Enertia Software

June 2017 Industry Digest

Lawsuit Contends CRA Violates Constitution

WASHINGTON–A lawsuit challenging a Congressional Review Act resolution passed by Congress and signed by President Trump could have implications for other attempts to roll back Obama-era regulations because it argues the CRA violates the U.S. Constitution, the National Ocean Industries Association warns.

NOIA reports the Center for Biological Diversity filed a lawsuit April 20 in the U.S. District Court for the District of Alaska at Anchorage, seeking to overturn HJR 69, which was introduced in February, passed by both the House and Senate, and signed by President Trump on April 3.

HJR 69 overturns “Nonsubsistence Take of Wildlife, and Public Participation and Closure Procedures, on National Wildlife Refuges in Alaska,” which was finalized by the U.S. Department of Interior in August 2016 to limit hunting of wolves, bears and other predators in national wildlife refuges in Alaska.

“(Center for Biological Diversity v. Department of the Interior) impacts other CRAs by arguing that a provision in (HJR 69) violates the Constitution’s separation of powers doctrine by preventing agencies from issuing a substantially similar rule to the one overturned,” NOIA says.

Specifically, the lawsuit explains, Section 801(b)(2) of the CRA prohibits the executive branch from promulgating “any rule that is substantially the same as” the rule rejected by Congress “unless the reissued or new rule is authorized specifically by a law enacted after the date of the joint resolution disapproving the original rule.”

“This constraint on future rule making violates the separation of powers that must be maintained between the legislative and executive branches under the U.S. Constitution,” the plaintiffs argue.

Because the CRA has never been tested in court, NOIA points out, the term, “substantially similar,” has yet to be defined.

The association notes that prior to this year, the CRA was used only once, to kill a Clinton-era ergonomics rule. President Trump, meanwhile, had signed 13 resolutions of disapproval by the end of April, NOIA notes.

Supreme Court Won’t Rule On Challenge To Polar Bear Habitat

WASHINGTON–The U.S. Supreme Court in early May declined to hear a challenge to an Obama administration decision to designate 187,000 square miles of Alaskan coastal land and the surrounding sea ice as critical habitat for polar bears, according to a report from the Independent Petroleum Association of America.

Several parties, including the Alaska Oil & Gas Association, Alaska Native Corporation and the state, challenged the 2010 designation by the U.S. Fish & Wildlife Service, and in 2013, the U.S. District Court for the District of Alaska ruled USFWS had failed to explain why it needed to protect so much land, and that the service did not follow proper government procedures (AOGR, February 2013, pg. 29).

However, in February 2016, the U.S. Court of Appeals for the 9th Circuit overturned the district court, holding that USFWS’s decision was not arbitrary, capricious or otherwise in contravention of applicable law (AOGR, April 2016, pg. 21). The 9th Circuit said the district court held USFWS to a standard of specificity that the Endangered Species Act did not require.

In appealing the 9th Circuit’s decision to the Supreme Court, IPAA says the plaintiffs argued that the ruling allowed USFWS to make “sweeping designations (in this case an area the size of California) that overlapped with human development (including, even, industrial areas).”

The designated habitat covers “the entire ancestral homelands for certain native communities, as well as the largest and most productive oil field in North America,” IPAA says the groups wrote.

U.S.-China ‘Action Plan’ Good For LNG Exports

HOUSTON–The 100-day action plan agreed to by U.S. President Donald Trump and People’s Republic of China President Xi Jinping has the potential to alter global liquefied natural gas trade and open the door to more U.S. exports, according to global consultancy Wood Mackenzie.

The U.S. Department of Commerce reports Trump and Jinping signed the agreement at their meeting May 11 at the Mar-a-Lago Club resort in Palm Beach, Fl. The action plan comes under the U.S.-China Comprehensive Economic Dialogue, which addresses issues in areas including agricultural trade, financial services, investment and energy, Commerce says.

Specific to LNG, Commerce says, the United States promises to “treat China no less favorably than other non-Free-Trade-Agreement trade partners.”

