January 2020 Industry Digest

U.S. Petroleum Exports Exceed Imports For Month Of September

WASHINGTON–Petroleum exports from the United States exceeded imports for the month of September, the first month this has happened since monthly record keeping began in 1973, the U.S. Energy Information Administration says.

The United States imported 260.0 million barrels of crude oil and petroleum products in September while exporting a total of 262.7 MMbbl, EIA details. It says long-running changes in U.S. trade patterns for both crude oil and petroleum products led to a steady decrease in overall net imports and the month’s 89,000 barrel a day difference.

According to the agency, increasing domestic crude oil production, which rose from an average of 5.3 MMbbl/d in 2009 to 12.1 MMbbl/d in 2019 is responsible for slashing crude oil imports from 9.0 MMbbl/d a decade ago to 7.0 MMbbl/d in 2019. It adds the decrease in volume corresponds with a decline in the number of sources from which the United States imports oil.

The United States lifted restrictions on exporting domestically produced crude oil in December 2015. Since then, EIA says, domestic crude exports have been the largest contributor to the nation’s export growth, with oil exports expanding from 591,000 bbl/d in 2016 to 2.8 MMbbl/d in September.

“Despite increasing exports of crude oil, however, the United States remains a net importer of crude oil,” the agency writes. “The United States continues importing primarily heavy high-sulfur crude oils that most U.S. refineries are configured to process, and more than 60% of U.S. crude imports come from Canada and Mexico.”

At the same time, U.S. refineries responded to increasing domestic and international demand for petroleum products, including distillate fuel, motor gasoline and jet fuel, by increasing throughput, EIA says. Gross inputs into U.S. refineries rose from an annual average of 14.6 MMbbl/d in 2009 to 17.0 MMbbl/d through the third quarter of 2019. This increase has outpaced U.S. consumption, leading to an increase in petroleum product exports.

EIA’s Short-Term Energy Outlook predicts U.S. net petroleum exports will continue to increase, averaging 751,000 bbl/d in 2020. If realized, it says, the United States would be a net petroleum exporter for the first time on an annual basis.

13 States File Defense Of Proposed Changes To ESA Regulations

OAKLAND, CA.–Republican attorneys general from 13 states are defending rule changes to the Endangered Species Act proposed by President Donald Trump. The states filed a petition Sept. 25 to intervene in State of California v. David Bernhardt, a lawsuit filed by a coalition of 17 states, the District of Columbia and New York City asking the court to repeal the revisions.

The dueling lawsuits in the U.S. District Court, Northern District of California, Oakland Division, follow the U.S. Fish & Wildlife Service and National Marine Fisheries Service promulgating three separate final rules affecting ESA requirements. Those revisions arise out of the agencies’ settlement of litigation challenging rules they issued in 2016.

According to the coalition of 17 states, the changes violate the plain language and purpose of the act, lack any reasoned basis, and violate both the Administrative Procedure Act and National Environmental Policy Act (AOGR, October 2019, pg. 123).

Led by Alabama Attorney General Steve Marshall, the Republican group–consisting of Alabama, Alaska, Arizona, Arkansas, Idaho, Kansas, Missouri, Montana, Nebraska, North Dakota, Utah, West Virginia and Wyoming–filed its defense of the ESA revisions.

According to their filing, those states say if the ESA revisions are blocked, their states will be harmed by unnecessary and unlawful regulatory burdens, and the ability of states, nonprofit groups and landowners to creatively cooperate to help endangered or threatened species will be reduced.

“In addition to rescinding the 2016 regulations, the new rules are designed to make the regulatory process more predictable and transparent, streamline interagency cooperation and spur innovation by states and other stakeholders to protect at-risk species,” the Republican AG petition states. “As their titles indicate, the rules concern three broad categories related to the services’ administration of the ESA:

  • Regulations for listing species and designating critical habitat;
  • Regulations prohibiting ‘take’ of threatened wildlife and plants; and
  • Regulations governing interagency cooperation.”

The Republican AGs contend there is more room under the revised rules for states to take the lead in protecting threatened species in ways that also protect landowners’ rights to make reasonable use of their properties. Such cooperative federalism was possible under the prior rules, but it was onerous, requiring either a special permit or a species-specific rule.

“By removing the blanket extension for threatened species, the new rules provide for a more tailored approach by which FWS may determine that the state’s regulation of the species is adequate–or it may issue a species-specific rule,” the Republican AGs state.

