HBW Resources: Ollison Hydraulic Fracturing 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.
California lawmakers rejected a bill, AB 1323 introduced by Assemblywoman Holly Mitchell (D, District 54) that would have stopped drillers from using hydraulic fracturing to free oil and natural gas from shale beds until state regulators implement rules for the controversial practice. The legislature also set aside until next year, SB 395, introduced by Sen. Hannah-Beth Jackson (D, District 19) which would require fracking wastewater to be regulated as a hazardous waste through the Department of Toxic Substances Control. The State Senate did pass with a 26-12 vote, SB 665, introduced by Sen. Lois Wolk (D, District 3) which would revise the bonding amounts that drillers must post in case a well is later abandoned. The Senate also passed 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 28-11.
At its May 7, 2013 council meeting the Boulder City council directed the city attorney to draft and bring back to council a proposed moratorium to limit the use of hydraulic fracturing in the City of Boulder and on lands owned by the Open Space and Mountain Parks Department. The City attorney recommended (proposal starts on page 121) that the City accept a one-year moratorium on the acceptance of applications for new permits for oil and gas exploration. Council members will also vote on an ordinance that would ban the use, sale or supply of city water in oil gas extraction processes. Those recommendations were unanimously approved.
The group, Citizens for a Healthy Fort Collins, has organized to place a measure on the November ballot that would impose a five-year moratorium on fracking within Fort Collins city limits. The group filed a notice with City Clerk’s Office of its intent to pass petitions. After the petitions are approved by the office, petitioners would have 60 days to collect the signatures of 3,907 city voters to move the measure forward. If sufficient signatures are collected, the City Council could approve the group’s proposed ordinance establishing the moratorium or it could pass it along for voters to decide. The City Clerk’s Office approved the form of petitions that will be circulated by the group Citizens for a Healthy Fort Collins. The signatures of 3,907 city voters are needed by August 5, 2013 to move the measure forward.
The Broomfield City Council won’t pursue a moratorium on fracking but will continue to meet over the next few months to decide how to treat future oil and gas drilling applications. Council members agreed that they need to update oil and gas policies and explore ways to work with oil and gas drilling applicants to ensure heightened safety standards.
The Illinois House passed legislation, SB 1715, which would regulate horizontal hydraulic fracturing in the state in a 108 to 9 vote. Under new regulations which would take effect as soon as Gov. Quinn signs them into law, companies who wish to frack for oil or gas, defined as the high-pressure injection of 80,000 gallons of fracking fluid or more to force out oil or gas from where it is trapped in rock, must disclose a wealth of new information to the public. The bill creates the Illinois Hydraulic Fracturing Regulatory Act, the Mines and Minerals Regulatory Fund, the Illinois Hydraulic Fracturing Tax Act and the Task Force on Hydraulic Fracturing Regulation. The bill also passed the Senate with a vote of 52-3.
Denver-based Strata-X said the company has received a permit from the Illinois Department of Natural Resources to begin drilling the Burkett 5-34HOR well west of Xenia. A rig from Les Wilson Inc. in Carmi will be used to drill a 4,500-foot deep vertical shaft to the Devonian Lingle formation, rock that underlies the hydrocarbon-rich New Albany Shale formation. Once the well is drilled, workers will extract a core from 60 feet of the rock for testing. The IDNR permit also allows Strata-X to drill a 4,300-foot long horizontal leg after coring.
The Michigan Department of Environmental Quality has confirmed the governmental agency approved permits for drilling a well for possible fracking in Ravenna Township. The Michigan branch of Houston-based Rosetta Resources had applied in March to drill vertically and horizontally, and to use a fracking technique on the well, which would be located a short distance northeast of the village of Ravenna.
Proponents of hydraulic fracturing have asked New York’s top court to hear their arguments on whether local governments can ban gas drilling within their borders, but whether the Court of Appeals agrees to take the case is far from a sure bet. Attorneys for Norse Energy and an Otsego County farm made the filing late Friday, asking the seven-member Court of Appeals to take on the cases of a pair of upstate towns that changed their zoning laws in 2011 to ban hydraulic fracturing and gas drilling.