This means, says Massimo Di-Odoardo, head of global gas and LNG research at Wood Mackenzie, that Chinese companies now may negotiate long-term contracts to source LNG from U.S. suppliers. “Until now, Chinese buyers have not bought long-term LNG supply directly from the United States,” he observes. “This ensures U.S. LNG entering the Chinese market will be politically palatable.”

A wire service report quotes Eben Burnham-Snyder with Cheniere Energy Inc. as saying the agreement should “amplify and accelerate conversations about new long-term contracts.”

“Cheniere has had extensive negotiations with several Chinese commercial entities,” Burnham-Snyder adds. “Obviously, with this agreement, we expect this to accelerate.”

The same report quotes Scott Atha, director of LNG marketing and commercial strategy for North American projects at Liquefied Natural Gas Ltd., which is developing the Magnolia LNG export terminal in Louisiana, as calling the agreement “a positive statement from the Trump administration about the LNG industry. It provides us additional confidence the Chinese market can be open to U.S. projects.”

Di-Odoardo says Wood Mackenzie considers China as the world’s largest LNG growth market. The country’s total LNG demand in 2016 amounted to 26 million tons, and Di-Odoardo says Wood Mackenzie expects it to reach 75 million tons by 2030, which it says is equivalent to $26 billion a year at $7.00 an MMBtu.

“In the longer term, the deal paves the way for a second wave of investment in U.S. LNG,” Di-Odoardo projects. “Developers now will be able to target Chinese buyers directly, potentially supporting project financing. It also could support direct Chinese investment into liquefaction and upstream developments on U.S. soil.”

The U.S. Commerce Department says that as concrete progress is made toward implementing actions under the 100-day plan, the two sides “will begin discussing a one-year plan to further solidify actions in promoting U.S.-Chinese economic engagement and cooperation.”

DOE OKs LNG Exports From Golden Pass Site To Non-FTA Countries

WASHINGTON–The Department of Energy has authorized Golden Pass Products LLC to export domestically produced liquefied natural gas to countries that do not have a free trade agreement (FTA) with the United States.

Under the authorization, Golden Pass can export the equivalent of 2.21 billion cubic feet a day from its Golden Pass Terminal near Sabine Pass, in Jefferson County, Tx., to any non-FTA country not prohibited by law.

According to DOE, it now has authorized a total of 19.2 Bcf of natural gas exports to non-FTA countries from LNG facilities planned in Texas, Louisiana, Florida, Georgia and Maryland. It adds if all those projects are built, the United States will become the world’s dominant LNG exporter.

Golden Pass says constructing its facility will provide 45,000 direct and indirect jobs over five years, and the project will provide 3,800 direct and indirect permanent jobs over the next 25 years of operational activity. The company also estimates the cumulative impact of construction and 25 years of operation will provide as much as $2.4 billion in federal tax revenues and $1.2 billion in state tax revenues.

The Golden Pass Terminal is owned jointly by Qatar Petroleum (70 percent) and ExxonMobil (30 percent).

Federal law generally requires approval of natural gas exports to counties that have an FTA with the United States, DOE says. For countries without an FTA, the Natural Gas Act directs the department to grant export authorizations unless it finds the proposed exports “will not be consistent with the public interest.”

The American Petroleum Institute says the United States can grow its economy through continued oil and gas exports.

“Expanding natural gas exports will help create jobs here at home and provide energy security to U.S. allies seeking a reliable alternative to energy supply from nations that use energy resources as a political weapon,” assesses API Vice President and Chief Strategy Officer Marty Durbin. “Just as greater use of natural gas for U.S. electricity generation has cut our carbon emissions to levels not seen in three decades, U.S. natural gas can help reduce emissions in other nations.”

CBP Withdraws Notice To Change Jones Act

WASHINGTON–The U.S. Customs and Border Protection Agency (CBP) has withdrawn a proposal that the American Petroleum Institute contends would have imposed serious limitations on the offshore oil and gas industry’s ability to operate safely, effectively and economically.

The National Ocean Industries Association explains that on Jan. 18, CBP published a general notice to revise almost 30 Jones Act interpretive rulings going back to 1976.

