March 2019 Industry Digest

BLM Pulls Chaco Area From New Mexico Sale

SANTA FE, N.M.–The U.S. Bureau of Land Management has once again excluded lands near New Mexico’s Chaco Culture National Historical Park in San Juan and McKinley counties from its March lease sale.

Meanwhile, a freshman New Mexico state senator has introduced legislation that would halt hydraulic fracturing statewide for four years.

BLM New Mexico State Director Tim Spisak announced on Feb. 8 that the agency was deferring nine parcels comprising about 1,500 acres from its March 28 oil and gas lease sale. Local press accounts identify the deferred parcels as “near the Chaco Culture National Historical Park” and note it is the third time the Trump administration has proposed and then deferred leasing parcels near Chaco Canyon.

Opponents to leasing have attempted unsuccessfully the past two years in the New Mexico Legislature to enact moratoriums on leasing in the area, including HJM 5 in 2017 by then state Representative Patricia Roybal Caballero, D-Albuquerque, who is a cosponsor on this year’s fracturing moratorium bill (AOGR, May 2017, pg. 34).

U.S. Senators Tom Udall, D-N.M., and Martin Heinrich, D-N.M., filed the Chaco Cultural Heritage Area Protection Act last year, which would have codified a 10-mile buffer around the 53 square-mile historical park (AOGR, July 2018, pg. 101). And in 2015, tribal and environmental groups filed a lawsuit to stop oil and gas development around the park, although U.S. District Judge James Oren Browning ruled against them in April 2018.

Antoinette Sedillo Lopez, D-Albuquerque, who was appointed to the New Mexico Senate by Governor Lujan Grisham to fill a vacancy, introduced SB 459 in February along with three cosponsors. It would prohibit the New Mexico Energy, Minerals and Natural Resources Department from issuing any new permits “allowing hydraulic fracturing for the purpose of extracting oil or natural gas” until June 2023.

In addition to the moratorium on fracturing, SB 459 directs the NMEMNRD to report annually to the governor and appropriate legislative committees on the number of oil and gas permit applications that involve fracturing as well as state, national and global trends regarding methane and greenhouse gas emissions. It also requires annual reports from six other state agencies, including Agriculture, Environment, Health and the Office of the State Engineer on the impacts of fracturing and oil and gas development on agriculture, public health, the environment, and the state’s surface- and groundwaters, among others.

While New Mexico Oil & Gas Association Director of Communications Robert McEntyre observes that “there is not a groundswell of activity on either side of the political aisle to push forward with this legislation,” he acknowledges that “it is a bad thing that these types of bills are going to make their way forward in the next couple of years.”

Louisiana LNG Terminal Gains FERC Approval

WASHINGTON–The American Petroleum Institute is praising the Federal Energy Regulatory Commission’s approval of a liquefied natural gas export terminal in Louisiana, saying the decision will help U.S. energy companies share the benefits of domestic energy and economic leadership around the world.

“We are thrilled that FERC has found a bipartisan path to approval of Venture Global LNG Inc.’s Calcasieu Pass LNG export project in Cameron Parish, La., which also creates a path forward for all other LNG export facilities that currently are in front of the commission,” says Todd Snitchler, vice president of market development at API.

As the United States has become a net natural gas exporter, API says new LNG facilities will help to advance the nation’s ability to produce and share clean energy to countries across the globe.

Venture Global says its $5 billion export terminal is expected to enter service early in 2022. The facility includes nine 1.2 million ton liquefaction blocks and two 200,000 cubic meter full containment LNG storage tanks.

“With our FERC order in hand and our project contracted with binding 20-year sale and purchase agreements (SPA) with Shell, BP, Edison S.p.a., Galp, Repsol and PGNiG, we plan to immediately commence construction activities in Louisiana in close coordination with FERC and other agencies,” co-chief executive officers Bob Pender and Mike Sable say.

Venture Global also is developing the 20 million tonnes per annum nameplate Plaquemines LNG export facility as associated Gator Express Pipeline in Plaquemines Parish, La. Plaquemines LNG has executed a binding 20-year SPA with PGNiG.

