September 2017 Industry Digest

Energy Transfer Sues Greenpeace, Earth First! Over Anti-DAPL Actions

DALLAS–The companies behind the Dakota Access Pipeline are suing Greenpeace International and other anti-development groups, alleging they engaged in a conspiracy to manufacture and disseminate materially false and misleading information about the pipeline project.

Energy Transfer Partners LP and Energy Transfer Equity LP filed the lawsuit in the U.S. District Court for the District of North Dakota. Other parties in the suit include Greenpeace Inc., Greenpeace Fund Inc., BankTrack, and Earth First!, the companies say. The allegations say the conspiracy’s aims include fraudulently inducing donations to the groups, interfering with pipeline construction activities, and damaging Energy Transfer’s business and financial relationships.

The lawsuit also alleges the groups incited, funded, and facilitated crimes and acts of terrorism to further its objectives, and claims those actions violated federal and state racketeering statutes, and also constituted defamation and tortious interference under North Dakota law.

Energy Transfer Partners lost at least $300 million because of those actions, the lawsuit reads, with the companies seeking triple damages and punitive damages.

“The alleged enterprise is comprised of rogue environmental groups and militant individuals who employ a pattern of criminal activity and a campaign of misinformation for purposes of increasing donations and advancing their political or business agendas,” Energy Transfer says. “The complaint describes the enterprise’s misinformation campaign that aggressively targeted Energy Transfer’s critical business relationships, including the financing sources for DAPL and Energy Transfer’s other infrastructure projects, by publically demanding these financial institutions sever ties with Energy Transfer or face crippling boycotts or other illegal attacks.”

According to the lawsuit, the attacks were calculated and thoroughly irresponsible, and harmed people and properties along the pipeline’s route. Energy Transfer says Dakota Access was a legally permitted project that underwent nearly three years of rigorous environmental review, and thus it has an obligation to its shareholders, partners, stakeholders and all affected by the violence and destruction intentionally incited by the defendants to file the lawsuit.

The companies also allege the anti-development groups directly and indirectly funded eco-terrorist attacks in North Dakota, forming their own outlaw camp among peaceful protestors near Lake Oahe, N.D. The complaint says those groups then exploited the peaceful activities to further their agenda by inducing and directing destructive attacks on law enforcement officers and Energy Transfer’s properties and personnel.

Appeals Court Rejects Sierra Club’s Lawsuit Against LNG Terminals

WASHINGTON–Federal judges ruled in favor of two liquefied natural gas projects, rejecting claims by the Sierra Club that environmental reviews did not consider the impacts of the increased natural gas drilling needed to support U.S. LNG exports.

In Sierra Club v. U.S. Department of Energy, the U.S. Court of Appeals for the District of Columbia Circuit denied the group’s petition that alleged the Federal Energy Regulatory Commission’s approval of LNG projects in Texas and Louisiana did not satisfy its obligations under the Natural Gas Act or the National Environmental Policy Act.

According to the court’s decision, the Sierra Club said FERC failed to examine the indirect effects of LNG exports, including the impacts of increased gas production to support the Freeport LNG project in Brazoria County, Tx.

The court decision also covers Cheniere Energy’s Sabine Pass project in Cameron Parish, La., and follows its July 2016 ruling, which dismissed legal challenges to FERC authorization of the Freeport and Sabine Pass terminals as well as the Dominion Cove project on Chesapeake Bay (AOGR, August 2016, pg. 22)

In its allegations that FERC failed to fully consider the environmental impacts of export-induced gas production, the Sierra Club focused on how production might affect water resources and ozone concentrations. Court documents say the group’s main complaint was that FERC did not attempt to quantify the impacts or tailor them to specific export levels.

According to the appeals court, FERC explained it deliberately did not perform such an impact analysis under the rationale that tying an incremental exports increase to an increase in gas production, and, in turn, to an impact on specific environmental resources, was not reasonably foreseeable. More importantly, the court held, even if FERC could make reasonable projections about the quantity of export-induced gas production, it “was stumped by where, at the local level, such production might occur.”

