January 2017 Industry Digest

USFWS Cites Petition As It Weighs Relist Of Lesser Prairie Chicken

WASHINGTON–The U.S. Fish & Wildlife Service says it plans to reconsider listing the lesser prairie chicken as endangered four months after removing the bird from the federal endangered and threatened wildlife list.

A 2015 court ruling removed the lesser prairie chicken’s threatened status under the Endangered Species Act (AOGR, October 2015, pg. 20). According to the agency, while a review of an emergency petition anti-development groups submitted cites information indicating a relisting may be warranted, the agency’s action actually is a continuation of an assessment that originates from the chicken’s 2014 listing.

Lesli Gray, a USFWS public affairs specialist, says the service has started the assessment to help the recovery process, with completion scheduled for the summer of 2017. She says the agency then will begin a 12-month review and assessment of the bird and conservation plans in September. USFWS will not make a listing decision until 2018, Gray states.

The WildEarth Guardians, Defenders of Wildlife, and Center for Biological Diversity submitted the emergency petition Sept. 8. The document says oil and gas development is one of the major causes of habitat loss and fragmentation for the lesser prairie chicken.

According to the petition, the amount of land converted to well pads and roads reflects only a small portion of the total impact of oil and gas development. It says the direct footprint represents only 5 percent of the total habitat degradation, while the impacts of habitation fragmentation and species avoidance behavior accounts for 95 percent of impacted habitat.

U.S. Senator James Inhofe, R-Ok., expresses disappointment in the USFWS decision.

“Just last year, the (U.S. District Court for the) Western District of Texas appropriately overturned the lesser prairie chicken’s previous listing, noting that the service did not adequately consider the effectiveness of the states’ conservation plans when it assessed the species’ need for federal protection. It is important that we let the multistate conservation plan have time to work before bringing down the full force of the ESA,” he says.

The ESA should be a last resort, he asserts, adding local cooperative efforts can set a precedent for progress on species conservation without the heavy hand of the federal government.

According to the Texas Independent Producers & Royalty Owners Association, USFWS is requesting scientific and commercial data on the lesser prairie chicken. Information can be submitted until Jan. 30.

18 States Sue To Stop Critical Habitat Rule

Eighteen states led by Alabama and Arkansas filed a lawsuit Nov. 29 in U.S. District Court for the Southern District of Alabama, challenging federal rules that expand the definition of critical habitat for threatened or endangered species.

The Independent Petroleum Association of America explains that in February 2016, the U.S. Fish & Wildlife Service finalized rules that enabled it to designate as critical habitat, areas that did not at the time, and might never be, necessary to conserve a species simply by determining that “it is reasonable to infer from the record that (the unoccupied areas) eventually will become necessary to support the species’ recovery.”

According to IPAA, USFWS’s order also:

  • Redefined “habitat destruction and adverse modification” to protect not only existing habitat features, but features that someday could develop; and
  • Essentially adopted as policy a de facto moratorium on considering federal lands for exclusion from critical habitat designations.

“This dramatic expansion of federal power over land rights has the potential to threaten economic development across the nation,” declares Arkansas Attorney General Leslie Rutledge, adding that the rules may “mire wide swaths of land in bureaucratic red tape under the notion that the property may theoretically someday be beneficial to a certain species, even when there is no actual research or data to support that speculation.”

Alabama Attorney General Luther Strange says, “If this rule is unchallenged, there could be no limit to (the government’s) regulatory reach, potentially setting the stage for the federal government to designate entire states or even multiple states as habitat for a particular species.”

As an extreme example of the rule’s potential, Rutledge and Strange contend USFWS could designate desert land as critical habitat for a fish and then prevent the construction of a highway over that land on the theory it would prevent the formation of a stream that might one day support the species. Or, they say, the service could prevent a landowner from planting loblolly pine trees in a barren field if planting longleaf pine trees might one day be more beneficial to an endangered or threatened species.

The lawsuit asks the court to find that the expanded definitions violate the Endangered Species Act, and are arbitrary and capricious under the Administrative Procedure Act.

Joining Arkansas and Alabama in the lawsuit are Alaska, Arizona, Colorado, Kansas, Louisiana, Michigan, Montana, Nebraska, New Mexico, Nevada, North Dakota, South Carolina, Texas, West Virginia, Wisconsin, and Wyoming. Named as defendants are the U.S. secretary of the interior, National Marine Fisheries Service, the secretary of commerce, and USFWS.