FID Pushes Forward Golden Pass LNG Plant

IRVING, TX.–ExxonMobil and Qatar Petroleum say they have made a final investment decision to develop the Golden Pass liquefied natural gas export project in Sabine Pass, Tx. The companies indicate the $10 billion, three-train facility will have a capacity of 16 million metric tons a year. Startup is scheduled for 2024.

“Golden Pass will provide an increased, reliable, long-term LNG supply to global gas markets, stimulate local growth and create thousands of jobs,” declares ExxonMobil Chairman and Chief Executive Officer Darren Woods.

He cites preliminary estimates by an independent study that the project could generate up to $31 billion in U.S. economic gains and more than $4.6 billion in direct federal, state and local tax revenues over its lifetime.

Published reports also say Oklahoma City-based Enable Midstream Partners LP has announced Golden Pass will be the anchor shipper on its Gulf Run Pipeline project to move 1.1 billion cubic feet of gas a day from the Haynesville Shale in northern Louisiana to the Gulf Coast.

Qatar Petroleum has a 70 percent working interest in Golden Pass while ExxonMobil owns 30 percent.

Published reports note that Golden Pass was opened as an LNG import terminal in October 2010, but received its last shipment in June 2011.

Alex Munton, principal analyst Americas LNG at Wood Mackenzie, observes that Golden Pass is one of the few remaining brownfield LNG development opportunities on the U.S. Gulf Coast.

Wood Mackenzie opines that the Golden Pass announcement “kicks off what could be a record year for LNG final investment decisions,” also citing sales and purchase agreements Anadarko Petroleum signed with the Chinese National Offshore Oil Corp, Tokyo Gas-Centrica and Shell, moving toward an FID on their proposed 6.1 mmty Mozambique LNG (Area 1) project.

Oil & Gas Lease Sales Bring BLM $1.2 Billion

HOBBS, N.M.–The U.S. Bureau of Land Management’s state offices generated nearly $1.2 billion from oil and gas lease sales in calendar 2018, nearly tripling the agency’s previous high of $408 million in 2008. According to preliminary figures released Feb. 6 by BLM, bonus bids on 1,412 parcels covering almost 1.5 million acres offered in 28 lease sales came to almost $1.2 billion.

“Responsible production of domestic energy keeps prices low for American families and businesses, reduces our dependence on foreign oil, creates American jobs and generates billions of dollars in revenue for the federal Treasury,” declared acting Interior Secretary David Bernhardt in Hobbs. “With a bold new approach to energy development and a president who recognizes that conventional wisdom is meant to be challenged, we are starting to see what a great America looks like.”

Adds BLM Deputy Director for Policy and Programs Brian Steed, “This was an historic year for oil and gas, and clearly illustrates what is possible when public lands are put to work using innovation, best science and best practices. Our sound energy policy continues to ensure reliable, safe, abundant and affordable energy for all Americans without putting unnecessary burdens on industry. In fact, this policy generated as much revenue as the BLM’s $1.1 billion budget for 2018.”

“This accomplishment undoubtedly makes America stronger by generating new jobs and new revenue to fund priority programs,” agrees Karen A. Harbert, president of the U.S. Chamber of Commerce’s Global Energy Institute.

“Expanded access for oil and natural gas production through increased lease sales brings tangible benefits–such as newly paved roads, upgraded school buildings, and better funded land and water conservation projects–to communities across the nation,” affirms Erik Milito, American Petroleum Institute vice president of upstream and industry operations. “The shale revolution continues to support goals of leading the world not only in energy production, but also in driving economic growth and increasing U.S. energy security.

“Hopefully, the administration’s five-year program for offshore access will open new areas in the Atlantic and Eastern Gulf Outer Continental Shelf that will bring similar benefits to coastal communities,” Milito adds.

The record year was paced by $972.8 million in bids BLM received for 142 parcels in New Mexico’s Lea, Eddy and Chaves counties during its Carlsbad Field Office’s Sept. 5-6 sale (AOGR, October 2018, pg. 19).

Steed compares 2018’s $1.2 billion with the $358 million generated by oil and gas lease sales in 2017. He says oil and gas development on BLM-managed lands supported 284,000 jobs in fiscal year 2017 and contributed $59.6 billion in output to the U.S. economy.

