HBW Resources: Ollison Hydraulic Fracturing Report. Highlights of Shale Development from Colorado to Algeria

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. 
 
States 

State Legislative Update: Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
 
Alaska
New regulations to oversee hydraulic fracturing of oil and gas wells in Alaska could be issued later this year by state regulators, officials said at a public hearing. The regulations, proposed by the Alaska Oil and Gas Conservation Commission, would require the approval of regulators before fracturing is conducted, notification of landowners and testing of water wells within a half-mile radius, and the full disclosure of chemicals in the hydraulic-fracturing liquids. The proposed regulations, which will incorporate well-bore-integrity rules, are intended to let state officials keep up with technology and to ensure that public concerns are addressed, said Cathy Foerster, chairman of the commission. Industry representatives complained at the hearing and in written testimony that the proposed Alaska fracking regulations are stricter than those in place or proposed in other states. They objected to the specific chemical disclosures because they would reveal proprietary formulas and trade secrets. For more information, please contact HBW Resources.
 
California
The Obama administration has tentatively settled an environmental lawsuit over oil and gas drilling in Monterey and Fresno counties with an agreement to conduct a statewide study of hydraulic fracturing and its possible effects on water and wildlife. The tentative settlement was announced Monday in a federal court filing in San Jose. The filing did not provide details, but attorney Brendan Cummings of the Center for Biological Diversity noted that the U.S. Bureau of Land Management had promised in earlier court papers to conduct a new review of fracking after a magistrate blocked two oil leases in April. California is about to start regulating the practice in legislation that Gov. Jerry Brown plans to sign. SB 4 introduced by Sen. Fran Pavley (D, District 27) will require the state to conduct its own study of fracking’s impacts, and will also mandate oil companies to obtain a specific permit to frack a well, notify neighbors in advance and disclose the chemicals used in the process.
 
California Governor Jerry Brown, preparing the state for development of the largest shale-oil reserves in the U.S., signed into law, SB 4, which regulates hydraulic fracturing, a process that has been criticized by environmental groups. The third-largest oil-producing state will for the first time require permits to use the drilling technique, which injects millions of gallons of chemically treated water underground to break up rock and free trapped oil and natural gas. Energy companies will have to disclose the ingredients in fracking fluid and notify nearby landowners of their plans. The governor said he will direct the state’s Conservation Department to develop a permitting program that groups permits together based on factors such as known geological conditions and environmental impacts. Brown noted alongside his signature, “I am also directing the Department of Conservation when implementing the bill to develop an efficient permitting program for well stimulation activities that groups permits together based on factors such as known geologic conditions and environmental impacts, while providing for more particularized review in other situations where necessary.” For more information, please contact us.
 
Colorado
Colorado’s oil and gas regulatory agency agreed to expand the acreage in formally designated sensitive wildlife habitat areas that require the industry to consult with state wildlife officials and avoid impacts before drilling wells. The COGCC’s governor-appointed commission unanimously voted to approve the rule revisions that will add a total of 2.2 million acres to already established sensitive wildlife habitat areas statewide, including 680,000 acres in protected elk winter concentration areas and nearly 530,000 acres in protected bighorn sheep winter range. The revised maps also add more than 400,000 acres to Gunnison sage grouse sensitive wildlife habitat. Oil and gas drilling projects proposed within the boundaries of sensitive wildlife habitat areas require the companies to consult with Colorado Parks and Wildlife before drilling to minimize impacts.
 
The Lafayette City Council instructed City Attorney David Williamson to draft resolutions stating its opposition to a proposed ban on hydraulic fracturing in the city and a utility occupation tax, which would replace the annual franchise fee paid by Xcel Energy. Anti-fracking activists, led by Lafayette-based East Boulder County United, submitted a successful petition this summer to place a question on the city’s November ballot asking voters whether the practice should be banned within city limits. Fracking opponents claim that drilling, particularly the water-sand-chemical mix used during the process to loosen up deeply buried pockets of oil and gas, risks contaminating water and air and harming human health. The council this year passed a three-year moratorium on new oil and gas drilling activity in the city. The utility occupation tax would replace the annual $740,000 Xcel Energy franchise fee with an occupation tax as part of an effort to decouple the city from the utility and fund renewable energy programs. For more information, please contact HBW Resources.
 
Kansas
Shell Oil has confirmed what it had hinted earlier: that it is pulling out of Kansas completely, selling off 45 producing wells and 600,000 acres of leases in Barber, Harper, Kingman, Pratt, McPherson, Sedgwick, Sumner, Rice and Reno counties. It’s the most dramatic in a series of high-profile departures of major exploration companies that have given up on the Mississippian formation, or at least the Kansas side of it. Chesapeake Energy, Encana and Apache have been gone for more than a year. Tug Hill Operating and Reeder Energy filed their last intent to drill in March, and Midstates Petroleum in April. Wichita-based Woolsey Petroleum, a local player in the horizontal Mississippian play, remains an active driller, but hasn’t filed new plans for a horizontal well in more than three months. Others, however, have remained active, including Sandridge Energy of Oklahoma City, Source Energy Mid-Con of Highlands Ranch, Colo., and Unit Petroleum of Tulsa.

Maryland
Two meetings have been scheduled on the impacts of developing the Marcellus Shale in Western Maryland. The gatherings, sponsored by the Department of Health and Mental Hygiene, are scheduled for Tuesday, September 24th at Frostburg State University’s Compton Science Building from 7:00 PM until 10:00 PM. The second one is set for Saturday, October 5th from 1:00 PM until 4:00 PM in the Auditorium at Garrett College in McHenry. At both meetings, DHMH says citizens are invited to present their views and suggestions for developing the Marcellus Shale. DHMH has been asked by the Maryland Department of the Environment to look into the public health impacts of developing the Marcellus Shale. DHMH will oversee the study, but the actual research will be done by the University of Maryland Institute for Applied Environmental Health. For more information, please contact us.