Judge Says ExxonMobil Innocent Of All Charges In New York Fraud Case

NEW YORK–A New York judge says the state’s attorney general failed to prove that ExxonMobil misled investors about the risk of climate change. New York State Supreme Court judge Barry Ostrager’s ruling ended a three-week civil trial in which AG Letitia James could not demonstrate the company violated the state’s anti-fraud statutes, including the Martin Act, or other similar laws.

According to court documents, James alleged ExxonMobil engaged in a “longstanding fraudulent scheme” “sanctioned at the highest levels of the company” to create the illusion that it had fully considered the risks of climate change legislation and had factored those risks into its business operations.

Court papers say the New York attorney general alleged that since 2013 ExxonMobil released written reports and oral statements that tended to mislead the public in violation of the state’s Martin Act.

Ostrager’s decision says ExxonMobil doesn’t dispute that its operations produced greenhouse gases or that those gases contribute to climate change. “But ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case,” he wrote. “The court finds that the Office of Attorney General failed to prove by a preponderance of evidence that ExxonMobil made any material misrepresentations that ‘would have been viewed by a reasonable investor’ as having significantly altered the ‘total mix’ of information made available.”

According to the ruling, testimony of all former and current ExxonMobil employees, called either as adverse witnesses by the attorney general or as defense witnesses by the company, was uniformly favorable to ExxonMobil while the testimony of expert witnesses called by the state was eviscerated on cross-examination and by the company’s expert witnesses.

ExxonMobil says the verdict affirms the position it has held throughout the state’s investigation, and that it provided investors with accurate information about climate change risks.

“Lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change,” the company says. “ExxonMobil will continue to invest in researching breakthrough technologies to reduce emissions while meeting society’s growing demand for energy.”

BLM Analysis Opens California Acreage To Hydraulic Fracturing

WASHINGTON–Hydraulic fracturing has no adverse environmental impacts that cannot be alleviated, the Bureau of Land Management says. The analysis was part of a federal action ending a five-year moratorium on fracturing and drilling on public lands.

Media reports say the agency’s findings open 1.2 million acres in California to fracturing operations, adding state officials, including Attorney General Xavier Becerra, are planning legal actions to block any such moves.

The analysis comes in the record of decision for a supplemental environmental impact statement released by the BLM field office in Bakersfield, Ca. According to the agency, the EIS supports the decisions made within the 2014 Bakersfield field office resource management plan and doesn’t make any new public lands or federal minerals available for oil or gas development.

The Bakersfield field office planning area includes eastern Fresno, western Kern, Kings, Madera, Sal Luis Obispo, Santa Barbara, Tulare and Ventura counties. BLM says the environmental review includes independent peer-reviewed studies from the California Council on Science and Technology and Lawrence Berkeley National Laboratory, as well as Kern County’s Planning and Natural Resources Department.

According to BLM, the ROD fulfills its commitment to a May 2017 court order to prepare additional environmental analysis of the potential impacts of fracturing. As part of the litigation settlement, the agency agreed to delay any new oil or gas lease sales by the Bakersfield field office until it completed a final analysis and ROD.

The 2014 RMP and ROD determines area available for oil and gas development on 1.2 million acres of federal minerals, including 400,000 surface acres of BLM-managed public lands, the agency describes. Those documents make approximately 1 million acres available for oil and gas leasing with stipulations to protect resources. The new analysis doesn’t include any new stipulations.

“No leases are issued, and no permits to drill are approved with the signing of this decision,” BLM notes. “If proposed, new leases and/or requests for permits to drill and their potential impacts would be addressed at the site or project-specific level in a subsequent tiered environmental analysis.”

In other BLM news, the agency received more than $11 million in total high bids for its lease sale in the National Petroleum Reserve of Alaska. The sale of 1 million acres on Alaska’s North Slope averaged $11 an acre. North Slope Exploration LLC dominated the bidding, accounting for 85 of 92 tracts offered. ConocoPhillips Alaska and Alaska Emerald House LLC also submitted bids.

API Revises Standards For Offshore Operations

WASHINGTON–The American Petroleum Institute has released a significantly updated version of a key safety standard targeting worker safety, incident prevention and environmental protection in offshore operations.

The institute says API Recommended Practice 75 provides guidance for establishing, implementing, maintaining and continually improving a safety and environmental management system (SEMS) for offshore operations. API describes RP 75 as a performance-based document that provides a systematic methodology for companies to identify and manage operational risks, enhance worker safety and protect the environment.