NOIA cites a blog post by international law firm Winston & Strawn LLP that points out the Jones Act restricts transportation of merchandise between two points in the United States, including U.S. territorial waters, to U.S.-flag vessels. One exception to that, Winston & Strawn notes, is “vessel equipment” that has not been considered “merchandise” as defined in the Jones Act.

“Over time, CBP has issued numerous rulings interpreting this definition, including determining that vessel equipment includes items ‘essential to the mission of the vessel,’” Winston & Strawn details. “This became controversial, culminating in a ruling in 2009 that determined, consistent with prior rulings, that an (oil and gas) subsea assembly was vessel equipment when transported by a construction vessel that had as its purpose the installation of such equipment.”

CBP’s Jan. 18 notice would have revised its interpretation of vessel equipment, but “based on many substantive comments,” on May 10, the agency announced it was withdrawing the proposal.

“Withdrawing the proposed changes protects U.S. energy security, and allows for consumers and businesses to continue benefitting from America’s energy renaissance,” praises API Upstream Director Erik Milito.

He cites a report released by API in April that found the economic impacts of CBP’s January proposal included:

  • The loss of 30,000 industry jobs in 2017 and as many as 125,000 by 2030;
  • A 23 percent decrease in U.S. oil and gas production between 2017 and 2030;
  • A decrease in offshore spending of $5.4 billion a year; and
  • The loss of $1.9 billion a year in government revenue from 2017 to 2030, and a cumulative loss of $91.5 billion in gross domestic product.

DOI Will Reconsider Permit Applications For Atlantic Seismic Surveys

WASHINGTON–The Department of Interior began to implement President Donald Trump’s America First Offshore Energy Strategy when it announced on May 10 it would resume evaluating applications from six companies to conduct seismic surveys in the Mid- and South-Atlantic Outer Continental Shelf planning areas that were denied late last year by the Obama administration.

Five days later, the Interior Board of Land Appeals, to which the companies had appealed the Obama administration denial, remanded their applications to the Bureau of Ocean Energy Management, according to a report from the National Ocean Industries Association.

“NOIA applauds Interior’s decision,” states President Randall Luthi. “As the Trump administration moves forward in developing a new five-year program for offshore oil and gas exploration, new surveys using modern technology are vital to providing an up-to-date and scientifically accurate picture of the resources off our Atlantic Seaboard.”

While the Atlantic Ocean was removed from the 2017-22 OCS Oil and Gas Leasing Program released last November by the Obama administration, DOI notes that President Trump’s executive order on offshore energy, which was released in late April (see story page 24), directs it to begin developing a new program.

“Seismic surveying helps a variety of federal and state partners better understand our nation’s offshore areas, including locating hazards and siting wind turbines, as well as offshore energy development,” comments Interior Secretary Ryan Zinke. “Allowing this scientific pursuit enables us to safely identify and evaluate resources that belong to the American people.”

DOI points out that the latest geological and geophysical data for the Mid- and South-Atlantic OCS were gathered more than 30 years ago.

Interior Department Picks Angelle To Head BSEE

WASHINGTON– Department of Interior Secretary Ryan Zinke has tapped former Louisiana state official Scott A. Angelle to head the Bureau of Safety and Environmental Enforcement.

Most recently, BSEE says, Angelle served as vice chairman of the Louisiana Public Service Commission, but his other positions in state and local government include interim lieutenant governor, secretary of the Louisiana Department of Natural Resources, and St. Martin Parish president. In the aftermath of the 2010 Gulf of Mexico oil spill, Angelle served as liaison to the federal government and negotiated an early end to the Obama administration’s offshore drilling moratorium.

The Louisiana Oil & Gas Association and National Ocean Industries Association are among those applauding the appointment. “It’s a good thing . . . to have someone from Louisiana who is familiar with the Gulf Coast in that position,” published reports quote LOGA President Don Briggs. “It’s an important position for companies operating in the Gulf of Mexico.”

“Angelle’s unique combination of political acumen, experience and knowledge of the offshore industry make him an excellent choice to lead BSEE,” NOIA President Randall Luthi assesses. “Angelle’s previous work related to natural resources and offshore safety will serve both the offshore industry and American consumers well, and he will no doubt add some Cajun spice to the BSEE hallway at the main Interior building in Washington.”