Michigan
The Graham Sustainability Institute at the University of Michigan released 7 technical reports about Hydraulic Fracturing in Michigan. The studies examine seven critical topics related to the use of hydraulic fracturing in Michigan, with an emphasis on high-volume methods: technology, geology and hydrogeology, environment and ecology, public health, policy and law, economics, and public perceptions. Hydraulic fracturing in Michigan has been going on for years. However, these projects have been on a much smaller scale than the types of projects looked at in the assessment. For example much of the fracking being done in Michigan right now consists of wells that are about 2,000 feet deep and that use about 50,000 gallons of fluid. The assessment focuses on wells that are about 10,000 feet deep and that can then shoot out in different directions. These wells use anywhere from 100,000 gallons to 20 million gallons of fluid. Only 19 projects of this scale have been completed so far in Michigan.
 
New Jersey
The Highland Park Borough Council passed an ordinance to explicitly ban hydraulic fracturing, apparently becoming the first in the New Jersey to do so. Ordinance No. 13-1851, an ordinance banning hydraulic fracturing in the Borough of Highland Park, County of Middlesex, State of New Jersey, states, “Drilling for natural gas, using the drilling technique of hydraulic fracturing and exploring for natural gas beyond the reconnaissance phase is prohibited within the Borough of Highland Park, Middlesex County, New Jersey.”  Without any gas companies idling on Route 27, the day-to-day local implications aren’t obvious, but environmentalists and borough officials hope it sends a message to the governor and to parts of the state where fracking, and peripheral issues surrounding the practice, is a bigger issue. Environmentalists also want the New Jersey to ban the byproducts of fracking from coming into the Garden State. For more information, please contact us.
 
North Carolina
Local governments in North Carolina wouldn’t be able to control natural gas drilling with zoning codes, according to a panel writing the state’s drilling rules. Under the “Mining and Energy Commission’s Local Government Regulation Study Group’s” Summary of Recommendations, cities and counties would be able to enforce local ordinances to regulate light, noise, odors and other side effects of drilling. However, communities would have to control drilling locations through setbacks — the distance required between a well and nearby buildings — and other tools, said James Womack, the chairman of the North Carolina Mining and Energy Commission. Communities wouldn’t be able to use zoning to separate drilling sites from residential areas, for instance, if it would prohibit drilling, Womack said. The proposal on local governments also says municipalities should take steps to moderate the impact of gas drilling, including allowing pipelines in road rights of way and using maintenance agreements with drilling companies to pay for road upkeep. Cities could also use weight limits for local roads, truck routes and restrictions on the timing of truck traffic to offset the impact of drilling-related traffic. The proposal will be sent back to the state Legislature for action next year.
 
North Carolina has turned down a pair of federal grants, one of which would have helped monitor water quality in areas where drilling for natural gas is likely to take place, provoking criticism from advocates who say the cash-strapped agency needs the money. In an email dated Sept. 3, the state informed the U.S. Environmental Protection Agency that it does not need a $222,595 grant for water quality monitoring in areas seen as candidates for hydraulic fracturing, or “fracking,” a method of natural gas drilling that has spurred environmental concerns in other states. The same email also declines a $359,710 grant to establish a long-term wetlands monitoring network in the coastal plains and Piedmont areas of the state. That money would have helped track how wetlands changed over time. For more information, please contact HBW Resources.
 
North Dakota
Calgary-based Aux Sable Midstream LLC and Summit Midstream Partners LP of Dallas said up to 25 million cubic feet of natural gas daily will be sent from Burke and Mountrail counties along a 2,300-mile pipeline system. Alliance Pipeline Ltd.’s pipeline runs from western Canada to the Chicago hub, where the gas is sold to Midwest and East Coast markets. In North Dakota, the pipeline is fed by the Prairie Rose Pipeline owned by Aux Sable. Summit spokesman Marc Stratton said about 17 million cubic feet of North Dakota natural gas is being shipped at present under an existing pact that has been in place since late 2011. Stratton said work is being done by Summit to bump the gathering capacity of natural gas in western North Dakota to about 30 million cubic feet daily by mid-2014.
 
North Dakota is projected to ultimately produce just under 1.6 million barrels of oil per day, but risk factors could threaten that production, the state’s top oil and gas regulator said. Department of Mineral Resources Director Lynn Helms told more than 800 people attending the North Dakota Petroleum Council’s annual meeting in Grand Forks that the industry is entering a final phase of development but should expect some bumps along the way. The main risk factors come from the federal government, Helms said, such as possible federal regulations on hydraulic fracturing. Another threat comes from a lack of capacity in the refining market that could soften prices of Bakken crude, Helms said. With the Bakken and the Eagle Ford shale in Texas producing more light, sweet crude, refineries can handle an additional 650,000 barrels of oil per day, Helms said. North Dakota produced 874,460 barrels per day in July. Planned refineries in North Dakota won’t make much of a dent in that supply. A refinery under construction near Dickinson will have the ability to process 20,000 barrels per day. That lack of refinery capacity means Bakken crude will need to compete with heavy, sour crude for refining and companies will need to incorporate potentially lower prices into their budgets for 2014, Helms said.
 
