the rights of nature – while prohibiting activities which would interfere with those rights, including oil drilling and hydraulic fracturing or “fracking,” for shale gas.
Governor Dalrymple signed HB 1134, sponsored by Rep. Todd Porter (R, District 34). Rep. Al Carlson (R, District 41), Rep. David Drovdal (R, District 39), Sen. Kelly Armstrong (R, District 36), Sen. Stanley Lyson (R, District 1) and Sen. Rich Wardner (R, District 37). The bill grants a two-year tax exemption for gas that converted to electricity or processed into marketable liquids at drilling sites.
For leasing a little more than 63 acres, the Barnesville Exempted Village School District will get $362,602 in its initial lease payment. Antero Resources donated another $37,500 to the district, increasing the total payment to $400,102. Most of the acreage leased to Antero is located under the Barnesville high and middle school campuses. However, residents and students need not fear that there will be drilling rigs popping up beside the schools. This is because Antero will use the horizontal drilling method, which will involve drilling wells outside the village limits before turning the shafts to reach the gas under Barnesville. The funds will be placed in a capitol projects fund, which could be used to fund repairs to buildings, new technology investments, boilers, etc.
The economic benefits of fracking to release natural gas and oil from deep shale deposits are the focus of a new TV ad that is also posted online by the Ohio Oil and Gas Association, the industry’s leading voice in the state. According to the ad, nearly 40,000 jobs have been created in Ohio based upon the development of new wells.
On behalf of the coalition, No Frack Ohio, Buckeye Forest Council Executive Director Cheryl Johncox sent a letter to the Center for Sustainable Shale Development stating that, “This industry ploy simply puts green lipstick on a pig. It in no way represents the thousands of groups around the nation fighting against this dangerous industry.”
Rep. Denise Driehaus (D, District 31) and Rep. Robert F. Hagan (D, District 58) introduced HB 148 that would make it illegal to dispose of oilfield waste in deep underground injection wells and would also prohibit the use of oilfield brine on roads.
The Pennsylvania State Supreme Court has decided there is no need for a scientific debate over whether shale and the natural gas contained within it fall under the definition of “minerals” for the purposes of deed reservations. Instead, under the Dunham Rule, requires courts interpreting deed reservations that do not specifically mention shale or natural gas to rely only on the layperson’s understanding of what a mineral is: a substance of a metallic nature.
Gas drilling isn’t to blame for a high-profile case of methane contamination in northeastern Pennsylvania, state environmental regulators declared. Anti-fracking celebrities visited the Susquehanna County village of Franklin Forks in January as part of a tour of natural-gas drilling sites. There, they met with Matthew and Tammy Manning, who blame the high level of methane in their well water on a natural gas driller, WPX Energy. But the state Department of Environmental Protection said its 16-month investigation shows WPX isn’t responsible for high levels of methane and other contaminants in the private water wells at three homes. The methane in the residents’ wells is naturally occurring shallow gas — possibly from nearby Salt Springs State Park — and not production gas from the Marcellus Shale formation, DEP said.
The impact of the recent boom in shale drilling is hard to miss in some remote Texas towns, where hotels and homebuilders scramble to keep up with the influx of oil and gas workers. But the most significant effect from the boom may be seen in the state’s coffers. Taxes on oil and gas production have soared past estimates from the state’s comptroller’s office for fiscal 2012. And with production expected to continue to rise over the next several years, the economic benefits will continue. James LeBas, a fiscal consultant who also works as a lobbyist for the Texas Oil and Gas Association, estimates that oil and gas interests paid about $12 billion in taxes in Texas in fiscal 2012, up from $9.25 billion in 2011 and $7.4 billion in 2010. That included taxes on property, sales and production, as well as the franchise tax and indirect items like taxes on motor fuels.
The U.S. Forest Service is considering whether to allow horizontal drilling for natural gas, in the George Washington National Forest. The George Washington National Forest’s decision will likely become part of the nation’s debate about a national energy policy.
The Environmental Protection Agency (EPA) has dramatically lowered its estimate of how much of a potent heat-trapping gas, methane, leaks during natural gas production. According to the report, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011, 145 million metric tons of methane was released by natural gas drilling in 2011, a more than 20 percent drop from previous estimates. The second largest factor, which accounts for another 137 million metric tons of methane released, is enteric fermentation, followed by landfills which account for 103 million metric tons. The EPA estimates that methane accounts for only nine percent of greenhouse gases.
The EPA extended its deadline for the public to submit data and scientific literature to inform EPA’s research on the potential impacts of hydraulic fracturing on drinking water resources from April 30, 2013 until November 15, 2013. EPA is extending the deadline in order to provide the public with more of an opportunity to provide feedback to the Agency. EPA’s Hydraulic Fracturing Research Advisory Panel will be providing feedback on the study’sprogress report in a public meeting on May 7-8, 2013 at the Westin Arlington Gateway in Arlington, VA. The meeting can be viewed via webcast.
The House Committee on Science, Space and Technology’s subcommittees on Energy and Environment held a joint hearing reviewing federal hydraulic fracturing research activities. In his recent budget proposal, President Obama requested $38 million to continue research on hydraulic fracturing. Lawmakers questioned what the funds would be used for and asked why the federal government missed a January deadline to submit a multiyear draft plan for researching hydraulic fracturing. On April13, 2012, President Obama signed Executive Order 13605 which set up a multi-agency task force to focus on “unconventional domestic natural gas resources.” Separately, the Energy Department, the Interior Department and the EPA teamed up to research the impact of fracking.
