February 2021 Industry Digest

GREAT FALLS, MT.–A regulation put out by the Trump-era Environmental Protection Agency that purported to encourage scientific transparency in federal rulemaking was nullified by the U.S. District Court for the District of Montana in late January, only weeks after it took effect. The EPA under Biden responded to the decision by asking the court to vacate the rule, which it did on Feb. 1, indicates plaintiff The Environmental Defense Fund.

According to law firm Steptoe & Johnson, EPA released the final rule “Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information,” on Jan. 6 to guide how the agency “will consider the availability of dose-response data underlying pivotal science used in its significant regulatory actions and influential scientific information.” The regulation, which sought to revise how EPA internally weighed scientific information when making rules, was proposed in 2018 and revised in 2020 and 2021 after receiving nearly 1 million public comments.

Besides addressing how EPA was to determine public availability and the importance of pivotal science and influential scientific information for significant regulatory actions, the firm says, the final rule would have established peer review requirements for pivotal science as well as well as criteria for the administrator to consider when granting case-by-case exemptions. Steptoe & Johnson notes the rule focused on “studies that describe the quantitative relationship between the dose or exposure of a pollutant, contaminant or substance and an effect,” making it narrower than earlier proposals.

EDF and other opponents objected that the regulation was rushed into place during the final days of the Trump administration. They also claimed the rule “would have undermined the agency’s ability to protect public health and the environment by fundamentally transforming the ways in which EPA may consider scientific evidence. It would have restricted EPA’s ability to use rigorous, peer-reviewed medical research for which underlying data are not publicly available–even when legal and ethical rules, like medical privacy laws, would have prohibited making that data public.”

EDF says it joined with the Montana Environmental Information Center, and Citizens for Clean Energy to sue EPA when the agency attempted to make the rule effective immediately upon its publication in the Federal Register rather than setting an effective date at least 30 days later, as required for substantive rules. According to EDF, the court issued an order implementing the legally mandated effective date for the regulation, and found fault with the rule’s legal basis.

Eugene, OR.–On Jan. 14, the U.S. Bureau of Land Management settled a 2018 lawsuit challenging the legality of 53 oil and gas leases covering 45,000 acres in western Colorado, Western Environmental Law Center reports.

“This legal agreement, along with successful challenges to management plans in the region, effectively puts the brakes on further oil and gas leasing in the Piceance Basin,” comments Kyle Tisdel, one of Western’s attorneys. “This is a major win against a Trump administration that refused to acknowledge or analyze the climate and human health impacts of oil and gas exploitation.”

The 2018 lawsuit, which was filed by Wilderness Workshop, Center for Biological Diversity, Living Rivers/Colorado Riverkeeper and Sierra Club, alleged that the BLM violated the National Environmental Protection Act by failing to perform site-specific environmental reviews before approving the leases. Instead, BLM granted them under resource management plans for the Grand Junction and Colorado River Valley field offices that Western argues did not consider hydraulic fracturing’s potential harm to the climate, public health and the Colorado River.

According to Western, the agreement blocks drilling on more than 45,000 acres until officials revise those land management plans, which govern 2 million acres of public lands in western Colorado.

The agreement notes that BLM denies it violated any laws by issuing the leases. However, through other cases, it already has agreed or offered to complete supplemental NEPA analyses for the resource management plans governing those leases. Therefore, the parties “believe it is in the best interest of the public, the parties and judicial economy to resolve the claims in this case.”

BISMARCK, N.D.–A North Dakota district court has struck down the pore space law passed by the 2019 North Dakota Legislative Assembly, but industry representatives say the legal battle may continue.

According to published reports, on Jan. 21, Northeast District Judge Anthony Benson declared the law–which took effect when Governor Doug Burgum signed SB 2344 in 2019–unconstitutional.

Arguably, SB 2344 was itself prompted by a court ruling. As it was originally written in 2009, the state code’s carbon dioxide storage section was meant to allow coal plants to permanently store the carbon dioxide they produced in subsurface pore space. However, in 2017, the North Dakota Supreme Court applied that law to a saltwater disposal well and ruled that, under the state’s oil and gas production damage compensation law, the operator owed a surface owner damages for using that owner’s pore space.