Ohio
Representatives of the Sierra Club and the organization for Frack-Free Ohio asked Richland County Commissioners to support legislation in the Ohio House, HB 148, and Senate, SB 178, that would ban the use of deep injection wells to dispose of brine from horizontal hydraulic fracturing for gas and oil. They also asked commissioners to change local regulations and eliminate the use of oilfield brine for road de-icing. Richland County currently allows brine from vertical drilling to be applied to road grit and road surfaces according to state regulations. The county requires the person or company applying the brine to provide a statement of where the brine comes from and test results showing that the levels of any toxic chemicals in the brine are within EPA limits. Commissioners generally supported Baker’s and Thorp’s requests but said they wanted to take some time to review their material before passing a resolution or changing brine regulations. For more information, please contact us.
 
Reps. Sean J. O’Brien (D, District 63) and David Hall (R, District 70) are preparing legislation to give state tax credits to people and companies who buy or convert trucks and cars to burn both natural gas and gasoline. The proposal, conceived with the assistance of an industry group, would also create a multimillion-dollar loan program to help companies converting fleets of vehicles buy and install the refueling equipment. The tax credit would pay for up to 50 percent of the cost of the conversion, which is $5,000 to $10,000 for cars and light duty trucks and up to $40,000 for large trucks. Under the proposal, the bill’s tax credits would disappear after five years. Also, over those five years, the state’s gasoline road tax would gradually be applied to CNG purchases, up to 28 cents for the amount of CNG equal to a gallon of gasoline. At least 11 states, including Indiana, Pennsylvania, West Virginia and Kentucky, have such incentive programs. For more information, please contact HBW Resources.
  
Less than a month after its passage, the Nile City Council voted unanimously to rescind the “community bill of rights,” a controversial measure opposing hydraulic fracturing within city limits. The ban was passed in its first reading by a 7-0 vote at the Aug. 21 council meeting, largely due to fears by several city officials that oil and gas companies were buying land in residential neighborhoods which it planned to use for deep wells. However, experts in the oil and gas industry have assured city officials they will not drill in residential neighborhoods, as there is not enough room to accommodate the five acres necessary for a safe drill. Councilman Steve Papalas pushed for the bill of rights’ passage in August. After voting to rescind the ordinance, he apologized to fellow councilmembers for pushing them into a decision before proper research was done. While the bill of rights was repealed, council also unanimously voted to adopt a resolution stating the position of the city concerning shale gas and oil extraction. In that resolution, council re-affirmed its stance against drilling in residential areas.
 
The state’s highest court will soon hear a case that for the first time challenges a law Ohio legislators passed in 2004 giving the Ohio Department of Natural Resources sole authority to permit and regulate oil and gas drilling. The pre-emptive state law — passed with House Bill 278 — almost entirely limits both local government’s authority and ability to restrict oil and gas drilling. Only within the last three years have opponents stepped up their attack on the law as drilling has increased dramatically in the state with the arrival of horizontal hydraulic fracturing. The case originated at the trial-court level in 2011 in Summit County after the city of Munroe Falls filed a complaint against Ravenna-based Beck Energy. In its initial complaint, Munroe Falls alleged that after the company had started to drill on private property there, it failed to file for local drilling permits and did not comply with zoning and right-of-way ordinances. For more information, please contact HBW Resources.
 
Belmont County taxpayers will see a $3 million windfall as county commissioners agreed to enter into an oil and gas lease with Rice Drilling. The agreement calls for Rice to pay the county $7,500 per acre for the mineral rights to 406 acres, with 20 percent royalties.
 
Members of the Athens County Board of Elections have declined to elaborate on their reasons for rejecting a local anti-fracking ballot initiative from going to voters this November. Meanwhile, the group that originally filed the initiative petition says that it’s now too late for the measure to go on the Nov. 5 city ballot.
 
Pennsylvania
State Rep. Daryl D. Metcalfe (R, District 12), the chairman of the House Committee on State Government, said he has asked the State Ethics Commission to investigate conflict of interest allegations against the wildlife agency official, William A. Capouillez, who is responsible for natural gas development on state game lands. The Inquirer reported last month that Capouillez, who oversees oil and gas leasing on 1.4 million acres of public game lands, operates a prosperous business in his off-hours negotiating gas leases for private landowners. Rival gas-leasing agents have complained for years that Capouillez’s state job as director of the Bureau of Wildlife Habitat Management gives him an unfair advantage. For more information, please contact us.
 
Pennsylvania’s economic development team wants drivers to start filling up their cars with natural gas – and they’re willing to hand out taxpayer money to kickstart the trend. The Commonwealth Financing Authority awarded more than $2 million in grant money plus a $169,000 loan for five natural gas fueling stations. The goal is that incentivizing fueling stations will, in the long term, continue to grow the state’s Marcellus Shale-related job markets, said Steve Kratz, spokesman for the Department of Community and Economic Development. All the recent Commonwealth Financing Authority fuel station awards went towards publicly accessible CNG stations. Sunoco will receive more than $500,000 for installing a CNG refueling station at the Pennsylvania Turnpike King of Prussia Service Plaza, and another in nearby Upper Merion Township. Clean Energy Inc., will add another station to an existing CNG fuel stop in Upper Merion Township with around $196,000 in state grant money. Clean Energy is receiving another grant for around $436,000 to add a CNG fueling station to a gas station in Hamilton Township in Adams County. The other two projects are in Franklin County and Philadelphia.
 