“Producing oil and gas safely while protecting our environment is a top priority for API and its members,” says Debra Phillips, senior vice president of API’s Global Industry Services. “API continuously updates its standards to reflect new technologies, techniques and in-field learning. This latest edition of AP 75 reflects state-of-the-art systems to drive safety and environmental protection in offshore operations.”

Among the changes unveiled in RP 75 that expand the safety and environmental management system are:

  • Extending its standard for use globally, beyond its focus on domestic operations in the U.S. Outer Continental Shelf;
  • Providing guidance on how companies should interface with each other to ensure operational risks are managed, and safety and environmental protections are maintained;
  • Expanding the types of operations that could fall under SEMS risk management expectations, providing greater consideration of human performance;
  • Structuring the standard to encourage use by contractors and subcontractors; and
  • Including advancements in technology, operations and overall knowledge.

API says RP 75 has been used for 25 years to promote safety and environmental protection at offshore assets, and it helped to create the Center for Offshore Safety, which was established to promote the highest level of safety for the U.S. offshore oil and gas industry. The center works with the offshore industry on implementing both RPI 75 and the Bureau of Safety and Environmental Enforcement’s SEMS requirements.

Industry Partnership For Safety, Environment Expands Membership

WASHINGTON–The Environmental Partnership marked its second anniversary by noting it now represents more than one-third of U.S. industry oil and gas production with 69 participating companies. It says the initiative includes 32 of the top 40 gas producers, with member companies innovating and adding best practices to improve environmental performance and further reduce emissions in every U.S. basin.

“The rapid growth of The Environmental Partnership in its first two years demonstrates the commitment of the U.S. natural gas and oil industry to delivering solutions that lower emissions while meeting society’s growing energy needs,” says Matthew Todd, the group’s program director. “The collective actions of the industry in The Environmental Partnership already have proven effective in reducing emissions, and we are proud of the achievements of this growing coalition.”

Overall, the group reports the natural gas industry’s methane emissions have fallen 14% even as production has increased 50% since 1990, which it says is effectively a 43% reduction. Accomplishments of The Environmental Partnership include:

  • Applying leak detection and repair programs, with participants conducting more than 156,000 surveys across nearly 80,000 production sites. The surveys inspected more than 56 million components and found 0.16% in need of repair–a tenth of the U.S. Environmental Protection Agency’s estimated 1.4%. The group adds 99% of those were repaired within 60 days.
  • Upgrading and replacing emissions-related equipment, including more than 31,000 high-bleed pneumatic controllers replaced, retrofitted or removed from service.
  • Sharing innovation through annual conferences to discuss research and technology developments by academia, equipment manufacturers and regulators.

In December 2017, the American Petroleum Institute formed The Environmental Partnership with 26 gas and oil member companies, with an initial focus on improving management of volatile organic compound and methane emissions. API says the group remains committed to improving member companies’ environmental performance by implementing programs that target emissions through collaboration and advanced technology.

The Independent Petroleum Association of America says successfully mitigating methane emissions requires innovative industry efforts as well as gathering information to challenge legislative and regulatory roadblocks created by governments and anti-industry groups. IPAA points to its efforts, including Energy in Depth and aggressive responses to regulatory proposals, as complementary to The Environmental Partnership’s work.

ONE Future Members Cut Methane Emissions

HOUSTON–Natural gas companies working together in the ONE Future coalition continue to cut their methane emissions. According to U.S. Environmental Protection Agency-approved reporting protocols, the coalition says its members’ methane intensity number dropped to 0.326% in 2018 from the previous year’s 0.0552% mark, a 41% decrease.

ONE Future, formed in 2014, is a coalition of 20 companies working in the natural gas value chain committed to voluntarily cutting methane emissions across the gas supply chain to 1% or less of total natural gas production by 2025, the group says. It adds member companies undertake measures such as upgrading and replacing pipeline infrastructure and actively seeking and repairing system leaks to lower their methane emissions. To demonstrate credible results, members agree to measure their emissions and track their progress over time according to approved reporting protocols.

ONE Future is partnering with the U.S. Department of Energy’s National Energy Technology Laboratory to improve operational efficiency and mitigate methane emissions. The coalition says member companies provide emissions data to the laboratory to allow it to characterize ONE Future’s supply chain greenhouse gas emissions and evaluate opportunities for improvement.