The American Petroleum Institute says the decision affirms a predictable and reasonable permitting process for additional U.S. LNG export facilities. “Moving forward, we must put in place smart, common-sense regulations that will continue to drive innovations in technology that will increase opportunities for American LNG throughout the world,” says API Executive Vice President and Chief Strategy Officer Marty Durbin.

Cabot Seeks Damages For Pollution Claims

DIMOCK, PA.–Cabot Oil & Gas Corp. has filed a $5 million lawsuit against a Dimock resident and his attorneys, claiming they attempted to extort and harass the Houston-based company.

According to published reports, Cabot filed a lawsuit Aug. 7 in Susquehanna County, Pa., County Court against Ray Kemble, the Speer Law Firm of Missouri and Fellerman & Ciarimboli of Pennsylvania, who sued Cabot in April, alleging the gas producer polluted Kemble’s water supply.

Even though Kemble withdrew his lawsuit two months later, Cabot said it would defend itself against frivolous lawsuits. “Cabot will protect its rights and pursue justice against those who irresponsibly and maliciously abuse the legal system,” Cabot Director of External Affairs George Stark reportedly told the Associated Press.

More than 40 Dimock residents sued Cabot in 2009, claiming the company’s drilling in the Marcellus Shale had polluted their water wells, and Dimock was featured in the 2010 anti-oil-and-gas documentary, Gasland. All but two of the Dimock families settled with Cabot after tests by the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection found no chemicals associated with drilling in any of their wells.

In March 2016, an eight-member jury in Scranton, Pa., awarded the two families that did not settle $4.24 million, but that judgement was overturned in March 2017 by the U.S. District Court for the Middle District of Pennsylvania (AOGR, May 2017, pg. 18).

According to reports, Cabot’s lawsuit claims Kemble, whom it says was part of the 2012 settlement, breached the settlement by continuing to publicly claim Cabot polluted his water.

D.C. Circuit Says FERC Must Consider Pipe’s Impact On Climate

WASHINGTON–A federal court has ruled the Federal Energy Regulatory Commission must consider the climate effects of burning natural gas as part of its environmental review of proposed pipeline projects, the Independent Petroleum Association of America reports.

IPAA says the U.S. Court of Appeals for the D.C. Circuit on Aug. 22 remanded to FERC its 2016 approval of the Southeast Markets Pipelines Project, a group of projects that would add nearly 700 miles of pipe to move natural gas to electric generation facilities in Florida.

The 2-1 decision says FERC’s environmental impact statement was inadequate because it “either should have given a quantitative estimate of the downstream greenhouse emissions that (would) result from burning the natural gas that the pipelines will transport or explained more specifically why it could not have done so,” IPAA quotes the court.

Other published reports note lawsuit filed by the Sierra Club and other environmental groups raised concerns about the project’s impact on wetlands and sensitive topography, and whether the pipeline really was needed. However, they say the D.C. Circuit dismissed all objections except the climate issue.

The law firm of Spilman Thomas & Battle says the ruling “should give everyone involved in fossil fuel infrastructure projects pause,” adding, “This decision would seem to open Pandora’s box for any project requiring a federal approval and compliance with the National Environmental Policy Act.”

IPAA says it expects the project sponsors and FERC to seek an en banc review by the full court, based on the dissent of Justice Janice Rogers Brown, who argued that FERC was not obligated to regulate greenhouse gases, and indeed, did not have the authority to regulate them.

Appeals Court Decision Protects Drilling Rigs From WARN Act Lawsuits

TULSA–In Meadows v. Latshaw Drilling Co. LLC, the U.S. Court of Appeals for the 5th Circuit has upheld a lower court’s finding that excludes drilling rigs from the federal Worker Adjustment and Retraining Notification (WARN) Act of 1988. According to Madalene A.B. Witterholt, a director in the labor and employment practice at Crowe & Dunlevy, that decision could save drilling contractors millions of dollars.

