Ollison Fracking Report–Tracking Unconventional Oil and Gas Development
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.
A new study by scientists at Duke University and the U.S. Geological Survey (USGS) finds no evidence of groundwater contamination from shale gas production in Arkansas. The scientists sampled 127 shallow drinking water wells in areas overlying Fayetteville Shale gas production in north-central Arkansas. They analyzed the samples for major and trace elements and hydrocarbons, and used isotopic tracers to identify the sources of possible contaminants. The researchers compared the chemical composition of the contaminants to those found in water and gas samples from nearby shale gas drilling sites.
Boulder County Commissioners considered a proposal related to imposing a transportation fee for oil and gas activities. The proposal recommended that Boulder County implement charging oil and gas companies a $700 “road deterioration” fee for each well pad, a $16,600 fee for each well and a $4,000 per well “safety fee” to mitigate concerns such as heavy oil and gas traffic. Commissioner Elise Jones moved that fees totaling $37,900 per well with certain exceptions, including that they be re-examined no less than every three years. The Commission agreed to the proposal.
Wilderness Workshop, a Colorado environmental group, is appealing BLM’s decision to suspend 25 oil and gas leases in the Thompson Divide pending a new study of potential environmental impacts. Although the leases were due to expire this month, BLM stated that, it may choose to void, extend, or renew the leases after the study is completed. Until then, the lessees cannot develop the leases. Wilderness Workshop argues that BLM should have just allowed the leases to expire as they were never developed and characterizes the lease suspensions as a “bailout” of the companies. The appeal is to the BLM State Director and then may be appealed to the Interior Board of Land Appeals.
HB 2615, introduced by Rep. John Bradley (R, District 117) which would regulate horizontal hydraulic fracturing in Illinois is ready to move forward. Following months of negotiations, the legislation stalled in March after a last-minute amendment was added to require unionized well contractors at each well site until drillers themselves were licensed. The move caused a coalition of business, labor, construction, transportation and agricultural organizations to pull their support for the bill. A compromise was reached this week that removes the union requirement. That language has been replaced with a tax credit that would flow to oil drillers who use local labor.
Fracing helps Kansas oil production reach highest level since 1990s. Kansas produced 43.7 million barrels of oil in 2012, up about 5 percent from the 41.5 million it produced the year before. The greatest increases in oil production were in counties atop a limestone rock formation in southern Kansas, with production in Harper and Comanche counties increasing by more than 70 percent between 2011 and 2012.
An amendment, sponsored by Sen. Matt Schmit (DFL, District 21) which would block excavation of frac sand within a mile of any trout stream in southeastern Minnesota was heading towards a vote late last week. The trout stream measure already has failed two close votes at the committee level, including one in the Senate Environment and Economic Development Committee. A compromise was reached earlier this week when lawmakers agreed to create a new Department of Natural Resources permit for companies hoping to mine silica sand in certain sensitive areas in southeastern Minnesota. The compromise would require a hydrological study and DNR permit for any mine within a mile of a trout stream but not springs.
Sen. Cecilia Tkaczyk (D, District 46), joined by opponents of the natural gas drilling technique known as high-volume hydraulic fracturing, announced that she would introduce S 5123A to ban “the treatment, discharge, disposal, transportation or storage” of hydraulic fracturing waste products in New York state.
H.R. 767, sponsored by Rep. Kevin Cramer (R, ND), which would allow oil and gas companies that want to drill on federal land in the Dakotas the ability to participate in a pilot program designed to speed processing of permit applications. Similar legislation was introduced by Sen. Hoeven (R, ND) in the US Senate and has been passed by the Senate Energy and Natural Resources Committee.
The Finance Committee of Salem City Council voted to recommend splitting the $1.3 million in shale lease money for leasing city-owned land for mineral rights. The split will be between capital improvements, paying off debt and placing the rest in a discretionary fund for council projects.
Trumbull County Commissioners approved an agreement to sell up to 200,000 gallons of water a day to an oil and gas company. The agreement will allow Halcon Resources to pump water from the southeast water district supply to its Vienna Township drilling site. Halcon will pay $10 per 1,000 gallons of water but will only access the water during low demand periods throughout the day.