SB 2344 sponsor Senator Jessica Unruh, R-Beulah, pushed the legislation to clarify the state’s pore space law (AOGR, June 2019, pg. 38). However, the Northwest Landowners Association charged that it violated landowners’ rights. According to the Bratten law firm, its representative, Benson’s ruling concurs, describing the law as “an unconstitutional taking of an inherent, inalienable property right . . . for the improper purpose of economic development, by giving all value of those property rights to a private party, for a nonpublic purpose.”

The firm says the court maintains that SB 2344 prohibits “landowners from obtaining any compensation for any oil and gas operators’ use of their pore space estate, whether reasonable or unreasonable, whether at large or small volumes, whether at a large financial detriment or small financial detriment. These provisions act as an absolute bar to not just money damages, but to all other meaningful remedies, including trespass, nuisance or other torts. The three provisions at issue here render the pore space worthless in every instance of its application, and (SB 2344) is unconstitutional on its face.”

Press accounts note that the North Dakota Petroleum Council, which backed SB 2344, disagrees with the court’s interpretation, and predicts that January’s ruling will not be the final word. “No matter how the court ruled, we expected one side to be disappointed,” NPDC President Ron Ness is quoted. “We expect to see an appeal; there will be more to come.”

WASHINGTON–Contrary to the notion of impending “peak” hydrocarbon supply and demand, the U.S. Energy Information Administration’s Annual Energy Outlook 2021 predicts that U.S. oil and gas output will bounce back to pre-COVID levels over the next couple years. In the out years, EIA predicts, natural gas production will continue to climb into the foreseeable future, while oil output looks to remain fairly stable for the same period.

After falling over the past year, the agency’s long-range forecast shows a robust rebound in domestic shale gas, tight oil and associated gas production. Specifically, EIA projects that U.S. oil production will return to 13 million barrels a day by 2023, and that natural gas output will return to levels preceding the COVID-19 pandemic by 2024. The report predicts gas will climb through the end of the forecast period in 2050.

According to EIA, U.S. hydrocarbon demand will continue to fall short of pre-COVID levels until 2029, which places much of the agency’s forecasted near-term demand growth in U.S. oil and gas exports. The AEO charts significant export volumes for crude oil and liquefied natural gas over the forecast period.

Ultimately, the report indicates, oil and gas will continue to serve as the backbone of the U.S. energy mix through the end of the 29-year forecast range, even amid huge projected growth in renewable capacity. In fact, EIA says that in the year 2050, the U.S. market will be consuming some 39 quadrillion Btu of oil and 37 quadrillion Btu of natural gas, compared with 17 quadrillion Btu of renewables.

EIA reports that U.S. oil production fell from more than 13.0 MMbbl/d in March 2020 to 10.9 MMbbl/d in January 2021, and says it expects output to continue to slip before bottoming out later this year. From that future low point, the agency’s forecast would require the country to add some 2.3 MMbbl/d-2.5 MMbbl/d over the course of 2022 and 2023. To put that into perspective, EIA data show that total oil output in the Permian Basin region grew by 2.6 MMbbl/d in the three years from January 2017 to January 2020.

MT. VERNON, IL.–The Illinois Oil and Gas Association has hired Robert Stewart as its new executive vice president. Stewart began his employment with IOGA on Feb. 1.

According to the association, the oil industry is a family tradition for Stewart, whose grandfather, Edward Stewart, started in the 1890s. His current company, Stewart Producers, was established in 1951 by Stewart’s father as an operating company for Stewart Oil. It expanded into well servicing in 1966 and got into exploration after Stewart Oil dissolved in 1968.

“I have been on the IOGA Board of Directors for 25 years,” Stewart relates. “I am looking forward to expanding my relationship with IOGA in this new role and continuing to help IOGA advocate for our members.”

Stewart received the IOGA Petroleum Professional of the Year Award in 2019, and Stewart Producers Inc. was named IOGA Wildcatter of the Year in 2016.

