August 2010 Industry Digest

California Delays RPS, Adds Lease Language To Well Bonding Bill

SACRAMENTO, CA.–California’s quest to impose a renewable portfolio standard hit a gubernatorial roadblock in July, as Governor Arnold Schwarzenegger asked the state Air Resources Board (ARB) to delay a rule requiring utilities to generate 33 percent of their power from renewable sources.

Blair Knox, director of public affairs for the California Independent Petroleum Association, says when the RPS was proposed initially in 2002, ARB projected an increased need for natural-gas fired generation to back up the intermittent wind and solar plants. The governor’s actions are not linked to concerns over natural gas supplies, but for political reasons, Knox suggests.

Schwarzenegger asked the board to delay adopting the new regulation until September, Knox says. According to media reports, the governor is pursuing negotiations with legislative leaders over the bill’s language. If those talks fail, Schwarzenegger told ARB, the board would be allowed to implement the move.

Existing state law requires utilities use renewables for 20 percent of their power by the end of 2010, a target no utility has met. The legislature approved SB 14, sponsored by Senator Joe Simitian, D-Palo Alto, in 2009. It called for boosting the standard to 33 percent. Schwarzenegger vetoed the bill, saying it placed too many limits on procuring renewable energy from out of state sources, media reports say. After the veto, the governor issued an executive order mandating a 33 percent threshold and authorizing ARB to develop RPS regulations.

The renewable portfolio question is only one of the concerns facing legislators, Knox says. At the end of July, the state’s budget was a month overdue and more than $19 billion in the red. Schwarzenegger declared a financial emergency and ordered thousands of state employees to take three days off each month without pay.

California is nearing the end of its two-year legislative cycle, and despite the budget crisis lawmakers continue to advance their own measures, Knox reports. CIPA continues to watch SB 550, sponsored by Senate Majority Leader Dean Florez, D-Shafter. The bill, which originally proposed new bonding requirements for wells to pay for cleanup operations (The Reporter, July 2010, pg. 19), has been amended in the General Assembly to require operators to disclose lease agreements reached with mineral owners to the surface rights owner, he says.

State law requires operators to provide the county with a shorter version of the signed lease, Knox points out, making it available to the public. Some in the agricultural community are supporting SB 550, arguing that prospective farmland buyers should be aware if acreage is likely to be disturbed by well activities.

Knox says the bill’s supporters also are arguing that learning the details of leasing agreements is too difficult, although he indicates landmen working for oil and gas operators do that every day.

The Deepwater Horizon accident in the Gulf of Mexico is providing legislators with political cover to advance their anti-oil-and-gas bills, Knox ventures.

 

West Virginia DEP Proposes TDS Rule

CHARLESTON, W.V.–West Virginia has joined Pennsylvania in setting a total dissolved solids standard of 500 milligrams a liter for discharges into state waters, according to the Independent Oil & Gas Association of West Virginia.

In a report written for IOGA WV, Andrew McCallister with Spilman, Thomas & Battle PLLC, says the West Virginia Department of Environmental Protection forwarded the proposed rule to the secretary of state for publication in June. Pennsylvania’s rule, which applies only to oil and gas industry discharges, was approved by the state’s Environmental Quality Board in May and forwarded to the state legislature by the Pennsylvania Independent Regulatory Review Commission in June (The Reporter, July 2010, pg. 21).

“This criterion is significantly more stringent than many of the TDS standards in surrounding states, which for the most part are applicable at the point of intake of a public water supply, not throughout the entire stream, as would be the case in West Virginia,” points out McCallister.

Although the 500 mg/l standard is based on a water maximum contaminant level under the Safe Drinking Water Act, McCallister notes the SDWA standard is not related to human health “because TDS affects the taste of drinking water, but does not have adverse human health effects.”

He also notes that the new standard would apply to all state waters, even though most of them are not used as drinking water sources, despite a recommendation by the West Virginia Environmental Protection Advisory Council that the 500 mg/l standard should be applied at the intake for a drinking water source.