Allegheny County Councilwoman Barbara Daly Danko proposed legislation that would create a three-year hold (ending on January 1, 2017) on the development of natural gas beneath county parks in order to investigate concerns and prepare “a comprehensive study” about who holds the rights to the subsurface minerals. At present, according to the motion submitted to the Council, “it is unclear whether or not the County owns the mineral rights to all County park land and if restrictive covenants exist which bear on the ability to lease those rights leaving the County at risk of a lengthy and costly legal entanglement that could render any royalty revenue moot.” This request comes after county officials discussed the possibility of allowing drilling in the 1,200-acre Deer Lakes Park. Matt Drozd, another councilmember, has proposed an ordinance that would allow the voters to decide whether or not to have drilling for natural gas under the county’s parks.

The United States Geological Survey (USGS) published a pair of reports, which are part of larger series aimed at documenting and quantifying the landscape disturbance from Pennsylvania’s natural gas drilling industry. The USGS-funded project has been underway for a little over two years and has documented a reduction of Pennsylvania’s interior forests – habitats for sensitive plant and animal species. So far, the federal government has examined 14 Pennsylvania counties where drilling is occurring and plans to publish several more reports before the end of the year. Forest fragmentation can occur with the development of drilling infrastructure like roads and pipelines.
 
State Sen. Jim Ferlo (D, District 38) is calling for a moratorium on state-issued fracking permits. Ferlo, who represents portions of the Alle-Kiski Valley as well as his Highland Park neighborhood in Pittsburgh, wants a study commission appointed to “conduct an unbiased study” of fracking issues. They include water source protection, air quality regulations, disclosure of chemicals used in fracking, and the state’s permitting process. The moratorium would only be partial and temporary, giving the state enough time to pass stricter regulations before it opens the door for new drilling permits, Ferlo said. The bill would mandate several improvements to the new regulations that the Legislature set in last year’s oil and gas reforms, Act 13. Ferlo called that law weak. For more information, please contact HBW Resources.
 
US Federal Energy Regulatory Commission gave unanimous backing to the Tennessee Gas Pipeline Company’s Rose Lake expansion project, which is expected to add about 230,000 Dt/d of firm pipeline capacity along the company’s 300 Line in northeastern Pennsylvania. TGP previously said that it would aim to bring the project into service by November 1, 2014. The expansion is expected to cost around $91.8 million. For more information, please contact us.
 
The Municipal Authority of Westmoreland County could earn up to $6.5 million this year in royalties from Marcellus shale gas drilling on its 8,000 acres. And officials want to make sure they receive every penny they are owed. So the authority board hired a consultant to audit the books for the 32 deep wells, along with other gas-producing facilities, on its properties. Royalties from gas production have been a boon for the utility, which sells water to more than 125,000 customers in five counties. Through the first quarter of the 2013-14 fiscal year, the money received from gas royalties has outpaced expectations and has bailed the authority out of a projected revenue shortfall. Revenues from water sales fell $750,000 short of projections for the first four months of the current fiscal year. Meanwhile, gas royalties have been $500,000 over budget — keeping the authority’s finances near the break-even point.
 
To position its students for in-demand energy jobs, the Pittsburgh Technical Institute (PTI) next month will open the doors of its new Energy Technology Center. The $3.5 million, 15,392-square-foot steel structure will house three new programs designed to put students on track for jobs in Pennsylvania’s energy sector, including its lucrative Marcellus Shale industry. The building was paid for in part by a $750,000 grant from Pennsylvania’s Redevelopment Assistance Capital Program, which funds, among other things, projects that aim to boost regional economic development.
 
Texas
Texas oil production from just two fields, the Eagle Ford shale and the Permian Basin, is likely to total well over 2 million barrels of oil per day (MMbopd) this year, if recent output trends continue, and could approach 2.5 MMbopd sometime in 2014, according to analysts. Production in the Eagle Ford play was about 599,000 barrels of oil per day (bopd) during the first six months of 2013, according to figures from the Texas Railroad Commission. Projections by the Wall Street Journal are that output will reach 930,000 bopd sometime this year. The Eagle Ford is expected to move well past the 1-million barrels-of-oil-per-day threshold by mid-2014. Meanwhile, output in the Permian Basin, which contains both shale plays and conventional plays, was about 890,000 bopd during the first half of 2013. Output is projected reach as high as 1.4 million bopd sometime in 2013, according to Stephen Shepherd for investment banking firm Simmons & Co. International. For more information, please contact HBW Resources.
 
Plains All American Pipeline and Enterprise Products Partners said they will expand their Eagle Ford joint-venture crude oil pipeline. The expansion will boost the pipeline’s capacity to 470,000 barrels per day of light and medium crude oil grades to accommodate additional volumes expected from Plains’ Cactus pipeline currently under construction. The Eagle Ford pipeline expansion is expected to cost about $120 million and should be in service in the second quarter of 2015.
 
New technology will play a key role in boosting output from the Eagle Ford Shale and other unconventional oil fields. Schlumberger Ltd. found it could increase the number of perforations that produce oil and gas in a group of test wells by redesigning the way they were hydraulically fractured. Using similar techniques, and better integrating the rapid advances in drilling technology, will play an increasing role in oil production. Schlumberger, working with a group of producers, tested a new frack design on a group of 12 wells this year and was able to get oil and gas to flow from 82 percent of the perforation clusters that reached into the surrounding rock, compared to 64 percent in a group of comparison wells. Varying the lengths allowed each frack stage to concentrate on rock with similar stress levels. That allowed the water-sand mix to break the rock more evenly. In a traditional frack, the water has a tendency to break down the lowest-stress rock, leaving other rock unbroken. For more information, please contact us.
 