NMFS Proposes Listing Bryde’s Whale In GOM

WASHINGTON–The National Marine Fisheries Service and the National Oceanic and Atmospheric Administration are proposing to list the Gulf of Mexico population of Bryde’s whale as threatened or endangered under the Endangered Species Act.

In its 12-month finding and listing determination, which was published in the Dec. 8 Federal Register, NMFS says it considers the Gulf of Mexico Bryde’s whale a distinct subspecies eligible for ESA protection. “Based on the Gulf of Mexico Bryde’s whale’s small population (likely fewer than 100 individuals), its life history characteristics, its extremely limited distribution, and its vulnerability to existing threats, we believe the species faces a high risk of extinction,” the service adds.

In its proposed rule, the National Ocean Industries Association points out, “NMFS alleges the 2010 Deepwater Horizon spill killed an estimated 17 percent of the species, and also concludes energy exploration and development, and oil spills and spill response, are increasing the risk of extinction.”

The Natural Resources Defense Council petitioned NMFS to list the species in 2014. The Independent Petroleum Association of America says it responded to that petition, arguing in comments filed in 2015 that the Gulf of Mexico population of Bryde’s whale was not a distinct subspecies, and that the Gulf of Mexico population could and did move freely in and out of the Gulf.

NMFS says it is accepting comments on its listing determination until Jan. 30.

Oklahoma Issues Completions Guidance For Seismic In New Plays

OKLAHOMA CITY–In what the Oklahoma Corporation Commission describes as a proactive approach that will ready the state for more development, the OCC’s Oil & Gas Conservation Division and the Oklahoma Geological Survey have developed seismicity guidelines for fracturing operations in a couple burgeoning plays.

According to OCC, the guidelines deal with operations in the South Central Oklahoma Oil Province (SCOOP) and the Sooner Trend Anadarko Basin Canadian and Kingfisher counties (STACK) plays. The guidelines address a protocol for completions within 1.25 miles of anomalous seismic activity. In such events, if the OGS-determined magnitude is at least:

  • Equal to or greater than 2.5, OGCD will contact any operator with active completion operations within the two kilometer radius of the seismic event, after which the operator will implement his internal mitigation practices and continue operations;
  • 3.0 or greater, the operator is to pause operations for no fewer than six hours while he confers with OGCD staff on mitigation practices and seismic activity declines, after which the operator will be permitted to resume under the revised completion procedure; and
  • 3.5 or greater, the operator is to suspend operations for an in-person technical conference with OGCD staff to examine whether the operation can resume with changes.

According to OGS Director Jeremy Boak, both old and new data have prompted a plan to mitigate earthquake risk in the SCOOP and STACK.

“Then-state seismologist Austin Holland did some work on small earthquakes some years ago in what is now widely known as the SCOOP and STACK, and showed some of them might have been related to hydraulic fracturing,” Boak says. “More recent small events outside the (injection well) area of interest (AOI) may also be linked to hydraulic fracturing. While the data indicate that seismicity related to the SCOOP and STACK would be far less frequent and much lower in magnitude than the activity we are addressing in the main earthquake region of the state that has been linked to wastewater disposal, we have enough information to develop a plan aimed at reducing the risk of these smaller events as operations commence.

“Unlike the strong earthquake activity in areas of the AOI linked to disposal activity, response to seismic activity that may be related to hydraulic fracturing can be more precisely defined and rapidly implemented,” he adds.

Fortunately, says OGCD Director Tim Baker, neither the STACK nor SCOOP plays generate anywhere near as much produced water as the region’s Mississippian Limestone and Hunton dewatering plays. “There is broad agreement among researchers that disposing of these large amounts of water into the Arbuckle can be linked to the high earthquake rate in parts of the AOI,” Baker relates. “By comparison, the SCOOP and STACK plays have very small amounts of produced water.”

Wyoming, Montana Ask Federal Court To Vacate Venting Rule From BLM

CHEYENNE, WY.–Wyoming and Montana, with North Dakota joining three weeks later, are asking a federal court to review the Bureau of Land Management’s final rule on venting and flaring from oil and natural gas activities on public and tribal lands. The bureau published the rule in the Nov. 18 Federal Register, with an effective date of Jan. 17.