A new report from the National Parks Conservation Association, National Parks and Hydraulic Fracturing, looks at how the hydraulic fracturing boom may impact national parks. The National Parks Conservation Association recommends that policymakers require a measured, thoughtful approach to fracking, especially near national parks and in their surrounding landscapes. They recommend that the National Park Service be engaged as a formal cooperating agency and comprehensive environmental reviews should be required when oil and gas drilling is proposed in the airshed, watershed or connected landscapes that surrounds national parks. The report also recommends that the BLM’s final fracking rules require that producers disclose to the public the chemicals to be used in a frack job before drilling begins, and that all flowback waters be stored in closed-loop containers and treated before they are allowed to re-enter public waters.
A recent report from the Western Organization of Resource Councils, Gone for Good, states that oil and gas extraction practices are removing at least seven billion gallons of water from the hydrologic cycle each year and that continued fracking could potentially lead to shortages of water.
An estimated $65.5 billion was invested drilling an estimated 10,173 U.S. shale oil and natural gas wells in 2011, according to American Petroleum Institute’s 2011 Joint Association Survey on Drilling Costs. The investment number represents an 87.6 percent increase in shale drilling expenditures from 2010 levels and more than half of an estimated $124.8 billion spent on all new wells drilled in 2011. The number of estimated shale wells drilled in 2011 is 43.8 percent more than in 2010.
The U.S. Geological Survey released updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought. The USGS assessment found that the Bakken Formation has an estimated mean oil resource of 3.65 BBO and the Three Forks Formation has an estimated mean resource of 3.73 BBO, for a total of 7.38 BBO, with a range of 4.42 (95% chance) to 11.43 BBO (5% chance).
The House Natural Resources Committee, led by Chairman Doc Hastings (R, WA 4), announced a hearing for May 8th on the proposed hydraulic fracking rule. Since November 2010 when the Administration mentioned possible new federal regulation of hydraulic fracturing, the committee has conducted oversight hearings on the issue highlighting the harm such regulations could have on economic growth and energy development. The latest hearing is in response to a report in The Hill newspaper that the Interior Department would be releasing its new proposed rule within weeks.
A new report from Ceres, Hydraulic Fracturing & Water Stress: Growing Competitive Pressures for Water, concludes that industry efforts underway, such as expanded use of recycled water and non-freshwater resources, need to be scaled up along with better water management planning if shale energy production is to grow as projected. According to the report, significant portion of fracturing takes place in regions of the country currently experiencing water shortages and prolonged drought conditions.
Eduardo Eurnekian, tapping a fortune of at least $1.3 billion, has pledged $700 million in two deals to hasten a definitive partnership with Argentine government-owned YPF SA to develop its Vaca Muerta fields. After his $500 million preliminary accord with YPF in October, last week he paid about $200 million for 81 percent of Cia. General de Combustibles SA, an oil producer and shareholder in pipelines to YPF’s first operating shale-gas well.
The U.S. Energy Information Administration has estimated that China’s technically recoverable shale gas resources could be 50 percent bigger than those in the United States, where shale has transformed the energy sector. China’s 12th five-year plan aims to boost natural gas to 8 percent of national energy use by 2015 up from its current 4 percent. Chinese firms such as Sinopec have invested in the U.S. to learn the shale business. The 2009 announcement of the “US-China Shale Gas Resource Initiative” by President Obama and Chinese President Hu Jintao, in which the U.S. government has tried to promote shale development in China by focusing on resource assessment and technology exchange has not provided the technology transfer necessary to fully develop China’s shale. One of the biggest challenges to shale development is the Chinese regulatory system.
The Russian state-owned energy company, OAO Gazprom, that once held sway over European natural-gas markets has lost its grip as booming U.S. shale-gas production has led European customers to seek out other sources of energy. Europe is Gazprom’s most lucrative market. The company supplies about one-quarter of the European Union’s natural gas via a network of pipelines. Gazprom said Tuesday its net profit declined by $6.5 billion, or 15%, in 2012, as sales to the EU fell by about 9%. The company’s current struggles are affecting Russia’s economy because it accounts for over 10% of export revenues.
Middle East and North Africa (MENA) oil producers have for years seen a gas crunch coming and for some it has already arrived. However, a number of states in the region—oil exporters and importers alike—have been developing effective programs to find and exploit gas deposits. Saudi Aramco has started drilling wells in its northwest region to tap Silurian shale. To date, only one such well has been stimulated by hydraulic fracturing. But that is likely to change, with 30 drilling rigs due to be deployed in the Red Sea Tabuk and Midyan basins during 2013.
The House of Commons’ Energy and Climate Change Committee released its 7th report, “The Impact of Shale Gas on Energy Markets” urged ministers to “get on” and support fracking. The report states, “The UK should learn the lessons of the US experience, including creating a favourable climate for companies to operate in, while ensuring environmental damage is avoided.”
The government’s paper on “community benefits” will propose policies that aim to persuade locals to drop their resistance to fracking in northwest and southeast England, where the largest shale-gas deposits are found. The biggest incentive being discussed is cheaper household energy bills for people in the area.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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