A new report from environmental group Earthworks maintains government regulators are ignoring evidence that oil and gas fracking in the Eagle Ford shale harms the public. The Washington-based group says its report “Reckless Endangerment in the Eagle Ford Shale: Government Fails, Public Health Suffers and Industry Profits from the Shale Oil Boom,” is based on state reports and independent environmental testing focused on the Eagle Ford’s Karnes County. Earthworks’ report alleges that regulators documented dangerous pollution in the Karnes County but took insufficient action to warn residents and penalize polluters.
 
Economists credit the Eagle Ford Shale – and all that has trickled down from it – as the catalyst for development in Victoria. The county was named one of the top 10 metro areas in the nation to see growth in gross domestic product, according to data released last week from the U.S. Bureau of Economic Analysis. Gross domestic product rose 8.7 percent last year in Victoria. The national average increased 2.5 percent. Development of oil and natural gas in the Eagle Ford Shale added more than $61 billion in revenue in South Texas in 2012 and supported 116,000 jobs, according to a study released by the Center for Community and Business Research, which is hosted by the University of Texas at San Antonio. The study focused on 14 producing counties most active in the Eagle Ford Shale development area and six adjacent counties, which includes Victoria. For more information, please contact HBW Resources.
 
Empyrean Energy PLC, a British exploration and production firm focused on U.S. assets, is participating in a pair of new Eagle Ford Shale wells, officials say. The participation comes through its interest in the Sugarloaf Block A assets operated by ConocoPhillips Co.’s ConocoBurlington Resources Oil & Gas Company LP subsidiary. The Baker Trust-4 well, in which Empyrean has a 2.45 percent working interest, was drilled in August and is awaiting completion. Its net drilling cost to Empyrean is $225,000. The Marlene Olson-3 well, in which Empyrean has a 0.85 percent working interest, will be drilled later this month at a cost of $100,000.
 
National

A run of more stable U.S. natural gas prices is slowing the pace of gas storage projects along the Gulf Coast and other parts of the country. U.S. gas storage projects under development – most of them bloom along the Gulf Coast – have slipped in planned capacity to about 708 billion cubic feet of gas from 980 billion in late October last year, according to SNL Financial. Texas has about 69 billion cubic feet of planned working gas storage capacity, the fourth-largest amount in the U.S. Meanwhile, about half of the new storage capacity in the U.S. is slated to come online in two years, but 32 percent of that has not moved beyond the announcement stage into construction. What’s more, much of the remaining projects do not have an estimated completion date yet and projects that planned to develop 198 billion cubic feet of natural gas storage capacity have been postponed. For more information, please contact us.
 
The Great American Energy Boom is having a major ripple effect on the shipbuilding industry, which thanks to a 1920s maritime law, is busier than it has been in decades. Some ten supertankers are currently under construction at U.S. shipyards, with orders for another 15 in the pipeline. That may not seem like a huge number, but considering there are only about 75 such tankers plying American ports now, it represents a genuine boat-building boom. It’s because of a specific sector of the U.S. economy that is also booming: natural gas production. The fuel must be transported, even within the country, either by rail, pipeline or ship. And if it is by ship, the ship must be American-made and American-manned, according to the 1920s Merchant Marine Act, also known as the Jones Act. Matthew Paxton, president of the Shipbuilders Council of America, said up to 3.3 million barrels are shipped out daily from the Gulf Coast, destined for ports along the east and west coasts, causing huge demand for tanker ships. The Aker Philadelphia Shipyard recently announced that it invested a total of $115 million to construct four tanks and plans to build eight in total. Constructing one tanker, which could be more than 600 feet long and nearly 200 feet wide, can cost upwards of $100 million. Once they are up and running, the ships more than earn their keep. Transport companies pay up to $100,000 per day over a five-year contract to lease them. Currently, the shipping industry contributes $36 billion to the economy.
 
A new report, “Reckless Endangerment while Fracking the Eagle Ford Shale,” released by Earthworks looks at the oversight of fracking-enabled oil and gas development. It claims that regulators, charged with protecting the public, are actively avoiding evidence that fracking is harming the public. The report focuses on Karnes County, TX in an attempt to illuminate a growing national pattern of absentee regulators. For more information, please contact HBW Resources.

Federal
EPA withdrew a proposed rule under the Toxic Substances Control Act which would have disclosed the identity of all chemicals in health and safety studies, even if they were protected as confidential trade secrets. Currently, all new chemicals must be registered with EPA, along with related health and safety studies, but when a company designates a chemical as a trade secret, its identity is redacted from studies released to the public. This protection is important to the oil and gas service industry, which frequently creates new chemicals for use in their processes to improve hydraulic fracturing fluid. Environmental groups criticized EPA’s decision, arguing that redactions make the health and safety studies less valuable to the public.
 
Environmental inspections of oil and gas facilities on public lands have soared since 2007, but federal investigators said that the government is doing a poor job of targeting the riskiest sites. In a new report, the Government Accountability Office faulted the Bureau of Land Management for not including information about the environmental inspection history of many wells in its central database for tracking oil and gas facilities on public lands. As a result, the inspection prioritization process “does not have sufficient information to ensure that wells receiving inspections are those that pose the greatest environmental risk,” said the GAO, Congress’ investigative arm. Other problems include “inconsistent documentation of inspections and enforcement actions and challenges with retaining and hiring environmental staff in some offices.” For more information, please contact us.
 
International

Algeria
An assessment study by the National Agency for Hydrocarbon Resource Promotion (Alnaft) has claimed that Algeria should be looking to invest around $300 billion to develop its shale gas deposits. Alnaft has called on Algeria to drill 12,000 wells in the next 50 years in a bid to produce around 60 billion cubic metres of gas annually. Current estimates indicate that this could be achieved with an investment of $300 billion, which includes $200 billion necessary to cover drilling costs. For more information, please contact HBW Resources.
 
