U.S. Now an Exporter of Natural Gas

By: Michael K. Reer

On November 28, 2016, the Wall Street Journal reported that the United States is projected to have exported more natural gas than it imported for the month of November. According to the U.S. Energy Information Administration, this is the first time the U.S. has been a net exporter of natural gas in 60 years.

Gas exports from the U.S. have risen more than 50% since 2010. Canada and Mexico are the largest consumers, but new export terminals hope to increase shipments to Asia and Europe. Cheniere Energy Inc.’s Sabine Pass, for example, has exported an average of 1.5 billion cubic feet of natural gas per day since it began operations in February of 2016.

Tuesday, November 29, 2016

EPA Approves Additional UIC Wells in Warren County, PA

On October 31, 2016, the U.S. Environmental Protection Agency approved three Class II-D Underground Injection Control permits for wells in Columbus Township, Warren County, Pennsylvania. If approved by state authorities, the three injection wells will supplement two existing wells owned by Bear Lake Properties near Pennsylvania’s border with New York State. Because the three wells were previously used for oil and natural gas production, Bear Lake Properties must obtain additional permits from the Pennsylvania Department of Environmental Protection. 

USEPA Region 3 has now approved 15 UIC wells for the Commonwealth, only eight of which are currently in operation. Region 3 noted in its Response to Comments document that the potential for the new injection wells to cause induced seismicity is low given that the wells are limited to an injection volume of 30,000 barrels per month (1/5 of the injection rates of some wells in Oklahoma and Texas) and a maximum bottom hole pressure of 3,916 psi, which is low enough “to prohibit the fracturing of the injection formation.”
Tuesday, November 29, 2016

Class Action Alleges Damages From Induced Seismicity

On November 17, 2016, a class action lawsuit alleging damages from induced seismicity was filed in Oklahoma state court.  The lawsuit, filed in Pawnee County, alleges that Oklahoma injection wells caused an induced seismic event on September 3, 2016, resulting in damages to the plaintiff class.  The petition seeks recovery for alleged physical damages to real and personal property, market value losses to real property, emotional distress, and punitive damages. 
The petition names two defendants, but also includes 25 unnamed oil and natural gas companies “that have engaged in injection well operations in and around Pawnee . . .”  The plaintiffs seek recovery on theories of absolute liability, negligence, trespass, and private nuisance and additionally request punitive damages.  The case is Adams v. Eagle Road Oil LLC, CJ-2016-78 (filed Nov. 17, 2016).  
Wednesday, November 23, 2016

Fall 2016 Regulatory Agenda Released

Last week, the U.S. General Services Administration released the Fall 2016 Unified Agenda of Federal Regulatory and Deregulatory Actions.  The Unified Agenda is released twice yearly, and lists the status of major rule proposals, including those with the potential to affect oil and natural gas development operations. 
In particular, operators might be interested in the following rule proposals.  After each proposal, the anticipated release date of the final rule is listed.
U.S. Environmental Protection Agency
  • National Pollutant Discharge Elimination System (NPDES) Application and Program Updates Rule (final in August 2016)
  • Toxics Release Inventory (TRI); Addition of Natural Gas Processing Facilities (final in August 2018)
  • Modernization of the Accidental Release Prevention Regulations Under Clean Air Act (final in December 2016)
Bureau of Land Management
  • Onshore Oil and Gas Order 1:  Approval of Operations (final in November 2016)
  • Onshore Oil and Gas Order 3:  Site Security on Federal and Indian Oil and Gas Leases (final in November 2016)
  • Onshore Oil and Gas Order 4:  Oil Measurement (final in November 2016)
  • Onshore Oil and Gas Order 5:  Gas Measurement (final in November 2016)
  • Waste Prevention, Production Subject to Royalties, and Resource Conservation (final in November 2016)
  • Non-Federal Oil and Gas Rights (final in December 2016)
  • Oil Shale Management (final in February 2017)
Wednesday, November 23, 2016

USGS Estimates Size of Wolfcamp

By: Michael K. Reer

On November 15, 2016, the U.S. Geological Survey estimated that the Wolfcamp shale in the Permian Basin contains 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids.  The USGS estimate makes the Wolfcamp shale the largest estimated continuous oil accumulation found in the United States. 

USGS estimated the size of the Wolfcamp as part of a nationwide project designed to assess domestic petroleum basins using standardized methodology and protocol.  USGS estimates continuous oil based upon undiscovered, technically recoverable resources.  The Wolfcamp is part of the Wolfberry play near Midland, Texas, which has seen a resurgence of activity since the advent of hydraulic fracturing.
Monday, November 21, 2016

Railroad Commission Amends Rule 15

By: Michael K. Reer

On November 15, 2016, the Railroad Commission of Texas announced final amendments to Rule 15 (“Surface Equipment Removal Requirements and Inactive Wells”), which will take effect January 1, 2017.  Generally, Rule 15 requires that operators who assume responsibility for an inactive oil or natural gas well either plug the well or return it to active operation within six months after the Commission approves an operation designation form. 

The final rulemaking modifies the regulatory requirements for returning oil and natural gas wells to active operation.  Currently, operators must produce at least 10 barrels of oil or 100 Mcf of natural gas for at least three consecutive months for an inactive well to become active.  Under the finalized rules, operators must produce just five barrels of oil or 50 Mcf of natural gas for an inactive well to become active.  Alternatively, operators may produce at least one barrel of oil or one Mcf of natural gas for 12 consecutive months. 

The Commission stated in the preamble to the final rulemaking that “the amendments discourage the premature plugging of wells that have the potential to produce and, thus, align with the Commission’s responsibility to prevent waste.”   

Friday, November 18, 2016

Commissioner Sitton Joins CISR

By: Michael K. Reer

On November 15, 2016, Texas Railroad Commissioner Ryan Sitton announced that he will join the Bureau of Economic Geology Center for Integrated Seismicity Research ("CISR").  According to the press announcement, CISR conducts "fundamental and applied research to better understand both naturally occurring and potentially induced seismicity and the associated risks." 

Commissioner Sitton states that "the science is clear that it is physically possible for injection wells that dispose of fluids deep underground to cause earthquakes" but cautioned that hydraulic fracturing itself may only cause "micro earthquakes that are almost never felt."  The press release also states that the Commission will use industry data and the Texas Seismometer Network to enhance CISR's and the Commission's understanding of induced seismicity.  In particular, the Commission will examine the potential for induced seismicity in Johnson County, Texas.

Thursday, November 17, 2016

Western Energy Alliance, IPAA Challenge BLM Methane Regulations

By: Michael K. Reer

On November 15, 2016, the Western Energy Alliance and the Independent Petroleum Association of America filed suit in the U.S. District Court for the District of Wyoming, challenging the Bureau of Land Management's final rule; "Waste Prevention, Production Subject to Royalties, and Resources Conservation."

While the rule has been finalized by BLM, it has yet to be published in the Federal Register. As proposed, the rule would regulate venting, flaring, and leaks during oil and natural gas production activities on onshore federal and Indian leases. The regulations would also clarify when produced natural gas lost through venting, flaring, or leaks is subject to royalties, and when oil and natural gas used on site would be royalty-free.

The lawsuit alleges that the final rule seeks to regulate air quality from oil and natural gas production facilities on non-federal lands, which the plaintiffs allege is a function delegated exclusively to the U.S. Environmental Protection Agency. The lawsuit also alleges that the final rule is an abuse of discretion, arbitrary and capricious, not supported by the administrative record, and procedurally deficient.
Thursday, November 17, 2016

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