The states’ action follows a similar petition for review filed Nov. 15 by the Western Energy Alliance and Independent Petroleum Association of America (AOGR, December 2016, pg. 32).

In mid-December, California and New Mexico asked the court to allow them to intervene in support of BLM. According to media reports, state officials argue the petitioning states failed to demonstrate they were likely to succeed in their lawsuit or that the final venting rule would cause them irreparable harm.

The proposed rule would require operators to adopt technologies and equipment to limit the flaring rate at oil wells, periodically inspect their operations for leaks, and replace equipment that vents large quantities of gas, BLM says. The rule also limits venting from storage tanks, and clarifies when operators owe royalties on flared gas.

“The bureau’s rule is a blatant attempt by a land management agency to impose air quality regulations on oil and gas operations under the guise of waste prevention,” the Wyoming/Montana petition says. “Congress specifically delegated authority to regulate air pollution to the U.S. Environmental Protection Agency and the states, because they are in the best position to regulate air quality matters. The bureau’s rule conflicts with the Clean Air Act, and unlawfully interferes with Wyoming and Montana air quality regulations.”

The states assert BLM lacks the authority and expertise to impose the final rule’s air quality control requirements. According to court documents, BLM is claiming authority through the Federal Land Policy and Management Act, and the Mineral Leasing Act, although the states maintain neither statute shows any evidence that Congress intended BLM to develop and implement air quality regulations.

“The bureau’s rule assumes that every oil and gas operation on a federal lease emits nothing but federal minerals, as opposed to a mix of constituents that may or may not include federal minerals. It is arbitrary and capricious for the bureau to categorize its total control of all emissions under the guise of ‘waste minimization.’ Congress has not delegated authority to the bureau to regulate emissions, much less emissions that are not federal minerals,” the two states say.

The court filing asks the court to vacate BLM’s proposed venting rule. According to media reports, North Dakota set aside $1 million in its 2017-19 budget for legal challenges of the BLM rule and other federal regulations.

TIPRO Encouraged By RCRA Case Despite Intervenor Status Denial

WASHINGTON–A federal court has rejected attempts by several groups to intervene in a legal attempt to force the Environmental Protection Agency to adopt national oil and gas waste regulations. Even so, the Texas Independent Producers & Royalty Owners Association is citing the language of the rejection as a reason for optimism.

A coalition of anti-development groups–including the Environmental Integrity Project, Natural Resources Defense Council and Earthworks–sued the U.S. Environmental Protection Agency in May, arguing the agency has failed to meet its obligations under the Resource Conservation and Recovery Act to review and revise federal regulations covering waste disposal.

According to the filing, the lawsuit asks the court to order EPA to strengthen federal regulations for underground injection wells and storage pits handling drilling and fracture fluids, ban road spreading and land spreading of wastewater, and complete required reviews of federal and state oil and gas waste regulations.

The Texas Independent Producers & Royalty Owners Association has filed a motion with the U.S. District Court for the District of Columbia asking to intervene. The motion claims the environmental groups have sought to compel EPA to exceed its authority, even though Texas’ waste management program is the country’s most robust (AOGR, September 2016, pg. 16). The state of North Dakota’s attempt to secure intervenor status also has failed, as have those of the American Petroleum Institute and Independent Petroleum Association of America.

TIPRO’s filing suggests that the plaintiffs seek to circumvent a statutory framework that unambiguously places authority for solid waste regulations with the states. If the anti-development groups want to change that control structure, TIPRO holds, the proper channel is through Congress, not EPA or the court.

TIPRO President Ed Longanecker says the court’s decision in rejecting the intervenors is a victory for the oil and gas industry because it emphatically states EPA and the plaintiffs cannot negotiate federal waste-handling rules, but only negotiate an agreement with the agency for a future determination of whether revisions to those rules are necessary.

“While we are disappointed that further consideration was not given to the arguments outlined in TIPRO’s motions, we are pleased that the court made it abundantly clear that the EPA and environmental groups cannot negotiate the substantive content of a RCRA rule for oil and gas wastes in this case,” Longanecker says. “TIPRO will watch this case closely, and continue with our ongoing analysis of frivolous lawsuits targeting the oil and gas industry.”

Environmental Groups, California Sue To Stop Fracturing In Pacific

LOS ANGELES–California’s offshore oil and gas industry faces legal challenges from anti-development groups as well as the state that claim federal agencies failed to follow government regulations by approving the use of well stimulation techniques on the state’s 23 offshore platforms.