Argentina
Germany’s Wintershall, the oil and gas arm of chemicals group BASF, has signed an agreement to search for oil in Argentina’s “Vaca Muerta” field, considered one of the largest shale reserves in the western hemisphere. Wintershall and the oil and gas company of the province of Neuquen, Gas y Petroleo de Neuquen, plan to explore an area of 97 square kilometres in the “Vaca Muerta,” formation, the company said. Both partners hold 50 percent in the joint venture and Wintershall will operate the search while Gas y Petroleo de Neuquen remains the owner of the exploration and exploitation permit. The state-owned Argentinean company already has a licence to search for oil and gas in areas of Vaca Muerta. That enables Wintershall to obtain exploration rights before the province auctions rights to international investors in other areas of the field next year.
 
Australia
In a first for the state of Tasmania, South Australian company, Petragas, has applied for an exploration license for shale oil and gas in the state’s southern midlands. There has been 22 objections submitted to Mineral Resources Tasmania against the proposal and those objections are now being worked through by the government organization and Petragas. A new group, Our Tasmania, has been formed to monitor the plan to explore an area of 4000 square kilometers in southern Tasmania for shale oil and gas.
 
BHP Billiton Ltd. and Houston-based Apache Corp.’s $1.5 billion natural gas project in western Australia has started producing. Reuters is reporting the Macedon development began operating last month. Melbourne, Australia-based BHP Billiton is the country’s largest oil producer. Apache expects net daily production to reach 35 million cubic feet per day from the project, according to information on the company’s website. Apache has said it plans to invest about $1.9 billion in Australia this year. For more information, please contact us.
 
Azerbaijan
Azerbaijan signed contracts to supply European buyers with gas, offering an alternative supply source to Russia towards the end of the decade. Earlier this year, Azeri state oil company SOCAR and partners including BP and Statoil selected the Trans Adriatic Pipeline (TAP) for potential gas deliveries to Europe, following more than a decade of planning, dealing a blow for Russia’s aspiration for tighter control over gas routes. SOCAR said that buyers of Azeri gas from its Shah Deniz II project are Shell, Bulgargas, Gas Natural Fenosa, Greek DEPA, Germany’s E.ON, French GDF Suez , Italian regional utility Hera Trading, Swiss AXPO and Italian Enel. The developers signed 25-year accords to sell more than 10 billion cubic meters of gas a year from the field’s second phase starting in 2019.
 
Canada
Apache Corp. said it would sell various oil and gas producing properties in Canada in two separate deals worth $112 million. The Houston energy company is selling its Hatton, St. Lina, Marten Hills, Snipe Lake, Valhalla, and a portion of its Hawkeye producing properties. They are primarily dry gas developments in Saskatchewan and Alberta and comprise about 4,000 operated and 1,300 non-operated wells. The wells averaged daily production of 38 million cubic feet of natural gas and 750 barrels of oil, condensate and natural gas liquids, net to Apache, during the second-quarter 2013. For more information, please contact HBW Resources.
 
Nova Scotia’s three largest political parties appear to be moving closer to saying no to fracking, says a coalition of environmental activists. The Nova Scotia Fracking Resource and Action Coalition released the results of a hydraulic fracturing-related questionnaire it had asked the Liberal, Tory, NDP and Green parties to answer. “All the parties seem to have shifted their position,” said Angela Giles, with the Council of Canadians. “(Their answers reflect) a greater understanding of the potential harm that can come from fracking.” Only the Green party said it supports completely banning the controversial method of extracting natural gas from shale rock. None of the three other parties said they are prepared to support a 10-year moratorium. The NDP and Liberals say they would only allow fracking if it was proven not to be environmentally harmful.
 
China
China’s fledgling shale gas industry — a potential threat to long-term demand for Australian LNG — is not going as well as hoped, according to some of Australia’s biggest LNG developers who are also exploring there. Chevron oil and gas production and exploration boss George Kirkland says a recent visit to China indicated shale ground there was not backing up previous US government estimates of vast shale gas reserves. He said a recent assessment by the US Energy Information Agency that China could have more shale gas than anywhere else in the world appeared unlikely. Chinese shale growth is a major factor that could influence demand for Australian LNG and influence the building of a host of new plants. But if China cannot produce large amounts of shale to meet demand, it may also encourage the building of pipelines to Europe. Chevron’s Kirkland said his company would know more about its ground in the next year or two.
 
India
India has approved a policy to allow state-owned companies to start exploration for shale oil and gas as the world’s fourth-biggest energy consumer moves slowly to seek alternatives to expensive oil imports. The government agreed on a policy that will allow national oil companies to search for shale reserves on acreage already awarded to them. India could be sitting on as much as 96 trillion cubic feet (tcf) of recoverable shale gas reserves, equivalent to about 26 years of its gas demand, according to the U.S. Energy Information Administration. The policy marks a first step and covers only acreage in the hands of state-run explorers Oil and Natural Gas Corp (ONGC) and Oil India Ltd, which were handed out when India first started a push to produce oil and gas. Of about 356 blocks held by ONGC and Oil India, India’s upstream regulator has said 176 could hold shale resources. Contracts for these areas were awarded with a broad remit to look for petroleum, which was interpreted to include unconventional resources. The new policy effectively confirms that.
 
Japan
An agreement is expected to be made between Japanese Prime Minister, Shinzo Abe, and the Prime Minister of Canada, Stephen Harper. The agreement could see Canada exporting as much as 40 million tons of liquefied shale gas to Japan annually, as of around 2020, officials have claimed. Canada would be the second country to supply shale gas to Japan, as the United States are already expected to be exporting around 6.7 million tons a year to the country from 2017. For more information, please contact us.
 