The Athens City Council is considering a proposal that would create a resource extraction and waste disposal monitoring and mitigation system. The proposal is scheduled to be introduced next week by Councilwoman Chris Fahl. The proposal would create a new chapter of Athens City Code to “protect the health, safety and welfare of residents by generating funds” for a number of activities such as air and water contamination monitoring, spelling out spill planning and notification requirements, giving the city the authority to test disposal waste for harmful chemicals, establishing a fee for all resource extraction and related waste disposal, and establishing the Athens Monitoring, Mitigation and Environmental Fund. Operators of injection wells or drilling sites would also have to supply certain background information to the city service-safety director such as a listing of all key employees under the proposed legislation.
The Cincinnati City Council approved a resolution supporting a statewide ban, HB 178 introduced by Rep. Denise Driehaus (D, District 31) and Rep. Robert F. Hagan (D, District 58), on the disposal of toxic waste from hydraulic fracturing in injection wells. Cincinnati enacted a citywide ban on all deep-well injection of wastes in 2012.
Governor Matt Mead (R) unveiled a new statewide energy strategy, Leading the Charge, that proposes that the oil and natural gas industry sample groundwater sources before drilling wells in an effort to better pinpoint pollution sources if contamination occurs. Gov. Mead also left open the possibility of adding post-drilling groundwater monitoring, after wells have been in operation, to ensure the operations do not contaminate groundwater. The strategy also calls for the increased production of compressed natural gas and liquefied natural gas “as a transportation fuel.”
Rep. Pete Olson (R, TX 22) wrote an op-ed for The Hill where he stated, “Hydraulic fracturing, commonly called fracking, and horizontal drilling are the technologies that have revolutionized our ability to access oil and gas previously thought inaccessible. Fracking has been conducted safely for more than 50 years under a sound state regulatory process. New drilling based on these technologies has flourished on private lands, while access to federal lands lags behind, mired in red tape. And now, the Interior Department is writing stricter new rules for fracking on federal lands, while the Environmental Protection Agency (EPA) conducts a massive study on fracking that could lay the ground work for comprehensive federal regulations covering both public and private lands. If they are successful, it would add more layers of bureaucracy to the process, further slowing down production. Instead, we can keep capitalizing on this combination of home-bred technologies by continuing to enforce commonsense state-based regulations on drilling practices.”
Rep. Diane DeGette (D, CO 1) and Rep. Chris Gibson (R, NY 19) reintroduced the Fracturing Responsibility and Awareness of Chemicals Act (FRAC Act), HR 1921. The Act would require disclosure of the chemicals used in fracing fluids and would remove the oil and gas industry’s exemption from the Safe Drinking Water Act. Rep. DeGette has introduced the FRAC Act in each Congress since 2008, but this year marks the first time it has been introduced on a bipartisan basis. The bill was referred to the House Energy and Commerce Committee.
Shale oil production could revolutionize global energy markets, reducing oil prices and bolstering the economy globally, but its impact will vary on a country-by-country basis. A recent report from PwC, “Shale Oil – the Next Energy Revolution” examines how the development of shale oil worldwide might impact oil prices and the economy worldwide.
EPA released its updated draft proposal for hydraulic fracturing on public lands. The updated draft proposal maintains the three main components of the initial proposal: requiring operators to disclose the chemicals they use in fracturing activities on public lands; improving assurances of well-bore integrity to verify that fluids used during fracturing operations are not contaminating groundwater; and confirming that oil and gas operators have a water management plan in place for handling fluids that flow back to the surface. The updated draft proposal will be subject to a new 30-day public comment period. If interested in providing comments, they can be emailed toOIRA_Submission@omb.eop.gov. When commenting, please indicate “Attention: OMB Control Number 1004-0203”
EPA issued a direct final rule that identified 15 chemical substances that will require notice prior to manufacturing, importing or processing for an activity designated as a significant new use. These chemicals were flagged pursuant to the Toxic Substances Control Act (TSCA) significant new use rules (SNURs). The notices, referred to as Significant New Use Notices (SNUNs), must be submitted to EPA 90 days before a listed chemical is manufactured, imported, or processed for an activity designated as a significant new use. While chemicals in the rule include those that can be employed in a broad range of uses, of particular interest is the listing of one compound, quaternary ammonium compounds, bis(fattyalkyl)dimethyl, salts with tannins (generic), used in natural gas and oil well drilling and hydraulic fracturing to eliminate bacteria in the water that produce corrosive by-products.