The West Virginia DEP made another proposed change under Section 3 of the state’s water quality standards, McCallister continues. Section 3 is titled “Conditions Not Allowable in State Waters,” and McCallister explains that the DEP has proposed language regarding “certain water withdrawal activities,” related to Marcellus Shale development, which he says “could be read to give WVDEP authority to regulate water withdrawals, even though the agency readily admits it does not have the authority to require operators to obtain permits to withdraw water.”

 

IPAMS Changes Name To Better Communicate With Public, Policymakers

DENVER–The Independent Petroleum Association of Mountain States Board of Directors announces it has officially changed the organization’s name to Western Energy Alliance in an effort to better reflect its 400 member companies and their hundreds of thousands of employees across the West.

“We are a 36-year old organization that has built a national reputation by working constructively with government, academia and local communities,” says Marc W. Smith, the association’s executive director.

“We are an alliance of people and companies dedicated to responsible use and development of energy in the West,” continued Smith. “With a name that more accurately reflects our purpose and mission, our organization is better positioned to advocate for western energy solutions that create jobs, strengthen the economy, and improve the environment.”

The board also unanimously elected Jim Schroeder, the chief executive officer and president of Mesa Energy Partners LLC, to serve as its president. Before the formation of Mesa Energy in 2007, he was co-founder, president, and chief operating officer of Laramie Energy LLC.

For information, visit westernenergyalliance.org.

 

Steve Henke To Serve As NMOGA’s President

SANTA FE, N.M.–The New Mexico Oil & Gas Association reports it has selected Steve Henke as its president.

Henke has managerial, political, public relations, and cooperative problem solving experience, the association says. In May, he retired from a 34-year career with the Bureau of Land Management. There, NMOGA notes, he held positions of increasing responsibility, including district manager in Farmington, N.M., for the past nine years.

In that role, Henke managed one of the largest onshore oil and gas programs in the United States, NMOGA points out. The association says that under his leadership, the office completed a groundbreaking, comprehensive land use plan for oil and gas development that balanced the need to develop natural resources with safety and environmental responsibility.

“All of the member companies felt like his dealings were fair and balanced,” NMOGA Executive Committee Chairman Leland Gould is quoted saying in published reports. “The experience and respect he has is a big plus for us.”

Gould adds that Henke’s work with government regulators will help the association “maneuver through regulatory waters that have become more challenging.”

Henke says he looks forward to communicating the benefits the oil and gas industry provides to New Mexico and working with state lawmakers and NMOGA members. “I want to work cooperatively, collaboratively,” the reports quote him as saying. “I hope as president I am afforded the opportunity to sit at the table with policymakers and legislators to describe the impact and the role that NMOGA members can play in issue resolution.”

 

Texas Alliance Will Preview State Issues At Abilene Meeting

WICHITA FALLS, TX.–Members attending the Texas Alliance of Energy Producers’ fall membership meeting, Sept. 20-21 in Abilene, will be treated to previews of emerging state issues as well as a keynote address by Midland, Tx., oilman Clayton Williams, the association announces.

The founder of Clayton Williams Energy Inc. is the featured speaker at the concluding membership luncheon at noon Tuesday, Sept. 21, at the Abilene Civic Center, where the Alliance says he will present a speech titled “It’s Your Duty to Get Involved.”

Williams’ appearance will be preceded by talks on the Texas Commission of Environmental Quality’s proposed equipment and emissions inventory, the Texas Legislature’s sunset review of the Railroad Commission, unitization, and proposed changes in mineral appraisals for ad valorem taxes, the Alliance outlines.

The association says TCEQ Chairman Brian Shaw has been invited to speak about the agency’s new emissions regulations at 8:30 a.m. Tuesday. At 9 o’clock, Steve Howell, chairman of the Alliance’s Sunset Review Committee, will discuss the RRC review. Then Lisa Vaughn with Shannon, Gracey, Ratliff & Miller LLP will review Texas’ current unitization laws and regulations, followed by Greg Schnacke with Denbury Resources, who will preview changes being considered by the state legislature.