The Environmental Defense Center and Santa Barbara Channelkeeper filed suit Nov. 11 in the U.S. District Court, Central District of California, Western Division, against the Bureau of Ocean Energy Management, Bureau of Safety and Environmental Enforcement, and the Department of the Interior.

According to court documents, the plaintiffs allege the agencies violated the National Environmental Policy Act in ending a moratorium on permit approvals for well stimulation treatments, including acidizing and hydraulic fracturing, and for allowing those treatments in Southern California Outer Continental Shelf waters. The government was wrong to issue a finding of no significant impact (FONSI) in approving the agencies’ environmental assessment, the groups claim.

The May 27 FONSI ended a moratorium on permit approvals for well stimulation treatments and allowed their use off California without conditions, mitigations or limitations, the plaintiffs state. The groups are asking the court to declare the agencies’ actions a violation of NEPA, and to block any offshore stimulation treatments until an environmental impact statement is prepared.

In a similar case, the Center for Biological Diversity and Wishtoyo Foundation sued BOEM, BSEE and DOI on Nov. 15 over their authorizing well stimulation for offshore wells without an EIS. The plaintiffs also challenge the agencies’ decision to authorize offshore fracturing and other well stimulation practices without consulting wildlife agencies about possible impacts on threatened or endangered species, a violation of the Endangered Species Act.

The two anti-development groups are asking the court to declare the agencies in violation of NEPA and ESA, and prohibit them from authorizing well stimulation operations on the Pacific OCS until they comply with federal regulations.

Those lawsuits were joined Dec. 19 by one filed by California Attorney General Kamala Harris and the California Coastal Commission, also in the U.S. District Court for the Central District of California, the National Ocean Industries Association reports.

NOIA says the state’s complaint alleges BOEM and BSEE failed to fully analyze and disclose the potential environmental risks of offshore hydraulic fracturing and acidizing. The lawsuit seeks to reimpose a ban on new stimulation permits off the Southern California Coast.

In addition, NOIA mentions, California Governor Jerry Brown requested a permanent federal ban on drilling off the California Coast in a December letter to President Barack Obama. “Federal and state lawmakers have echoed those sentiments and called for an executive order imposing a permanent moratorium on oil and gas exploration off the West Coast,” NOIA points out.

Army Corps Denies Dakota Access Permit, Energy Transfer Sues

Round two of the Dakota Access Pipeline standoff left the parties in pretty much the same positions they found themselves at the end of round one.

On Nov. 14, after the Army Corps of Engineers announced it was suspending Energy Transfer Partners’ request for an easement to construct the final section of the pipeline underneath Lake Oahe in North Dakota, ETP filed a lawsuit in the U.S. District Court for the District of Columbia, seeking the legal right to complete the project without further Corps action (AOGR, December 2016, pg. 37).

On Dec. 4, published reports indicate, the Corps announced it was denying the easement. “Although we have had continuing discussion and exchanges of new information with the Standing Rock Sioux and Dakota Access, it is clear there is more work to do,” reports quote Jo-Ellen Darcy, Corps assistant secretary for civil works.

She adds, “The best way to complete that work responsibly and expeditiously is to explore alternate routes for the pipeline crossing.”

ETP responded by saying, “The White House’s directive to the Corps for further delay is just the latest in a series of overt and transparent political actions by an administration that has abandoned the rule of law in favor of currying favor with a narrow and extreme political constituency.”

ETP calls the announcement “a purely political action, which the administration concedes when it states it has made a ‘policy decision’–Washington code for a political decision.”

The following day, published reports say, ETP was back in court, asking a judge to grant the permit, arguing the Corps was responding to “political pressure and an escalating campaign of violence and disorder waged by protesters.”

Industry responses to the administration’s announcement likewise had a ring of déjà vu. American Petroleum Institute President and Chief Executive Officer Jack Gerard said, “I am troubled, though not surprised, that the Obama administration is again putting politics over sound public policy and ignoring the rule of law. The Dakota Access Pipeline went through an open, transparent, and established permitting process that was upheld twice by the courts, making this decision even more baffling.

“I am hopeful President-elect Trump will reject the Obama administration’s shameful actions to deny this vital project, restore the rule of law, and make this project’s approval a top priority as he takes office,” Gerard concludes.