SB 76, introduced by Sen. Buck Newton (R, District 11), Sen. Bob Rucho (R, District 39) and Sen. Andrew Brock (R, District 34) passed the House Commerce and Job Development Committee and was referred to the House Environment Committee. The original Senate version of the bill authorized the Department of Environment and Natural Resources to issue permits on or after March 1, 2015 for oil and gas exploration and development activities in the state, including the use of Horizontal Drilling and Hydraulic Fracturing treatments for that purpose. The version that passed the House Commerce and Job Development Committee removes many provisions in a Senate measure that would set a date for regulators to begin issuing permits to energy companies drilling for gas through hydraulic fracturing.
The Muskingum Watershed Conservancy District (MWCD) has signed three lease agreements – for a combined total of more than $77.8 million – involving its property for Utica Shale exploration. Royalties range from 16.5% to 20% on gross revenue of oil and gas produced. MWCD recently received its first royalty check – for $750,000 from Gulfport Energy Co. at 16.5%, covering a few months of activity at a well near Clendening Lake. MWCD has used part of the lease signing funds to pay on its debt, and improve public access to recreational facilities throughout the district. “As the royalties grow over time, a percentage of those royalty funds will determine what any reduction in the assessment will amount to on an annual basis” MWCD executive director/secretary John Hoopingarner stated.
Pennant Midstream is ready to begin building a processing facility and start moving natural gas through a new pipeline as part of its $300 million project to serve the Utica and Marcellus shale plays in Ohio and Pennsylvania. Pennant, a joint venture between NiSource Midstream Services and Hilcorp Energy Co., is constructing a natural gas liquids processing plant near Youngstown in Mahoning County and about 55 miles of pipelines through northeast Ohio and western Pennsylvania.
A northeast Pennsylvania couple launched an appeal challenging the state Department of Environmental Protection’s conclusion that hydraulic fracturing at natural gas wells near the property was not the cause of methane contamination of their well water. In a notice of appeal, Tammy and Matthew Manning — who are also plaintiffs in a federal class action over fracking pollution — told the state’s Environmental Hearing Board that DEP’s conclusion that drilling by WPX Energy Inc. was not the cause of methane contamination discovered in their private water supply in Susquehanna County in December 2011 was not backed up by any hard data.
Following last week’s press reports that Rep. Jesse White (D, District 46) had attacked constituents who supported natural gas development while using an assumed name, there are now calls for him to resign his position.
A new study in Groundwater suggest that methane concentrations in Susquehanna County water wells in Pennsylvania can be explained without the migration of Marcellus shale gas due to hydraulic fracturing. The study examined over 1,700 water wells in gas-producing and non-gas producing areas, determining that “methane is ubiquitous in groundwater” in the region, and that it is unrelated to Marcellus Shale development. In fact, the study noted that over 78 percent of the sampled water wells exhibited detectable methane concentrations. Of these, some 3.4 percent of the sample exceeded action levels at which corrective action is recommended by the Pennsylvania Department of Environmental Protection.
A Perry Township resident has asked supervisors to look into the possibility of placing a modified five-year moratorium on hydraulic fracturing because of recent hazard alerts. The National Institute for Occupational Safety and Health identified exposure to airborne silica as a health hazard to workers conducting some fracking operations during recent field studies. Chairman A.J. Boni said the supervisors will look into possible options.
At a Senate Energy & Natural Resources Committee hearing “to review programs and activities of the Department of Interior,” Secretary Jewell announced an extension of 60 days for the comment period for the proposed hydraulic fracturing rule on federal and Indian lands. The extension will give the public a total of 90 days to comment on the proposed rule. Comments will now be due on August 23rd.
FracFocus.org, the national hydraulic fracturing chemical disclosure registry, will implement major upgrades beginning June 1, 2013. FracFocus 2.0 users will now be able to more efficiently search for well site chemical information due to the site’s conversion to an XML database platform. In addition to using GIS mapping technology to identify chemicals used in individual wells, users will also have the option to search and pull reports by date ranges, chemical names or Chemical Abstract Service (CAS) numbers.