“Robert has been a great asset to our association throughout the years,” affirms IOGA President Bryan Hood, “He always brings forward great ideas and viewpoints to issues.”

Stewart also has served on several other industry boards, including those for the Society of Petroleum Engineers, American Association of Petroleum Geologists, State of Illinois Petroleum Advisory Board, and the Petroleum Technology Transfer Council.

HOUSTON–The Petroleum Equipment & Services Association and the Association of Energy Service Companies are joining forces to form a new organization, the Energy Workforce & Technology Council.

“This is an exciting moment for our organizations and for the oil field services sector,” says PESA President Leslie Beyer, who will serve as the council’s chief executive officer. “The combination of PESA and AESC will strengthen our sector’s voice with policymakers, media and communities, and help us bring attention and resources to the innovative and essential work (members are) doing.”

According to the announcement, PESA’s top officer, Rod Larson, president and CEO at Oceaneering, and AESC top officer Gay Wathen, vice president of mobile rigs at NOV Inc., will serve as the council’s co-chairs. Former AESC Executive Director Kenny Jordan will be the council’s vice president.

The announcement notes that Tim Tarpley, senior vice president of government affairs and counsel, will lead the group’s domestic and international policy issues, while Molly Determan, chief operations officer, will oversee daily operations, including the council’s certification, standards and training programs. As part of the merger, Andy Knapp, former senior director of U.S. federal government affairs related to upstream at BP America Inc., will join the council as senior adviser of sustainability and ESG and oversee ESG training and certification, as well as ESG committee work.

The council has chosen Houston for its headquarters. The combined organization says it will represent more than 600 member companies in energy services, supply, manufacturing and drilling, and will focus on enabling members to safely, profitably and sustainably produce the energy needed to meet rising global demand.

“We will continue to deliver industry-recognized workforce development opportunities through training, certifications, best-practice sharing and standards development,” Beyer vows. “Building on the legacies of PESA and AESC, the council will elevate and foster the vital role the oil field services sector plays in the economy, the innovative technology it develops and deploys, and its leading role in achieving a lower carbon energy future.

The council says PESA’s long-term partnership with the U.S. departments of State and Commerce to train foreign service officers in industry technology will continue. PESA’s certification programs in leadership development, inclusion, diversity and equity, and ESG will be complemented by AESC’s collaboration with the Occupational Safety and Health Administration, and National Institute for Occupational Safety and Health, the council adds.

MIDLAND–The Petroleum Museum of Midland has revealed the 2021 inductees to The Petroleum Hall of Fame: Frank M. Late, Paul L. Morris and Frederic M. Newman.

Late was a businessman with interests in oil field services, car dealerships, manufacturing, soft drink bottling, banking, exploration and production, and ranching. The museum says his involvement in drilling began in 1944, when he co-founded Cactus Drilling, which had grown into the third-largest U.S. land-based contract drilling company by the time he sold it in 1980. Late also helped found Cardinal Chemical and grew Republic Supply to 25 locations across eight states.

Morris began career with Hope Natural Gas Co. in 1960. While he served as president and chief executive officer of Banner Energy Inc., the company made major discoveries in Louisiana, Wyoming and North Dakota. The museum says he later moved to Wagner and Brown, which completed 600 wells across Texas, Oklahoma, the United Kingdom and Australia under his leadership. In 2013, he partnered with Ed Jones to launch Elk River Resources, which drilled 25 horizontals in the Spraberry and Wolfcamp formations.

Newman began working at Schlumberger as a field engineer in 1965 and went on to become its youngest district manager. As an inventor, he has patented more than 80 innovations designed to improve the industry’s safety and efficiency. His other accomplishments include co-founding Aztec Drilling, Total Abandonment Plugging Service Inc. and Triple N. Services, which the museum notes became one of the leading plugging and abandonment contractors in the Permian Basin.

CALGARY–Enerplus Corp. announces it has entered into a definitive agreement to acquire Bruin E&P HoldCo LLC, a private company with assets in the Williston Basin, for a total cash consideration of $465 million.

