API criticizes ‘foolish’ drilling bans and New York’s fracking delay

As local restrictions on shale drilling crop up, one industry representative candidly voices his annoyance.

This story appeared in EnergyWire in October 2012. The story is behind a paywall, but an excerpt is below.

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API criticizes ‘foolish’ drilling bans, N.Y.’s fracking delay
Local shale drilling bans are often “foolish” and championed by uninformed leaders, an industry economist said yesterday.

The American Petroleum Institute’s John Felmy said in a call with reporters that he hoped more bans would go the way of Binghamton, N.Y.’s hydraulic fracturing prohibition, which was struck down Tuesday by the state Supreme Court.

“Let’s look at why [local leaders] are making these decisions,” Felmy said of local drilling restrictions sprinkled across the Marcellus Shale (EnergyWire, Sept. 25).

“Somebody went out and saw ‘Gasland’ and suddenly decided that they needed to do something,” he added, referring to filmmaker Josh Fox’s anti-fracking documentary that draws connections between the drilling practice and water contamination.

Binghamton’s two-year ban on fracking — the process of shooting chemical-laced sand and water deep underground to access trapped oil and gas — was overturned because the court found it to be worded as an illegal moratorium, not a police-powers action as city officials had claimed (EnergyWire, Oct. 4).

Local control over oil and gas development has become a contentious topic at the center of more widespread litigation, including a Pennsylvania Supreme Court case that zeroes in on local zoning rights. Industry maintains that local bans and moratoriums create a regulatory jumble, which puts additional strain on operators and ultimately causes states to miss out on increased local revenue brought on by oil and gas development.

In New York it will be even longer until any concrete impacts of development or local limitations can be seen, as the state has delayed a decision on lifting its current fracking moratorium until a new health study is done. Gov. Andrew Cuomo’s (D) administration announced plans last week to take on an internal health review of fracking, a move that will likely require the state to restart the long rulemaking process (EnergyWire, Oct. 2).

Felmy would not clarify whether he thought the governor was stalling, but he said he was doubtful of the rationale for carrying out a health study.

“What evidence have you seen that they should be doing it?” he asked. “Otherwise, it looks like it’s just a delaying tactic” …

Email me at egilmer(at)eenews.net for more.

Despite major inroads on reuse, concerns about shale wastewater persist

Every six months, the Pennsylvania Department of Environmental Protection dumps two piles of data on its website — one with oil and gas production numbers, the other with oil and gas wastewater numbers. I broke down the wastewater numbers to determine how volume is changing, whether the data back up driller claims of increased reuse, and what other wastewater management patterns are emerging.

This story appeared in EnergyWire in September 2012.

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Wastewater disposal concerns persist despite rise in reuse

Fresh data from Marcellus Shale drillers show that despite doubling oil and gas production over the past year, industry has curbed a parallel rise in waste.

Wastewater volumes jumped by 26 percent since 2011, according to new data from the Pennsylvania Department of Environmental Protection. But that is a relatively controlled rise considering the region’s surging natural gas production, and it’s enough to prompt some claims that the industry has an entirely smaller environmental footprint with its improved handling of water.

During the first half of 2012, companies reported a total of 12.1 million barrels of drilling fluid, frac fluid and produced fluid generated from unconventional wells in Pennsylvania, up from 9.6 million barrels in the same period last year.

Meanwhile, drillers using horizontal drilling and hydraulic fracturing in Keystone State shale brought up almost 900 billion cubic feet of gas between January and June this year, up from 2011′s midyear weigh-in of 435 billion cubic feet — despite the fact that a natural gas glut has pushed prices to 10-year lows.

Now concerns over water quality and drought have put a spotlight not only on the high volumes of water used with every puncture of the ground, but also on how drillers dispose of what the wells spit back.

A single fractured well can require 4 million gallons of chemical-laced water that cannot directly re-enter the public water supply safely. That’s a fraction of the water used by agriculture and other industries, but an increase over water demands of traditional wells. Frac fluid churns up particles deep in the ground, bringing a more hazardous mix to the surface that can include sodium, chloride and arsenic compounds and naturally occurring radioactive material.

“There remain a dearth of desirable options for the really high waste stream,” said Natural Resources Defense Council attorney Kate Sinding, especially as drilling wastewater is exempt from federal hazardous waste management requirements.