Ernst & Young has a new study, US Oil and Gas Reserves Study 2013, detailing $185.6 billion in total capital spending by oil and natural gas companies last year – the largest in the history of the firm’s oil and natural gas reserves study. The study of U.S. upstream (pre-refinery stage) capital spending by the 50 largest companies (based on 2012 end-of-year oil and natural gas reserve estimates) found a 20 percent increase compared to 2011. Ernst & Young said the increase was largely due to increased tight oil and liquids activity. That refers to development in tight-rock formations, made possible by hydraulic fracturing and horizontal drilling. Details:
· $26.3 billion in exploration spending in 2012.
· $103.4 billion in development spending.
· Companies spent 17 percent more to acquire properties for development in 2012 than they did in 2011 – spending for proved properties rose to $21.6 billion.
· Tight oil developments and greater focus on natural gas liquids led to a 45 percent rise in U.S. oil/liquids reserves over the five-year study period. Oil reserves for the 50 companies rose to 23.3 billion barrels.
If there was any doubt the U.S. shale revolution is breaking the dominance of unsavory energy producers on global oil supplies, look no further than last week’s OPEC meeting, where the alarm bells were going off. After years of dismissing U.S. energy production as insignificant and expensive, OPEC suddenly said it would “study” the growth in hydraulic fracturing and horizontal drilling. Fracking has made U.S. oil production skyrocket 20% in just the last year, according to the Energy Department. That’s the biggest increase in 21 years, and it is expected to soar another 21% in the next five years. The growth has curbed the U.S. need for energy imports. America is expected to end its dependence on imported liquid fuels by 2025, according to a recent study by the American Petroleum Institute. And worse still for OPEC, the U.S. has become a net energy exporter — read: competitor — with oil now its top export.
Argentina’s Supreme Court revoked a $19 billion embargo on the assets and future income of Chevron Corp.’s Argentina subsidiary, giving the U.S. oil giant a victory in a decades-old battle with indigenous groups in Ecuador. The court’s decision is also a victory for Argentina’s government, which has been encouraging Chevron to invest in its vast but almost entirely untapped unconventional oil and gas reserves. Argentina’s state-run oil company YPF SA recently signed off on broad terms of an agreement that would see Chevron Argentina invest up to $1.5 billion to produce shale oil in the province of Neuquen in western Argentina. If successful, the deal could rise to $15 billion over the course of many years.
Australia could be sitting on more than 1,000tn cubic feet of untapped shale gas, but effective environmental regulations and a fall in costs are needed before this resource can be fully exploited, according to a new report from the Australian Council of Learned Academies, Engineering Energy: Unconventional Gas Production. The report found that while Australia had huge deposits of gas, it would “not be cheap gas in most circumstances” and would have a slightly higher rate of carbon emissions than standard gas, albeit significantly less than coal-fired power. The report states that shale gas infrastructure costs in Australia will be double that of the U.S., where the industry is relatively mature, and will require a high price to make it profitable.
Bulgaria’s new Environment Minister, Iskra Mihaylova, has suggested that the moratorium on shale gas drilling is an impediment triggered by public mistrust of Bulgarian and EU laws. Mihaylova pointed out that Bulgaria had good environmental legislation and could well afford to launch shale gas exploration which would identify where the technology posed environmental and health risks, after which the people would be free to say “no” to the concrete project, instead of an all-out moratorium.
An opposition party says the Quebec government has quietly approved hydraulic fracturing on Anticosti, warning that the picturesque island packed with four-legged wildlife will be “devastated” when oil drill rigs arrive and begin exploration work in earnest. The large island is home to just 280 people but thousands of deer, drawing hundreds of hunters every year to its remote location in the Gulf of St. Lawrence. Three companies – Junex Inc., Pétrolia Inc. and Corridor Resources Inc. have done initial exploratory work on Anticosti. The estimated oil initially in place is about 40 million barrels. Québec Solidaire pointed Wednesday to a water protection regulation published May 29 in Quebec’s Gazette Officielle, the publication through which the government releases official decisions. The regulation under the environment quality act states that “the fracturing of a well intended for exploration for, or the production of, petroleum or natural gas is prohibited less than 400 meters below the base of an aquifer.”