BLM notes that 48 percent of lease sale revenue goes to the states while the rest goes to the U.S. Treasury. States also receive half the royalties generated from any oil and gas produced. The agency adds that it is scheduled to hold 28 oil and gas lease sales again this year.

New API Guidelines Cover Drilling Safety, Integrity Of Pipelines

WASHINGTON–The American Petroleum Institute released updates on a pair of recommended practices in February. On Feb. 20, it unveiled Recommended Practice 54, Occupational Safety and Health for Oil and Gas Well Drilling and Servicing Operations, which API says provides procedures for promoting and maintaining safe and healthy working conditions for industry personnel. On Feb. 27, it published a third edition of RP 1160, Managing System Integrity for Hazardous Liquid Pipelines, which it says provides a process for establishing safe pipeline operations, including robust assessments of potential risks and establishment of systems to safely and sustainably manage them throughout day-to-day operations.

“The safety of oil and natural gas operations is of paramount importance to our industry–and API continues to lead the way through the creation and revision of key standards that improve safety and environmental protection. Each day, more than 11.9 million barrels of oil are pumped from thousands of wells in the United States to meet the needs of U.S. consumers–and standards such as RP 54 help the industry provide this important resource safely and sustainably,” says Debra Phillips, vice president of API global industry services.

RP 54 applies to rotary drilling rigs, well servicing rigs and special services as they relate to operations on locations, API describes. Significant revisions in this latest edition include a new section on flowback operations crucial to safe well testing, revised requirements for facility and site process hazard assessment and mitigation, and introduction of formal risk assessments as well as expanded provisions for offshore operations.

According to API, the newest edition of RP 1160 incorporates recent industry experience about pipeline mechanics, while embracing a rigorous, proactive approach to safe pipeline operation (API RP 1173). This will help pipeline operators build a safe, contemporary and comprehensive integrity management system. Additionally, the document contains references to leading industry publications, such as pipeline leak detection (API RP 1175), assessment and management of cracking in pipelines (API RP 1176), integrity data management and integration (API RP 1178), and hydrotechnical hazards for pipelines located onshore or within coastal areas (API RP 1133). API adds that the pipeline industry continues to support an industrywide understanding and implementation of these standards.

According to API, its standards are developed under its American National Standards Institute accredited process, ensuring that API standards are recognized not only for their technical rigor but also their third-party accreditation, which it says facilitates acceptance by state, federal and increasingly international regulators.

Federal Appeals Court Overrules New York DEC On Northern Access

ALBANY, N.Y.–Two industry groups are hailing a Feb. 5 decision by the U.S. Court of Appeals for the 2nd Circuit to vacate an order by the New York Department of Environmental Conservation to deny a Clean Water Act Section 401 water quality permit (WQC) for National Fuel Gas Company’s Northern Access natural gas pipeline expansion.

Northern Access would expand capacity on National Fuel Gas’ and Empire Pipeline Inc.’s existing systems in the northeastern United States and Canada by 497,000 and 350,000 dekatherms a day, respectively.

The pipelines filed their requests for state WQC’s in March 2016, and appealed to the 2nd Circuit after they were denied by the New York DEC in April 2017.

In remanding the case to the DEC, according to published reports, the 2nd Circuit held, “The denial letter here insufficiently explains any rational connection between facts found and choices made. Specifically, there are no record citations in the denial letter, and there are no citations to specific projects or studies the department may have considered.”

The reports add that the 2nd Circuit also noted that the DEC’s basis for denying the WQC relied on considerations outside the Northern Access project. The court said that while DEC was not required to adopt the Federal Energy Regulatory Commission’s water quality findings, the state still failed to address evidence that supported those findings. FERC approved Northern Access in February 2017.

FERC had rebuked the DEC itself, ruling last August the agency waived its right to review the WQC application by failing to act within a year of receiving it (AOGR, September 2018, pg. 14). That ruling is under appeal.

In praising the 2nd Circuit ruling, Natural Gas Supply Association Executive Vice President Pat Jagtiani says, “State denials of 401 water certifications must be scrutinized closely to ensure states are sticking to the facts instead of using their certificates as a tactic simply to limit infrastructure.”

Karen Moreau, executive director of API-New York, calls the decision “good news for infrastructure projects across the state.”