As the policy, economics and perception of wastewater disposal evolve, drillers are hopeful that reuse serves as that sought-after solution that wins nods from critics and regulators, without throwing off companies’ bottom lines. …

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Water flows to money in drought-stricken drilling regions

Everyone’s abuzz about the record drought sweeping the United States this summer. So, what’s it mean for oil and gas drillers who are reliant on water to stimulate wells? My colleague @gayathriv and I explore the issue.

This story appeared in EnergyWire in July 2012.

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Water flows to money in drought-stricken drilling regions

Farmer Mike Cather, 55, lives in Harper County, Kan., at the center of the emerging Mississippi Lime oil field. His land is dry, his 950 cattle do not have enough to feed on, and ponds and streams are running low.

The oil industry is helping him cope, said Cather, who has three oil wells on his property.

“It’s made this drought easier to stomach,” he said. “I would be incurring more debt just to get through this drought period, and I’m not having to because of the industry.”
Agriculture Secretary Tom Vilsack tours Eric Cress’ farm early this week to examine crop damage caused by the drought. Cress said the Center Point, Iowa, farm is running around 7 inches behind normal rain levels for this time of year. U.S. Department of Agriculture photo by Darin Leach.

But water is starting to become an issue for the oil companies in Harper County. Restrictions on withdrawals from some streams kicked in earlier this month. There isn’t much groundwater available in the arid region, prompting companies to go on a hunt for privately owned supplies from farmers and adjacent municipalities. The price of water has gone up to as much as 25 cents a barrel (1 barrel is 42 gallons), making the liquid a valuable revenue stream for farmers.

More than half of the United States is suffering from a drought, the worst recorded since the 1950s. High temperatures and low rainfall have dried out crops as well as rivers and streams, the very sources that oil and gas producers rely on for water in some states.

A regional water commission in northeastern Pennsylvania’s gas country has suspended some permits for pulling water out of rivers and streams because of low flow levels, affecting the gas industry in the Marcellus Shale formation. Texas regulators last week put consumers on notice that it might curtail surface water withdrawals. In Oklahoma, municipalities are rationing water. …

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Forced pooling for natural gas prompts conservative crisis of ideals

Forced pooling is a commonly used leasing maneuver, legal in most traditional oil & gas states, that compels a landowner to give up his subsurface mineral rights if a certain percentage of his neighbors do so. It works out well for drillers, who can work on neatly arrange plots of land, and, many argue, for the landowners, who get royalties from the drilling.

But with the spread of drilling to areas unfamiliar with these age-old arrangements, forced pooling has created a moral crisis for many conservatives who, on one hand, want to support oil and gas development, but on the other hand, can’t make peace with the idea of surrendering private property rights.

This story appeared in EnergyWire in July 2012.

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‘Forced pooling’ of mineral rights wins over some staunch property-rights advocates

In the rig-dotted gasland of northeastern Pennsylvania last year, a conservative lawmaker from the South did some soul-searching.

It was there in the Marcellus Shale hot spot of Bradford County that Mitch Gillespie was moved to support “forced pooling” — a leasing practice that, at first glance, seems to steamroll Republicans’ tightly held notions of private property rights.

In a forced pooling scenario, a resistor of oil and gas drilling can be compelled to lease his or her own mineral rights if a certain percentage of neighbors do so. This last resort allows companies to manage clean-cut plots with minimal equipment, and many argue it actually serves the landowner’s best interest by providing a cut of the profit.

The practice is commonplace and fuss-free in many traditional oil and gas states. But as shale drilling permeates from coast to coast in areas less accustomed to the complexities of mineral rights, forced pooling has triggered scrutiny from many pro-drilling conservatives seeking to reconcile it with their ideals of individual rights.

“I have struggled with this issue for two years now,” said Gillespie, a North Carolina state representative who describes himself as the staunchest property-rights advocate in the Legislature. But after his trek to Pennsylvania, where forced pooling is not in play, Gillespie’s mind is made up.

“Forced pooling is a way that property owners can actually receive some royalties from the gas that’s underneath their property,” he told EnergyWire this week.

Gillespie now faces the formidable task of winning over other decisionmakers in North Carolina, a state that has limited gas resources but nonetheless is cobbling together a regulatory framework for drilling.