France’s ban on hydraulic fracturing should not be eased because the oil and gas drilling technique is causing “considerable” environmental damage in the U.S., according to a government minister. “We have to have our eyes wide open about what is going on in the U.S.,” Environmental and Energy Minister Delphine Batho said. “The reality is that the cost of producing gas doesn’t take into account considerable environmental damage.” Earthquakes, aquifer pollution, heavy metal contamination, increased truck traffic and damage to the countryside are consequences of fracking, the minister said. However, a new report by a French parliamentary commission called for the ban to be eased in order to allow estimates of the size of France’s shale oil and gas reserves.
The German government has reportedly suspended plans to regulate hydraulic fracturing until after September’s election, prolonging the uncertainty that has hampered development of the gas extraction technology in Europe’s biggest economy. Angela Merkel’s center-right government had drawn up legislation laying out the conditions for exploration and imposing restrictions on where drilling could take place, but that has now been put on hold.
India will “very soon” finalize policy on shale gas exploration and is actively considering new rules to allow commercial gas production from coal blocks allotted to several companies for industrial uses in an attempt to raise natural gas output, its federal minister said. The plans are in line with the country’s goal to cut dependence on energy imports by half by 2020 and eliminate it by 2030. India now imports 75% of its energy needs. India has laid out several plans to liberalize its energy policies ranging from partially loosening control on pricing of natural gas to freeing up gasoline pricing and allowing fuel retailers to steadily raise diesel rates as it looks to attract more investment in the sector.
Indonesia’s state-owned oil and gas company, Pertamina, signed the country’s first shale gas production-sharing agreement, and two shale gas blocks were offered up for tender. According to a company statement, Pertamina will explore for shale gas in the Sumbagut block in North Sumatra, which is estimated to possess 18.56 trillion cubic feet (525.6 billion cubic meters) of shale gas. Pertamina is aiming for initial production after six years of exploration with production levels beginning at 40 million standard cubic feet per day (MMscfd) and increasing to 100 MMscfd in 2020, and plans to invest $7.8 billion into the Sumbagut project, with $28.4 million budgeted for a three-year exploration stage.
The Polish government will receive drafts of the law on the law on geology and mining and on the taxation of hydrocarbons on June 12. Deputy Environment Minister Piotr Woźniak told Puls Biznesu that his ministry has completed consultation work on the mining and geology law. He added that the Finance Ministry has also finished working on the taxation law.
After years of failed attempts to start developing one of the world’s largest gas fields, Gazprom might delay the Shtokman project for decades. The shale revolution in the US – the project’s key export market – is undermining its profitability.
One of the two largest oil producers in the world, Russia accounts for 12 percent of global output. Russia is also the top producer of natural gas, accounting for about 20 percent of the world’s total. Russia faces two challenges that will affect not only its preeminence as an energy supplier but also its ability to wield oil and gas as geostrategic tools. New technologies are helping other countries develop their own natural resources more easily and inexpensively, threatening billions of dollars of Russian state revenue. At the same time, to maintain the current level of production, not to mention increase it, Russia must make huge investments in exploring and recovering oil from virgin deposits (“greenfields”) of the east Siberian region and the Arctic shelf. The likely result is a significant thinning of oil and gas rents — jeopardizing the stability of the regime and perhaps even its survival.
Gazprom is likely to fall victim to the shale gas revolution that is under way across the US. The shale gas revolution will probably have telling consequences for Russian state capitalism and President Vladimir Putin’s power. High quality global journalism requires investment. A second big blow to Gazprom came on September 4 when the European Commission opened formal proceedings against the company for anti-competitive practices in eight central and eastern European countries. The European Commission is investigating Gazprom for having “divided gas markets by hindering the free flow of gas across member states”, “prevented the diversification of supply of gas” and “imposed unfair prices on its customers by linking the price of gas to oil prices.”
British energy company IGas said that there may be as much as 170 trillion cubic feet of natural gas in shale license areas in the North. IGas said it conducted an analysis of some 20 wells in a 300-square-mile area where it’s the exclusive license owner. The estimate of 170 trillion cubic feet was the high-end assessment from the Bowland Shale license area. The low end was around 15 trillion cubic feet of natural gas.
The UK’s special envoy for trade with Azerbaijan, Charles Hendry stated that the UK, expanding actively its relations with Azerbaijan in the energy sector, not only backs provision of the energy security of Europe, but also the processes of direct purchase of Azeri gas.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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