Jordan
Jordan and China have agreed a Memorandum of Understanding to construct a $2.5 billion oil shale-fired power plant in the southern city of Karak, Jordan, which will produce around 900 megawatts of electricity. The agreement was signed in Beijing, and will see China’s Shandong Electric Power Construction Corporation (SEPCOIII) and HTJ Group teaming up to form a consortium with Jordan’s Al-Laijun Oil Shale Company to build the power station. For more information, please contact HBW Resources.
 
Mexico
Prices for natural gas over the border in Texas are at historic lows, so what happened earlier this month at the Gulf of Mexico port of Altamira, Mexico, might seem to defy market logic. Huge tankers arrived from distant Yemen and Nigeria to offload liquefied natural gas at a price four times the market rate for natural gas in the United States. At Mexico’s two other liquefied natural gas terminals, on the Pacific coast, the same phenomenon occurs, with expensive liquefied gas arriving from Peru, Indonesia and even Africa. It’s a sign of Mexico’s enormous energy crisis, even as oil remains the mainstay of the country’s economy. Mexico has huge natural-gas reserves, yet those reserves are largely untapped, and the nation is a net importer of the fuel. Abundant supplies of natural gas at low prices lie just across the border, but U.S.-Mexico pipelines are already handling all they can. So Mexico is forced into the global market, importing natural gas from the far corners of the Earth. In short, Mexico is over the barrel on natural gas, made worse by a state-owned oil company that’s desperate to hunt for “elephants” – massive oil discoveries – rather than develop more humdrum, far-less-profitable natural gas fields. President Enrique Pena Nieto on Aug. 12 announced broad revisions to Mexico’s oil and natural gas industries to boost exploration and production and allow foreign companies to invest in risk-sharing contracts. But even if Mexico’s Congress approves the changes, it will take years for them to result in greater gas production. The U.S. Energy Information Administration estimates that Mexico has the world’s sixth-largest shale-gas reserves, thought to be 555 trillion cubic feet.

Netherlands
Dutch government move to delay a decision on allowing shale gas drilling was hailed by local communities but “regretted” by energy boosters. Netherlands Economic Affairs Minister Henk Kamp announced the Cabinet would take 1 1/2 more years to study the potential effects of hydraulic fracturing on the environment before allowing Britain’s Cuadrilla Resources to drill test wells in the central province of Flevoland. In a Wednesday letter to the House of Representatives in The Hague, Kamp said more time is needed to study the entire range of possible shale gas sites in the country before approving the licenses, the Dutch daily Volksrant reported. Kamp indicated he wants to be able to include more input from local governments, such as those in Flevoland — including the cities of Noordoostpolder, Boxtel and Luttelgeest, which have vociferously opposed “fracking” after being identified as promising shale gas areas. The government delay came after the coalition partner Labor Party this month put up a political roadblock to approving the licenses. Parliamentary leader Jan Vos said Labor MPs would oppose drilling for shale gas in the Netherlands, thus dashing promoters’ hopes of a gaining a majority in favor.

Poland
Poland’s natural gas giant PGNiG plans to carry out research to find out why no company has so far managed to find commercial levels of shale gas in Polish deposits. The work will be carried out by the company’s experts in cooperation with the AGH University of Science and Technology and the Oil and Gas Institute. PGNiG hopes that the expert group will gather enough information to state whether there is enough gas in the deposits that the company has rights to. For more information, please contact us.
 
Romania
Romanian Prime Minister Victor Ponta has announced that foreign interests are attempting to hold Romania back from re-starting its mining sector, and that the political class is deadlocked in a debate over whether the gold mining project at Rosia Montana should go ahead. “There is an economic war which folded on some goodwill and normal manifestations (the street protests) and which comes, based on the information I received, from two directions: there are certainly economic interests outside Romania that Romania will not re-open its overall mining sector – and I am not talking about only gold mining, but mining in general – and that Romania will not become economically independent as concerns the gas production,” said Ponta. There have been reports that American billionaire George Soros is responsible for the protests at the gold mine as he is interested in taking over the site. It has been speculated that he is financing protests to sabotage Gabriel Resources. Furthermore, there are reports that Russia is backing anti-shale gas protests in Eastern Europe in a bid to retain its influence over the region.
 
Romania’s top oil and gas company, Petrom plans to earmark about 1 billion euros ($1.35 billion) for investment next year and could move into shale gas exploration if feasible, Chief Executive Mariana Gheorghe said. Petrom is regarded as an indicator of the Balkan country’s financial health and a robust investment program suggests the European Union’s second poorest member is on track to achieve economic growth of more than 2 percent this year and next. For more information, please contact HBW Resources.
 
Russia
Rosneft is acquiring Enel’s indirect stake in Russian gas producer SeverEnergia, valued at $1.8 billion, in its latest move to boost its presence in the gas market. State-owned Rosneft, the world’s top listed crude oil producer, has been aggressively expanding its gas business with a slew of purchases, including Russian gas company Itera which it bought for $2.9 billion. The company, headed by Igor Sechin, a long-standing ally of Russian President Vladimir Putin, aims to increase its share of the domestic gas market to 19-22 percent by 2020 from around 9 percent currently. It expects to produce over 60 billion cubic metres (bcm) of gas by 2016, compared with 42 bcm forecast for 2013, and 100 bcm in 2020, of which more than half will be produced at newly acquired projects.
 