Under the WARN Act, she notes, companies with more than 100 employees must notify employees, the chief local elected official, and the state retraining agency of a mass layoff or plant closing 60 days in advance. If they fail to do so, they must pay 60 days’ wages and benefits to the affected employees, and may face fines as high as $500 a day.

“The mayor and the state are advised a layoff is coming so they can prepare and mitigate its impacts,” Witterholt says. “The law was meant to apply to towns that would be dramatically impacted by a facility closing or a mass layoff, not to mobile sites such as drilling rigs.”

But in 2015, Witterholt estimates 10 lawsuits were filed in Texas against major drilling contractors alleging they had violated the WARN Act. Normally, the act only applies if the layoff occurs at a site with at least 50 employees. For it to apply to drilling rigs, which generally are crewed by fewer than half that number, Witterholt says, Meadows had to argue that drilling rigs should be considered a single site of employment under the law.

Regulations allow sites aggregation under specific–but narrow–situations, Witterholt says, noting that even two plants on separate sides of town are considered separate facilities. “No evidence can make drilling rigs that are hundreds of miles apart be in the same town,” she stresses.

The original court concurred, dismissing the case. Under the strict standards for summary judgement, it ruled that “no reasonable jury could . . . find that any of Latshaw’s job sites can be combined into a single site of employment.”

“That decision was persuasive and has been cited by other courts, but it was not binding,” Witterholt says. “By upholding the original decision, the Fifth Circuit Court of Appeals has effectively made the case the law. In addition to saving millions of dollars for entities that have been sued under the WARN Act, that decision will reassure drilling contractors that must decide whether it applies to them.”

District Court Confirms EPA Authority To Set Renewable Fuel Volume

WASHINGTON–A federal court decision confirms the U.S. Environmental Protection Agency’s authority to increase volumes of biomass-based fuel under the Renewable Fuel Standard, but also handicaps the agency’s ability to adapt by shrinking the mandate. The ruling in Americans for Clean Energy v. Environmental Protection Agency combined several lawsuits focusing on fuel volumes required for compliance years 2014-16 and biomass-based diesel volumes for 2014-17.

The U.S. Court of Appeals for the District of Columbia decision, issued July 28, supports the National Biodiesel Board’s view that the EPA has the authority to increase the biomass-based diesel volumes even through it missed statutory deadlines, media sources describe. According to the court, the agency acted reasonably in setting RFS levels and explaining its actions.

Court documents note the ruling rejects almost every petition from a range of organizations and companies challenging the RFS.

The judges did rule in favor of the Americans for Clean Energy (ACE) assertion that EPA erred in how it interpreted the “inadequate domestic supply” waiver provision. According to the court, the provision does not allow the agency to consider the volume of renewable fuel available to consumers or the demand-side constraints that affect renewable fuel consumption. The decision grants the group’s request to review the 2015 RFS’s final rule, vacates EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through use of the “inadequate domestic supply” waiver, and remands the provision to the agency for review.

The American Petroleum Institute says it is disappointed in the court’s decision supporting ACE, saying the ruling demonstrates Congress should reform the RFS program, and that the waiver provision is necessary to protect consumers from an outdated mandate that attempts to force the use of ethanol beyond the limits of the vehicle fleet.

When the RFS mandate was revised in 2007, fuel imports and costs were increasing, API notes, making the mandated use of corn-based ethanol a viable reaction that also could reduce emissions. API says in the past few years, petroleum consumption derived from imports reached its lowest level since 1970. With the United States now the world’s largest producer and refiner of oil and natural gas, API asserts that the country must reform its outdated energy policies to reflect current energy realities.

“API had supported EPA basing its waiver on the broader negative economic consequences of the mandate, and as EPA considers implanting a revised and retroactive standard for 2014-2016, we will encourage EPA to reconsider this option,” API Downstream Group Director Frank Macchiarola says.