Bruin’s assets span 151,000 net acres in the Williston Basin, including 30,000 net acres contiguous with Enerplus’ tier one acreage position, Enerplus describes. The assets produce 24,000 barrels of oil equivalent a day and have 84 million boe of proved plus probable reserves from an inventory of 149 (111 net) drilling locations, the company continues. After the acquisition, Enerplus estimates it will hold more than a decade of drilling inventory capable of sustaining production at 2021 levels, with additional drilling inventory upside if commodity prices strengthen.

The company adds that it expects the acquisition to be materially accretive to per share metrics in the first year, including adjusted funds flow and free cash flow.

“This acquisition demonstrates our disciplined returns-oriented focus and commitment to value creation for our shareholders,” says Ian C. Dundas, Enerplus president and chief executive officer. “With immediately adjacent acreage offering strong operational synergies, Bruin’s assets are highly complementary to our existing tier one position in the Bakken and will enable us to accelerate free cash flow growth and further support our focus on providing long-term, sustainable shareholder returns.”

DENVER–Fundare Resources Co. LLC announces it has completed its private equity financing with funding commitments from Woodward Diversified Capital and management.

Fundare introduces itself as a Denver-based acquisition and development company in search of yield-driven, long-lived producing properties that may benefit from advanced technologies and low-cost operatorship. According to the company, its management team was behind Fifth Creek Energy Co. and the four Bonanza Creek Energy companies.

“We are pleased to be working again with the outstanding team at WDC as we build Fundare into another successful acquisition and development company. I have known (WDC Managing Partner) Beau Woodward since 1995 and look forward to repeating the success of the past five Creek companies with WDC,” says Michael Starzer, Fundare managing partner.

Woodward praised Fundare’s management team, saying, “WDC has a long history of energy investments, partnering with, and providing capital to proven management teams. In their operational and leadership roles at the previous Creek companies, Cody (Truitt), Mike and Pat Graham demonstrated their ability to acquire and develop assets in varied market conditions with exceptional returns for their investors.”

FORT WORTH–Contango Oil & Gas Co. reports it has completed its acquisition of Mid-Con Energy Partners LP.

When it announced the acquisition in October, Contango praised Mid-Con’s oil-weighted assets, noting they had a low production decline profile. The company also said the acquisition would enhance the combined entity’s liquidity.

“After many months of significant effort from both companies, this merger further highlights Contango’s ability to execute on its strategy to acquire producing properties and implement cost-cutting efforts that maximize shareholder returns,” says Wilkie S. Colyer Jr., Contango’s chief executive officer. “The board and management team remain committed to growing shareholder value as we look for new opportunities in the dislocated market environment.”

In a separate announcement, Contango revealed it successfully acquired Silvertip assets, including wells in the Big Horn, Permian and Powder River basins, from a bank for $58 million.

When it announced the transaction in November, Contango said the assets offered low-decline liquids production requiring minimal maintenance capital. “Since signing the purchase and sale agreement, we have only grown more excited by the producing reserves, employees and upside the Silvertip assets provide,” Colyer remarks.

WASHINGTON–Underground natural gas storage in the United States stood at 2.689 trillion cubic feet on Jan. 29, 3.6% above the five-year average, according to the U.S. Energy Information Administration. That was 41 Bcf more than a year ago, when gas storage stood at 2.648 Tcf.

According to EIA, gas storage in the East Region was 582 Bcf on Jan. 29, 3.6% above the five-year average, but 27 Bcf less than it was a year ago.

Gas storage in the Midwest Region stood at 719 Tcf on Jan. 29, 7.3% above the five-year average and 16 Bcf less than a year ago.

In the Mountain Region, EIA says, gas storage was 158 Bcf on Jan. 29, 12.9% above the five-year average and 20 Bcf more than a year ago.

Gas storage in the Pacific Region was 261 Bcf on Jan. 29, 19.7% above the five-year average and up 51 Bcf from a year ago.

In the South-Central Region, gas storage levels on Jan. 29 were 970 Tcf, 7.7% above the five-year average and up 14 Bcf from a year ago.