At 10:30 a.m., the Alliance continues, Don Sparks with Discovery Operating in Midland, will discuss proposed changes in the state’s mineral appraisals for ad valorem taxes. In the final morning session, the association says Chairman Tom Taylor, President Alex Mills, and Executive Director Bill Stevens will go over federal tax proposals, environmental rules, and responses to the Deepwater Horizon blowout in the Gulf of Mexico.

The Alliance’s fall membership meeting opens at noon on Monday, Sept. 20, with a golf tournament at Diamondback Golf Course. An awards reception and membership get-together will follow at 5:30 p.m. at the course.

For information, contact the Texas Alliance at 940-723-4131 or visit http://www.texasalliance.org.

 

Four Companies Unite On Spill Response Plan

WASHINGTON–Four oil companies plan to spend $1 billion to jointly develop and deploy a rapid response system that will be available in the event of a future underwater well blowout in the deepwater Gulf of Mexico.

Chevron Corp., ConocoPhillips Co., ExxonMobil Corp. and Shell Oil Co. say the investment is needed to rebuild the trust of the American public. The companies will form a nonprofit organization, the Marine Well Containment Company, to operate and maintain the system. Other companies will be invited and encouraged to participate, the four companies state.

According to the participants, the new system will be flexible, adaptable and able to begin mobilizing within 24 hours of an incident. It will be suitable to respond to accidents on a wide range of well designs and equipment, oil and natural gas flow rates and weather conditions, the coalition says. It will be engineered for spills in depths to 10,000 feet and able to handle 100,000 barrels a day, with potential for expansion.

The system offers several advantages to the response equipment now stationed in the Gulf in that it will be pre-engineered, constructed, tested and ready for rapid deployment in the deepwater Gulf, the companies report. It will include specially designed subsea containment equipment connected by manifolds, jumpers and risers to capture vessels that will store and offload the oil, the coalition describes. Dedicated crews will ensure regular maintenance, inspection and readiness of the facilities and subsea equipment.

The American Petroleum Institute says the effort is one of a number of industry initiatives focusing on improving equipment, operations, and well containment.

“The experts and engineers at these companies will build on the lessons of the Deepwater Horizon accident to design, develop and implement a state-of-the-art engineering system that will raise industry safety preparedness and capability,” says API President and Chief Executive Officer Jack Gerard.

The National Association of Manufacturers says the effort is another action that illustrates the need to lift the Gulf drilling moratorium.

“The moratorium is costing thousands of jobs, and manufacturers who make and supply equipment, services, engines, boats and materials such as steel and concrete soon will feel massive economic consequences,” NAM warns. “We believe it is critically important to understand the causes of the Gulf of Mexico accident. However, canceling existing leases puts our country at a further disadvantage every day.”

The four companies say they will begin with the engineering and procurement of equipment and vessels for the system, with ExxonMobil taking the lead.

 

DOE Extends Funding For Stripper Well Group

WASHINGTON–The U.S. Department of Energy reports it has extended its funding commitment to the Stripper Well Consortium to 2015.

An industry-driven consortium initiated in 2000, SWC’s goal is to keep stripper wells productive in an environmentally safe manner, DOE says, maximizing the recovery of domestic hydrocarbon resources. Pennsylvania State University manages and administers the program on behalf of DOE. The National Energy Technology Laboratory and New York State Energy Research and Development Authority provide base funding and technical guidance.

Nearly 100 projects have been funded under the consortium, which consists of small domestic oil and gas producers, service and supply companies, trade associations, industry consultants, technology entrepreneurs and academia, DOE reports

Among SWC’s successes, the department says, are a gas-operated automatic pump to remove fluids from the well bore developed by Brandywine Energy & Development Co.; Vortex Flow Tools LLC’s vortex flow unit that assists in lifting and removing fluids; a hydraulic diaphragm submersible pump that continuously cleans stripper wells, developed by Pumping Solutions Inc., now part of Smith Lift LLC; and a set of technologies developed by Oil Well Sentry Inc. that eliminates fluid level issues in beam-pumped wells.