Senate Confirmations Restore FERC Quorum

WASHINGTON–Two Senate confirmations have given the Federal Energy Regulatory Commission a quorum again. The agency had been down to one commissioner since a pair of February resignations reduced the five-person commission to one. After Neil Chattarjee and Robert Powelson cleared the Senate Energy and Natural Resources Committee on 20-3 margins in June, the full Senate confirmed both men by unanimous consent on Aug. 3.

According to FERC, before their appointments, Chatterjee served as energy policy adviser to Senate Majority Leader Mitch McConnell, R-Ky., while Powelson was a member of the Pennsylvania Public Utility Commission and president of the National Association of Regulatory Utility Commissioners.

Chatterjee will serve out the remainder of a term that ends in June 2021, while Powelson is serving out a term that ends in June 2020. Both were sworn in in early August.

In addition to those selections, the White House also has nominated Richard Glick to fill a FERC term that expires in June 2022, and Kevin McIntyre, to serve until June 30, 2018. The White House simultaneously nominated McIntyre to be reappointed, with a term that expires in June 2023, FERC says.

According to FERC’s acting chairwoman, Commissioner Cheryl A. LaFleur, with the agency’s quorum restored, its first order of business is the backlog of orders and issues awaiting consideration.

The American Petroleum Institute hailed the confirmations, pointing out the lack of a quorum at FERC has held up nearly $4 billion in energy infrastructure investments.

“There are billions of dollars of privately funded infrastructure projects currently tied up at FERC because the agency lacked a quorum. With the confirmation of both Powelson and Chatterjee, the agency now can move forward in approving the critical natural gas infrastructure that will create jobs across the country,” says API Midstream Group Director Robin Rorick.

In other federal appointments, the Senate confirmed Dan Brouillette deputy secretary of energy. Brouillette served in the department during the George W. Bush administration. Following the 79-17 confirmation vote, he becomes the second Department of Energy nominee to take office, serving under Energy Secretary Rick Perry.

Gulf Lease Acreage Nets 27 Companies

WASHINGTON–Five independent producers were among the most active bidders in the Gulf of Mexico Lease Sale 249, held Aug. 16 in New Orleans. According to the Department of the Interior, 27 companies participated in the largest acreage sale in the federal offshore program, submitting 99 bids for 508,096 acres, with accepted bids totaling $121 million out of a total bid amount of $137 million.

The sale offered 76 million acres offshore Texas, Louisiana, Mississippi, Alabama and Florida for oil and gas exploration and development. According to the Bureau of Ocean Energy Management, Lease Sale 249 included 14,220 unleased blocks in the Gulf’s Western, Central and Eastern planning areas. Lease terms include a 12.5 percent royalty rate for leases in less than 200 meters of water and 18.75 percent for all other leases. BOEM estimates resources developed in the leased area may be as much as 1.12 billion barrels of oil and 4.42 trillion cubic feet of natural gas.

Lease Sale 249 is the first offshore sale under the National Outer Continental Shelf Oil and Gas Leasing Program for 2017-22. BOEM says nine regionwide lease sales that combine all three GOM planning areas are scheduled.

Shell Offshore Inc. topped the list of total high bids with 19 (totaling $25.1 million), followed by Chevron USA Inc., with its 15 bids totaling $27.9 million. The two companies swapped positions in the ranking for sum of high bids submitted.

Agency figures show independent producers made their presence felt, and were led by Anadarko U.S. Offshore LLC, which was third in the number of high bids submitted, with 10 for a total of $10.6 million. Houston Energy LP ranked fifth, with seven bids ($444,976); LLOG Bluewater Holdings LLC was seventh with six bids ($2.6 million); and Ridgewood Energy Corp. with five bids ($1.4 million).