South Africa
And as South Africa finalizes regulation on hydraulic fracturing, Eskom says it is considering converting the natural gas to electricity. Should commercially viable shale gas reserves be found in the Karoo, Eskom will build a plant to exploit the natural feedstock. This could help SA join the league of countries such as the US which shale gas has helped catapult into energy self-sufficiency in the past decade, says CEO Brian Dames. “Fracking can be done, and as Eskom we firmly believe it must be done,” he says. Eskom “will certainly” build a gas-fired power station if there is enough feedstock. SA urgently needs a national gas strategy that prioritizes different gas supply options and maps the location and sequence of gas infrastructure investments, says Anton Eberhard, a professor at the University of Cape Town Graduate School of Business. He is also a member of the national planning commission, which drew up the National Development Plan (NDP). Royal Dutch Shell has applied for permission to explore for gas through fracking in the Karoo. Citing a study by consultancy Econometrix, Shell says fracking may create up to 700,000 jobs in 20 years. Sasol has said that it would build a gas-to- liquid facility in the Karoo should sufficient reserves be confirmed.
 
Turkey
Turkey has begun to carry out hydraulic fracturing operations to extract shale gas from the wells in the Thracian and southeastern regions, where 4.6 trillion cubic meters of reserves have been detected. Meanwhile, a delegation from the Ministry of Energy went to the United States and Canada to examine the existing wells there and to meet the representatives of the companies in the sector. The delegation members specifically examined the hydraulic fracturing operations for shale gas there. Furthermore, they visited a number of R-D facilities which specialized in shale gas drilling and production. The delegation members also made short presentations about the new Petroleum Law of Turkey. Shell and TPAO began exploring for shale gas in the eastern province of Diyarbakır’s Sarıbuğday-1 natural gas field in September 2012. For more information, please contact us.
 
Ukraine
The United States will actively cooperate with Ukrainian authorities to strengthen their nation’s energy independence, the U.S. ambassador in Kiev said. “I’m very determined to cooperate with the Ukrainian government in strengthening Ukraine’s energy independence. There are several areas on the road to this goal,” Ambassador Geoffrey Pyatt said in an interview with Interfax-Ukraine. Pyatt said there are several ways to help Ukraine become more independent by working on energy efficiency projects, developing nuclear power and reimporting natural gas from Europe. The U.S. administration has promoted so-called Southern Corridor pipelines, a transit route for gas coming from the Caspian Sea basin to Europe, as a means to diversify Europe’s energy without having to rely on Russian gas that passes through Ukraine. One of the ways the U.S. is working with Ukraine is by helping the country develop its shale gas by bringing in companies like Chevron Corporation and Exxon Mobil Corporation, which have the technologies to extract the shale gas. For more information, please contact HBW Resources.
 
United Kingdom
Perth-based Eden Energy has signed a deal to sell all of its UK shale gas – as well as coal seam methane – portfolio to London-based unlisted company Shale Energy for A$19.3 million. The new agreement, which includes a non-refundable A$94,291 deposit, a further cash payment at settlement of A$1.88 million and a separate A$410,843 placement by Shale for 12-month escrowed shares in the Australian company, will see Eden by November add more than A$2.39 million to its cash in bank. In addition, the sale terms will see the Eden emerge with a 29.9% direct stake in Shale Energy – giving it exposure to any future discoveries and gas developments by shale in the England and Wales-based assets acquired from Eden.
 
Profits from shale gas extraction should be put in a state investment fund to ensure they are not squandered, the UK Independence Party has said. Mr. Helmer, a former Conservative politician who joined UKIP last year, was speaking on the first day of the party’s annual gathering in London. He pointed to the example of Norway, which has invested North Sea oil revenues in a sovereign wealth fund for decades, as to how the UK should maximize the benefits of shale gas. “UKIP is calling for our tax revenues from shale gas to go into a British sovereign wealth fund,” he said.
 
British utility Centrica said it was calling off two gas storage projects after the government refused this month to help build stockpiling sites, dealing another blow to a sector needed to feed the country’s high winter demand. Centrica, which owns household supplier British Gas, said it would incur 240 million pounds ($384 million) in costs for scrapping its offshore project at Baird in the North Sea and putting its Caythorpe plan in east Yorkshire on hold indefinitely. For more information, please contact us.
 
Cuadrilla Resources announced that it has completed its controversial drilling operation at Balcombe, West Susses, England. The firm said that the well confirmed the presence of hydrocarbons but will now be closed off for several months while Cuadrilla obtains planning permission to come back and test flow rates. The vertical well was drilled to an approximate depth of 2,700 feet, collecting some 294 feet of rock samples along the way, while the horizontal well was drilled a distance of 1,700 feet. Cuadrilla also carried out a set of advanced petrophysical logs that it said provides valuable data about the characteristics of the underground rock and the fluids contained within those rocks.
 
Additional Information
For additional information, please contact Bo Ollison with HBW Resources.  His contact information is below.
 
Bo Ollison
HBW Resources
2211 Norfolk Street, #410
Houston, TX 77098
Tel: 713-337-8810
E-mail: bollison@hbwresources.com
Web: http://www.hbwresources.com
Twitter: @BoOllison

Contact Information
 
If you have any general questions, please contact me anytime. Previous versions of the HBW Ollison Hydraulic Fracturing Report, the HBW Greenfield Offshore Energy Report, daily updates and new Member profiles can be viewed at: http://hbwresources.com/intelligence.  Hope you have a great day.
 
Thanks,
 
Michael Zehr
HBW Resources
1666 K Street, NW, Suite 500
Washington, DC 20006
Direct: 202-429-6081
Cell: 202-277-3927
E-mail: mzehr@hbwresources.com
Twitter: @mzehrhbw
 

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