He reasoned with fellow lawmakers on the House floor last month: “If you don’t do something to protect that landowner by forced pooling, then the gas companies when they do the fracking will steal their gas, and they’re going to get nothing.”

Though gas companies might cringe at the word “steal,” the logic stands. Because of its physical properties, natural gas, like water or oil, will migrate to areas with lower pressure. So, if a company pumps gas from beneath Home 1, the gas from Home 2 will begin to seep over into the void. At that point, Home 2 has no claim on the migrated gas.

An 1889 Pennsylvania Supreme Court ruling cited in a review by the North Carolina attorney general puts it this way: “Possession of the land, therefore, is not necessarily possession of the gas. If an adjoining, or even a distant, owner drills his own land, and taps your gas, so that it comes into his well and under his control, it is no longer yours, but his.”

It’s those very properties that spurred forced pooling in the first place. Without pooling, supporters argue, one successfully producing well in an area would prompt the sinking of many more as overlying property owners scramble to cash in on the find. Soon enough, each parcel would be punctured with straws desperately draining the oil and gas. Pooling, on the other hand, allows a driller to centrally place a well to access the broader supply with less surface disruption.

“Pooling is intended to conserve natural resources, particularly surface areas,” said James Pardo, an attorney at McDermott Will & Emery, “while at the same time allowing for development … in the most efficient way with the most minimal impact.”

But it’s not so cut-and-dried to skeptical conservatives, not to mention environmentalists and other drilling critics. …

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U.S. refiners face another tough year – American Petroleum Institute

With American oil and gas refineries in decline, the American Petroleum Institute gives its bleak outlook for the coming year. This story marks the first time I used “rough-and-tumble” in a lede. Reluctantly, probably the last, too.

This story appeared in Greenwire in January 2012. The story is behind a paywall, but an excerpt is below.

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U.S. refiners face another tough year – American Petroleum Institute
Ellen M. Gilmer, E&E reporter

U.S. refineries are bracing for another rough-and-tumble year of global competition and pending environmental rules won’t make it any easier, industry representatives said today.

The refining sector is coming off a year of heavy production, processing more gasoline and diesel in the first 11 months of last year than in any comparable period, American Petroleum Institute chief economist John Felmy said in a press call.

But, Felmy warned, U.S. refineries are strained by a propagation of worldwide facilities that face more lax environmental and safety regulations than those in the United States.

U.S. EPA in November delayed rules that aimed to curb greenhouse gas emissions from refineries. The action angered environmental groups that saw the move as a signal that the Obama administration is not serious about addressing climate policy. A new target date has not been set for the so-called New Source Performance Standards for refineries, but the proposed Clean Air Act rules are looming.

“We are very concerned about that whole suite of rules,” said Bob Greco, API’s director of downstream and industry operations, calling it a “regulatory blizzard.” …

Please email me at ellen.gilmer(at)gmail.com for the full piece.

BP sees energy independence in Western Hemisphere by 2030

In a jam-packed energy industry forecast from BP PLC, I quickly pull out the pieces that matter to our readers, including a bold statement from a BP executive for the United States to institute a price on carbon.

This story appeared in E&ENews PM in January 2012. The story is behind a paywall, but an excerpt is below.

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BP sees energy independence in Western Hemisphere by 2030
Ellen M. Gilmer, E&E reporter

New projections for global energy demand and its impact on climate change whirred through the energy industry today as BP PLC released its 2030 forecast.

BP analysts expect the world’s growing population to push up demand 39 percent in the next 18 years, with fossil fuels still leading the pack of energy sources. Coal, oil and gas will provide 81 percent of energy needs in 2030, the report says, down from 87 percent now.

Other sources will see some action, too: The BP forecast sees renewables, including biofuels, growing at 8 percent annually.

Notably, the report predicts that the Western Hemisphere will be able to supply all its own energy needs by 2030, thanks to shale gas and oil, Canadian oil sands and Brazilian deepwater plays.

BP CEO Bob Dudley said the report gives industry an outlook that is both optimistic and realistic.

No doubt meeting demand will take a toll on the climate, said BP chief economist Christof Rühl. “Doing all of this without damaging the environment? It doesn’t look very good,” he said in a video accompanying the energy outlook. …

Please email me at ellen.gilmer(at)gmail.com for the full piece.