Noting that the Environmental Protection Agency provides guidance on how states should grant Section 401 permits, Moreau adds, “The court’s decision that New York failed to provide factual justification for its denial . . . emphasizes why this guidance should be clarified by the EPA.”

Appellate Court Upholds Louisiana Crude Pipeline

BATON ROUGE, LA.–The Louisiana Oil & Gas Association is praising a state appellate court ruling it says should allow for completion of a 162-mile crude oil pipeline in the state.

“Pipelines remain the safest and most efficient medium for transporting oil and gas,” says LOGA President Gifford Briggs in response to the Jan. 30 decision by the Louisiana 5th Circuit Court of Appeal. “We should celebrate the construction of pipelines (because) it takes more traffic off our roads and railways, and makes Louisiana safer for all. It is exciting to see this project move forward.”

Louisiana’s 5th Circuit overturned an April 2018 ruling in the 23rd Judicial District Court for the Parish of St. James, La., that had rejected a permit for the Bayou Bride Pipeline issued by the Louisiana Department of Natural Resources.

According to Energy Transfer Partners, Bayou Bridge is a joint venture between itself and Phillips 66 Partners LP. When complete, the 162-mile pipeline will be capable of transporting up to 480,000 barrels of crude oil a day to refineries in the St. James area. Phase one of the project from Nederland, Tx., to Lake Charles, La., went into service in April 2016, ETP says. Phase two runs from Lake Charles to the St. James crude oil hub, and was the subject of the litigation.

According to court documents, DNR approved the proposed pipeline in April 2017, but the permit was challenged by several conservation groups and two local residents. According to the appellate court, the plaintiffs contended DNR failed to consider potential and cumulative environmental impacts of the pipeline, as well as that ETP should have been required to develop an evacuation plan for area residents in the event of an accident.

Specifically, court documents say, the plaintiffs maintained–and the district court agreed–that DNR failed to adequately consider state guideline 711(A) regarding surface-altering activities as well as 719(K), which says, “Effective environmental protection and emergency or contingency plans shall be developed and complied with all mineral operations.”

The 5th Circuit Court of Appeal disagreed, however, ruling that “no commercial or industrial activity will occur on the surface of the earth because the pipeline will be completely buried.” The court also ruled 719(K) applied only to exploration, production and refining, and “does not include the transportation of oil.”

As to evacuation routes, the 5th Circuit found that responsibility for spill response lies jointly with the federal Pipeline and Hazardous Materials Safety Administration and the Louisiana Oil Spill Coordinator’s Office, not DNR, while local governments are responsible for evacuations, adding, “There is no indication in the record that the proposed pipeline will change existing evacuation routes.”

The court’s judgement also noted that ETP had obtained a permit from the Bayou Lafourche Fresh Water District, and that St. James Parish had issued two letters supporting the project.

Federal Court Upholds FERC’s Certification For Mountain Valley Pipeline

WASHINGTON–The U.S. Court of Appeals for the D.C. Circuit has removed one potential obstacle to the Mountain Valley Pipeline, which is being developed to carry up to 2 million dekatherms a day of natural gas from Appalachia to markets in the U.S. Mid-Atlantic and Southeast.

The $3.5 billion, 303 mile-long pipeline is being constructed from Wetzel County, W.V., to Pittsylvania County, Va., by EQT Midstream Partners along with four other companies.

On Feb. 19, the American Petroleum Institute reports, the D.C. Circuit dismissed a claim by environmental groups and landowners that the Federal Energy Regulatory Commission failed to properly evaluate downstream greenhouse gas emissions in certifying the project.

Published reports add that the court also found the developers did not violate federal law in their use of eminent domain to acquire pipeline rights of way.

API Vice President of Midstream and Industry Operations Robin Rorick praises the D.C. Circuit for “reaffirming FERC’s role in the pipeline permitting process, making it clear that (FERC’s) scope of review is still correct.”

“FERC conducted a thorough environmental impact study that looked at everything from groundwater to surrounding communities’ cultural attachments, and the court’s decision underscores that no further assessments are needed to ensure a safe path forward for the project’s completion,” Rorick says.