Independents also were represented among the top 10 companies for total bids submitted. Anadarko was fifth, LLOG Bluewater Holdings sixth, and Apache Deepwater LLC eighth, with its one bid totaling $1.7 million.

Randall Luthi, president of the National Ocean Industries Association, says while the results of the lease sale reflect market realities, they also demonstrate the offshore industry’s commitment to the Gulf of Mexico.

“Industry has continually demonstrated a commitment to providing tremendous economic and energy benefits for our nation, despite the fact that unwise energy policies have closed more than 94 percent of U.S. offshore areas to leasing and exploratory functions,” Luthi notes. “Responsible offshore oil and gas development is critical to America’s economic and energy security.”

BOEM Releases PEIS For New G&G Surveys In Gulf of Mexico OCS

WASHINGTON–The Bureau of Ocean Energy Management says its Gulf of Mexico Outer Continental Shelf geological and geophysical final programmatic environmental impact statement satisfies a commitment it made under a 2013 settlement agreement with the Natural Resources Defense Council.

The document addresses potential environmental impacts of G&G surveys (deep penetration, high-resolution geophysical, electromagnetic, deep stratigraphic and remote sensing) conducted in connection with BOEM’s oil and gas, renewable energy and marine minerals programs. The analysis in the final PEIS shows that, subject to adequate mitigation measures, BOEM’s decision to continue authorizing G&G activities in the Gulf will not have major environmental impacts, the agency says.

BOEM indicates it will use the final PEIS to assess the environmental impacts associated with permitting or authorizing G&G activities in Gulf OCS waters in accordance with the National Environmental Policy Act. It adds the document also allows the National Marine Fisheries Service, one of the cooperating agencies in developing the final PEIS, to comply with its NEPA obligations in processing applications for incidental take regulations under the Marine Mammal Protection Act.

According to the National Ocean Industries Association, BOEM considered several alternative mitigation measures for the final PEIS. The one selected allows it to permit and authorize G&G activities as they were prior to the June 2013 settlement with NRDC, with several additional mitigation measures. Those include expanding protected species observer and passive acoustic monitoring (PAM) programs, requiring PAM measures in the Mississippi and De Soto canyons area, changing the timing of coastal seasonal restrictions, and adding survey protocols for nonairgun high-resolution geophysical surveys.

NOIA says it is concerned the preferred alternative remains overly precautionary, and rejects more than 50 years of safely demonstrated G&G activities in the Gulf. It points out there has been no documented evidence of G&G activities harming marine animals, and that basing mitigation measures on unsubstantiated claims may place prohibitive barriers on the ability of companies to provide safe and accurate seismic surveys.

The final PEIS is available on BOEM’s website at http://www.boem.gov/GOM-G-G-PEIS.

RPSEA Proposes Study Of Marginal Wells’ Methane Emissions

HOUSTON–The Research Partnership to Secure Energy for America is initiating a project with oil and gas industry partners to conduct a real-world study that RPSEA says will determine the precise levels of methane emitted from marginal oil and gas wells.

RPSEA says the survey is needed to demonstrate that marginal wells’ methane emissions are much lower than estimates the Environmental Protection Agency used to update its Subpart OOOOa New Source Performance Standards under former President Barack Obama.

“EPA based this rule on assumptions, with only limited accurate and defensible data from marginal wells,” says RPSEA President Tom Williams. “It is absolutely imperative that we provide EPA with data that show the accurate methane emissions contributed by marginal wells.”

RPSEA notes that EPA’s final rule did not–as anticipated–include an exemption for marginal wells from leak detection and repair requirements, creating a significant economic burden, especially for smaller oil and gas producers.

RPSEA says the Independent Petroleum Association of America and the U.S. Oil & Gas Association support the proposed study, and it will work with their members, as well as with state and regional association member companies. Work will commence when adequate funding is secured, RPSEA adds.

Parties interested in participating in the study or learning more should visit RPSEA’s website at www.rpsea.org or contact Business Development Program Director Jack Belcher at 832-248-2914.