Jay Lehr, science director for the Heartland Institute, comments, “There is no technical, scientific or engineering reason that this pipeline would create any problem for the landscape, environment or natural resources. Therefore, one must conclude that it is Obama’s death rattle attempt to continue to block capitalistic progress in our nation until his last day in office.”

Heartland Institute Policy Analyst Tim Benson adds, “A project that is 90 percent complete, not sitting on any tribal land, and which was approved by the Army Corps this past July, now is being blocked for no other reason than because it has become the cause of the month for professional progressive activists, and President Obama has decided to throw them a bone on his way out the door.”

Karen Harbert, CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, agrees, saying the White House “sent a clear message. If your special interest-funded protest is loud enough and has enough celebrities tweeting their support, then the rule of law and the facts no longer matter.”

Congress Authorizes Sale Of SPR Crude Oil

WASHINGTON–The 114th Congress dipped into the Strategic Petroleum Reserve for extra money a couple more times before concluding its run.

According to published reports, the temporary spending bill that funds government operations through April 28, which was sent to the president on Dec. 9, authorizes the Department of Energy to sell $375 million worth of oil to fund “necessary steps to increase the integrity and extend the life” of the SPR.

The day before that, reports note, the House of Representatives gave final approval to HR 34, the 21st Century Cures Act, which authorizes selling 25 million barrels from the reserve to fund medical research. The bill also lowers the minimum level at which the SPR is to be maintained to 450 million barrels of oil.

The 114th Congress used the SPR as a funding mechanism twice in 2015. The two-year budget deal passed at the end of October 2015 called for selling 58 million barrels of SPR crude over eight years beginning in October 2017 to raise general revenue (AOGR, December 2015, pg. 28). That same bill also directed DOE to sell $2 billion worth of crude from October 2016 through October 2020 to fund SPR maintenance.

In early November 2015, HR 22, a highway funding bill, approved selling another 101 million barrels over eight years.

PHMSA Releases Federal Safety Rules For Natural Gas Storage

WASHINGTON–An interim final rule (IFR) establishing minimum federal safety standards for underground gas storage facilities drew kudos for following American Petroleum Institute recommendations, but not for the implementation timeline.

The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration published the IFR in the Dec. 19 Federal Register (Docket No. PHMSA–2016–0016), amending 49 CFR Parts 191 and 192, establishing minimum federal safety standards for underground natural gas storage facilities, including wells, wellbore tubing, and casing.

In an alert to clients, law firm Babst Calland points out that because the rule was released as an IFR, it is to take effect within 30 days of publication without benefit of public input. However, Babst Calland says PHMSA is accepting comments for 60 days, and “may consider making changes to the rule based on the comments filed.”

Babst Calland says the rule incorporates by reference API Recommended Practice 1170 Design and Operation of Solution-Mined Salt Caverns used for Natural Gas Storage, and RP 1171 Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs, covering reservoir and well design, integrity and monitoring, risk management, record keeping, integrity verification, site security and safety, emergencies, procedures, training, and other subjects.

API Midstream Group Director Robin Rorick says the organization is “encouraged the new rule adopts API’s rigorous safety management practices,” but that it “fears the rule’s unrealistic compliance timeline will effectively prevent operators from implementing the requirements of the rule, and potentially could undermine the very safety efforts the rule is trying to promote.”

Under the rule, Babst Calland mentions, PHMSA will regulate the downhole portions of gas storage facilities for the first time. The attorneys note that PHMSA has had statutory authority to regulate storage since 1968, but had declined to do so until it was mandated by the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act, which Congress passed in June 2016 in response to the 2015 Aliso Canyon, Ca., gas storage leak.

Babst Calland says existing storage facilities must meet the operations and integrity provisions of the applicable API RP within one year of publication. Storage facilities built more than six months after publication must comply with all applicable provisions on commencement of operations. The attorneys say reporting obligations will take effect 30 days from publication, and operators must file initial annual reports within six months of the effective date.

Babst Calland explains that the rule requires storage operators to file annual, incident, and safety-related condition reports, and to file 60-day notices for certain construction activities (new storage facilities and wells, and well workovers), as well as changes such as acquisitions, divestitures, and changes in responsible operating entity.

“The IFR is the first step in PHMSA’s storage rule making,” the firm continues. “PHMSA may or may not make changes to the IFR based on comments received. Beyond the IFR, PHMSA has indicated it may adopt additional, and potentially more stringent, regulations.”