However, Mountain Valley still must work around an October 2018 ruling by the U.S. Court of Appeals for the 4th Circuit that vacated the pipeline’s Clean Water Act permit from the U.S. Army Corps of Engineers. The Corps had granted Mountain Valley a CWA Nationwide Permit 12, but the 4th Circuit determined the project required an individual permit because of differences between the Corps’ construction method for stream crossings and the method used by the state of West Virginia (AOGR, December 2018, pg. 45).

Florida Appeals Court Upholds Right To Drill

TALLAHASSEE, FL.–The Florida Department of Environmental Protection has asked a state appeals court to reconsider its ruling that DEP erred in twice rejecting an application for a permit to drill in the Everglades, according to local media accounts.

The reports say a three-judge panel of the First District Court of Appeal in Tallahassee ruled on Feb. 5 that the DEP couldn’t reject a 2017 “recommended order” from an administrative law judge that the permit should be approved. However, later reports note that on Feb. 20, the DEP asked for an en banc rehearing by the district court.

Kanter Real Estate filed the APD in 2015, the reports say, on five acres located in the Sunniland Trend within Broward County, Fl. Kanter’s lease sits in one of the South Florida Water Management District’s three conservation areas.

The DEP denied the APD and Kanter requested an administrative hearing. The reports say Administrative Law Judge E. Gary Early found the evidence presented established that “the potential for harmful discharges and for harm to groundwater and public water supply are insignificant,” and recommended the permit be approved.

However, the DEP again rejected the application, saying the state had not issued a drilling permit in the Everglades since 1967.

But the appeals court determined DEP “improperly recast factual findings to reach a desired outcome, contrary to law,” the reports continue. The court said Kanter “correctly asserts that (Early’s recommended order) is made up entirely of factual findings and that the (DEP) improperly relied on or created an unadopted rule by basing its decision on a ‘long-standing policy to deny oil and gas permits within lands subject to Everglades restoration.’”

In a statement announcing its motion for rehearing, the DEP says it “is committed to protecting and restoring Florida’s Everglades, and will work with Broward County and local municipalities to provide technical assistance as they pursue their own actions regarding this matter.”

The reports mention that at least four other applications are pending at the Florida DEP for permits to drill in the protected Everglades or nearby areas.

PHMSA Finalizes Rules For Trains Transporting Flammable Materials

WASHINGTON–The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration and the Federal Railroad Administration in mid-February issued a final rule requiring railroads to develop and submit comprehensive oil spill response plans (OSRPs) for route segments traveled by high-hazard flammable trains (HHFTs).

“This new rule will make transporting energy products by railroad safer,” says Secretary of Transportation Elaine L. Chao.

According to PHMSA, the rule revises OSRP requirements so that railroads must establish geographic response zones along various rail routes, and ensure that both personnel and equipment are staged and prepared to respond to an accident. Furthermore, rail carriers must identify a qualified individual responsible for each response zone, as well as the organization, personnel, and equipment capable of removing and mitigating a worst-case discharge.

The regulation also requires rail carriers to provide information about HHFTs to state and tribal emergency response commissions in accordance with the Fixing America’s Surface Transportation Act of 2015.

Specifically, PHMSA explains, the rule consists of three components, the first of which expands OSRP requirements to include any single train transporting petroleum oil in a block of 20 or more loaded tank cars and all trains that have 35 loaded petroleum oil tank cars. It also requires a plan for:

  • Responding to a worst-case discharge of oil (300,000 gallons or 15 percent of lading); and
  • Ensuring response zones can be staged with resources within 12 hours.

PHMSA says a segment regarding information sharing and notification entails the state and tribal emergency response notification requirements. It also says rail carriers must:

  • Offer reasonable estimates of the number of HHFTs they expect to travel through each county within a state each week; and
  • Describe the materials being shipped, provide a railroad point of contact and notify authorities of any material changes greater than 25 percent.

The final component incorporates by reference ASTM D7900, the Standard Test Method for Determination of Light Hydrocarbons in Stabilized Crude Oils by Gas Chromatography. PHMSA says doing so authorizes the standard for voluntary use in calculating both materials’ flash and initial boiling points for classification, and provides regulatory flexibility and more accurate packing group assignments.

The final rule takes effect 180 days after the date of publication in the Federal Register.