The Environmental Protection Agency cancelled a teleconference of the Hydraulic Fracturing Research Advisory Panel which was to provide an opportunity for independent expert members of the ad hoc panel to provide comment on EPA’s study of the potential impacts of hydraulic fracturing on drinking water resources.
A new paper by A.T. Kearney forecasts that Ukraine and Poland have a good chance of becoming the leading European countries in the extraction of shale gas by 2035. The paper expects the shale gas production to amount to 58bn cubic meters by 2035, which is more than 12 percent of the total gas consumption in the EU in 2011. By 2035, the production of shale gas is supposed to make 45 percent of the total gas production in the region.
Chevron Corp. will become the first major oil company to partner with YPF SA to develop shale oil and a final deal is expected in July. Miguel Galuccio, chief executive officer of YPF, and Ali Moshiri, Chevron’s head of Latin America, Middle East and Africa, visited the Patagonia shale formation and met with Neuquen’s governor Jorge Sapag. The fields for the $1.5 billion joint venture comprise an area of 180 miles in southwestern Argentina.
Chevron Corp. has finalized a deal to farm into shale gas acreage in central Australia’s Cooper Basin owned by local upstream player, Beach Energy. Chevron has paid Beach $36 million for a 30% stake in the PEL 218 permit in South Australia and $59 million for 18% of ATP 855 in Queensland. The permits are known as the Nappamerri Trough gas ventures.
A delegation comprised of the Brazilian government and business leaders travelled to Pennsylvania to learn more about the Marcellus Shale and related business opportunities at an event hosted by the State of Pennsylvania and K&L Gates.
The Quebec government has tabled legislation to impose a moratorium on hydraulic fracturing for shale gas in the Lowlands of the St. Lawrence River. The moratorium, which could last up to five years, would remain in place until a new legislative framework for hydrocarbon exploitation in the province is set up. The tabled bill proposes stiff fines, from $10,000 to $6 million, for individuals or companies caught violating the moratorium.
Indonesia’s state-owned energy firm PT Pertamina signed an agreement to explore and develop shale gas in the northern part of Sumatra Island, potentially tapping 18.56 trillion cubic feet of reserves.
Poland will adopt a new, more investor-friendly law on shale gas exploration activity by the end of June, Environment Minister Marcin Korolec said. The new regulations are meant to ease bureaucracy in the sector. Poland will also create state operator that will take part in energy consortia. Poland has issued more than 100 shale gas exploration licenses, with some 40 test wells being in operation currently, though none is expected to start producing gas before 2015. The announcement seemed to contradict a statement earlier in the week by the Deputy Environment Minister Piotr Woźniak.
The Polish government does not want to support foreign investments in the shale gas sector, Rzeczpospolita wrote quoting reports from a meeting between Deputy Environment Minister Piotr Woźniak and a group of foreign investors and diplomats. According to press reports, “the Polish government has no intention of investing into shale gas and does not want to support cooperation with US and Canadian firms.” Two North American energy companies have withdrawn from Poland in recent weeks. Marathon Oil from the US and Canada’s Talisman Energy are in the process of selling their Polish assets.
Britain is on track to “accelerate” its shale gas program, according to Michael Fallon, the energy minister, as he confirmed a new licensing round for oil and gas explorers will take place next year. The Government will next year launch the UK’s 14th onshore licensing round, he said, announcing that engineering consultancy AMEC has been hired to do the environmental assessment of plots’ suitability for exploration.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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