NRDC-Backed Study Finds No Water Pollution From Marcellus Wells

WHEELING, W.V.–Analysis funded by the National Science Foundation and the Natural Resources Defense Council finds no evidence that unconventional oil and natural gas extraction has contaminated groundwater in five northern Appalachian Basin counties in West Virginia, points out law firm Steptoe & Johnson PLLC.

The three-year study, published by authors from Duke, Ohio State, Pennsylvania State and Stanford universities, and the French Geological Survey Laboratory monitored geochemical variations in drinking water wells before and after nearby shale gas development, Steptoe & Johnson indicates. The findings provide “a clear indication for the lack of groundwater contamination and subsurface impact from shale gas drilling and hydraulic fracturing,” the law firm quotes. “Saline groundwater was ubiquitous throughout the study area before and after shale gas development, and the groundwater geochemistry in this study was consistent with historical data reported in the 1980s.”

According to Steptoe & Johnson, although the study links elevated chloride concentrations (and bromide/chloride ratios) to geological and topological features, it cannot tie them to the proximity of shale gas production. The analysis concludes that both the biogenic and thermogenic gases that occur in groundwater in the Marcellus play regions studied are unrelated to human activity.

The isotopic “fingerprints” of the study’s groundwater samples “were not consistent with the signature of hydraulic fracturing fluids,” and reflected local groundwater conditions, the firm says.

Study Debunks CO2 Endangerment Finding

WICHITA FALLS, TX.–A 2016 study that only recently has been publicized contends that the U.S. Environmental Protection Agency’s so-called 2009 determination that carbon dioxide posed a danger to human health and welfare, and therefore could be regulated under the Clean Air Act, is false, according to the Texas Alliance of Energy Producers.

EPA’s so-called endangerment finding is the basis for many of the Obama administration’s fossil fuel regulations.

The Alliance cites a report by “veteran researchers”–economist Jim Wallace, climatologist John Christy and meteorologist Joe D’Aleo–that is says concludes there is “very, very little doubt but that EPA’s claim of a tropical hot spot caused by rising atmospheric CO2 levels simply does not exist in the real world.”

The Alliance explains that one of EPA’s lines of evidence was computer models that predicted enhanced warming would show up as a “hot spot” in the tropical troposphere.

However, it says the study finds that after naturally occurring events–solar, volcanic and organic–are accounted for, there is no record-setting warming to be concerned about. “At this point, there is no statistically valid proof that past increases in atmospheric CO2 have caused the officially reported rising,” the Alliance quotes.

The Alliance says the study was completed on behalf of the Concerned Household Electricity Consumers Council, which has filed the study with the EPA and requested the agency reconsider the 2009 endangerment finding.

The report may be accessed at https://thsresearch.files.wordpress.com/2016/09/wwww-ths-rr-091716.pdf.

AG Lawsuit Dismissed When Boulder County Moratorium Expires

BOULDER, CO.–A Colorado district court dismissed the state attorney general’s lawsuit challenging Boulder County’s moratorium on oil and gas development after the moratorium expired on May 1, according to published reports.

Colorado Attorney General Cynthia Coffman sued Boulder County in February over its then five-year-old moratorium, declaring that “Boulder County’s open defiance of state law has made legal action the final recourse available to the state” (AOGR, March 2017, pg. 21).

The reports say the Boulder County attorney’s office filed a motion to dismiss the state’s complaint, noting that the Boulder County Commission had allowed the moratorium to expire after it adopted new county land use regulations for oil and gas drilling and production on March 23. Boulder District Judge Norma Sierra granted the county’s motion on May 2.

Coffman responded to the court’s action by stating, “Boulder County took a positive step by finally lifting its unlawful moratorium, and I strongly believe that would not have happened without my office taking action to enforce state law,” reports indicate.

“While my office will be watching how Boulder’s new rules are implemented, we have agreed to the dismissal of our court case since there no longer is a moratorium in place,” Coffman is quoted.