 

Gas Storage Levels Increase By 235 Bcf

WASHINGTON–Underground natural gas storage in the United States stood at 2.919 trillion cubic feet on July 23, 8.9 percent above the five-year average, according to the U.S. Energy Information Administration. That was up 235 billion cubic feet from the 2.684 Tcf reported by EIA on June 25, which was 12.0 percent above the five-year average. However, the July 23 storage number was 94 Bcf less than a year ago, when storage stood at 3.013 Tcf.

EIA reports gas storage in the producing region stood at 987 Bcf on July 23, 14.6 percent above the five-year average and 44 Bcf more than the 943 Bcf reported in storage on June 25, which was 15.0 percent above the five-year average. The July 23 storage number for the producing region was down 70 Bcf from a year ago.

In the eastern region, EIA reports, gas storage on July 23 was 1.459 Tcf, 1.7 percent above the five-year average and up 166 Bcf from the 1.293 Tcf reported in storage on June 25, which was 5.9 percent above the five-year average. The July 23 storage number for the eastern region was down 56 Bcf compared with a year earlier.

In the western region, EIA reports, storage levels on July 23 were 473 Bcf, 22.9 percent above the five-year average, and up 25 Bcf from the 448 Bcf reported on June 25, which was 25.5 percent above the five-year average. The July 23 storage number in the western region was up 32 Bcf from a year ago.

 

API Says Public Rejects Higher Taxes For Oil, Gas

WASHINGTON–Voters in 10 key states oppose higher taxes on the U.S. oil and natural industry by two-to-one, a poll sponsored by the American Petroleum Institute says.

According to the poll, 64 percent of respondents oppose new taxes on the oil and gas industry, including 46 percent who strongly oppose such an action. Only 27 percent back increased taxes.

Conducted by Harris Interactive on behalf of API, the poll contacted 6,000 registered voters in Colorado, Michigan, North Carolina, Pennsylvania, Virginia, Maine, Missouri, Ohio and West Virginia, with an overall margin of error of ± 2.5 percent at a 95 percent confidence level.

The poll found those surveyed believe the most important issues for the federal government to address are the economy and job creation.

“Voters know raising taxes on an industry that provides most of their energy and supports more than 9.2 million jobs would hurt them and damage the economy,” says API President and Chief Executive Officer Jack Gerard. “Raising taxes doesn’t address their major concern, which is putting people back to work. The fact that the proposals are being pushed under the guise of addressing the oil spill in the Gulf doesn’t make them any better. With 15 million people out of work, now is not the time to be imposing more taxes.”

The U.S. oil and natural gas industry already is one of the nation’s biggest taxpayers, API points out. According to the U.S. Energy Information Administration, the industry paid almost $100 billion in federal income taxes in 2008, the latest year data are available. PriceWaterhouseCoopers says the industry had an effective tax rate of 48.4 percent in 2009, compared with 28.1 percent for the rest of the S&P industrial companies.

 

Two FERC Nominees Confirmed By Senate

WASHINGTON–The Federal Energy Regulatory Commission reports the U.S. Senate has confirmed Cheryl LaFleur to her first term as commissioner and Philip D. Moeller to a second FERC term.

“We are grateful for these Senate confirmations,” says FERC Chairman Jon Wellinghoff. “Commissioner Moeller will be able to continue his important work here at FERC, and we will be joined by Cheryl LaFleur, who brings to the commission experience in energy policy and operations.”

LaFleur has more than 20 years of experience in the electric and natural gas industries. She retired in 2007 as executive vice president and acting chief executive officer of National Grid USA, which serves 3.4 million customers in the Northeast. LaFleur also worked for National Grid’s predecessor company, New England Electric System. She practiced law in Boston earlier in her career.

Moeller joined FERC in 2006, after serving as energy policy adviser to U.S. Senator Slade Gordon, R-Wa. He also worked as staff coordinator for the Washington State Senate Committee on Energy, Utilities and Telecommunications. Before joining FERC, Moeller headed the Washington office of Alliant Energy Corp., and also worked in the Washington office of Calpine Corp.

LaFleur’s term ends in 2014, while Moeller will serve through 2015.

 

All rights reserved.  Reproduction in whole or in part, in any form or medium without express written permission is prohibited.