To enable multiple companies involved in different sectors of the natural gas supply chain to report methane emissions consistently and transparently, ONE Future says it has developed a methane emissions estimation protocol, which defines both the annual emissions intensity calculation techniques as well as the method by which annual results will be compared with the ONE Future sector and overall goals. It tracks company and program progress by calculating emission intensities at the national, segment and participant levels.

For example, the production sector uses an emission allocation approach that uses the energy content of the production stream, including gas and crude/condensate, to allocate total emissions to those represented by gas production alone. ONE Future says this allocation is necessary because its emission intensity value is based on gross gas production, and co-produced crude or condensate volumes are not included in the gas value chain.

“Our members have made great strides in reducing their methane intensity, even as production and throughput increased,” says Richard Hyde, executive director of ONE Future. “These numbers prove that natural gas can be a clean, sustainable fuel, meeting the energy needs of our country and around the globe for years to come.”

New Mexico Joins Effort Promoting LNG Exports

SAN DIEGO–New Mexico has joined the Western States and Tribal Nations (WSTN) natural gas initiative, an international coalition of states, counties and tribal nations. The coalition advocates for responsible energy development to improve rural economies by developing liquefied natural gas exports to Asian markets.

“We are encouraged by these efforts to help strengthen our local communities by providing our energy producers with access to new markets around the globe, truly making the impact of our industry felt on an international scale. This not only helps other parts of the world access energy, it helps them access clean, reliable energy that reduces emissions and alleviates poverty,” says Ryan Flynn, executive director of the New Mexico Oil & Gas Association.

New Mexico joins Wyoming, Utah, Baja California in Mexico, the Ute Native American Tribe and the Colorado counties of Garfield, Mesa, Moffett and Rio Blanco.

Sarah Cottrell Propst, secretary of New Mexico’s Energy, Minerals and Natural Resources Department, says supporting rural economic development in the state is a priority for Governor Michelle Lujan Grisham, and New Mexico looks forward to finding new markets for its energy resources.

According to media reports, New Mexico’s WSTN participation will increase opportunities for new export markets for San Juan and Permian Basin producers, especially after Baja California became part of the alliance in August. WSTN already is pursuing export options for natural gas production from the Piceance and Uinta basins in Colorado and Utah, and Wyoming’s Green River Basin. Baja California is supporting construction of an LNG export terminal at the Port of Ensenada on the Pacific Coast as well as the proposed Jordan Cove terminal in Coos Bay, Or., to target expanding Asian LNG markets.

Andrew Browning, chief operating officer of consumer advocacy group Consumer Energy Alliance, says the unique configuration and membership of WSTN, an organization founded and led by sovereign tribal nations, states and counties, gives it an authority that transcends typical energy discussions because its members’ goals and environmental stewardship elevates its purpose.

“The Ute Tribal Business Committee welcomes the arrival of New Mexico, a state that understands how energy production can support tribal self-determination and rural economic growth can exist while maintaining stewardship of our environment here and across the world,” says committee member Shaun Capoose. “As North America’s original guardians of the environment, we are encouraged by allies like this who see the greater value in balancing important priorities that too often are portrayed as incompatible.”

Gas Storage Levels Decrease By 416 Bcf

WASHINGTON–Underground natural gas storage in the United States stood at 3.193 trillion cubic feet on Dec. 27, 1.2% below the five year average, according to the U.S. Energy Information Administration. That was down 416 billion cubic feet from the 3.609 Tcf in storage on Nov. 22, which was 0.9% below the five-year average. The Dec. 27 storage number was 487 Bcf more than a year ago, when gas storage stood at 2.706 Tcf.

According to EIA, gas storage in the East Region was 771 Bcf on Dec. 27, 1.7% above the five-year average, but 123 Bcf less than on Nov. 22, when storage stood at 894 Bcf, which was 2.4% above the five-year average. East Region gas storage on Dec. 27 was 108 Bcf more than it was a year ago.

Gas storage in the Midwest Region stood at 905 Bcf on Dec. 27, 0.1% above the five-year average and 147 Bcf less than the 1.052 Tcf in storage on Nov. 22, which was 0.3% below the five year average. Dec. 27 gas storage in the Midwest Region was 104 Bcf more than a year ago.

In the Mountain Region, EIA says, gas storage was 173 Bcf on Dec. 27, 3.9% below the five-year average and 31 Bcf less than the 204 Bcf stored on Nov. 22, which was 1.9% below the five year-average. Gas storage in the Mountain Region was 26 Bcf more than a year ago.

Gas storage in the Pacific Region was 251 Bcf on Dec. 27, 12.5% below the five-year average and 42 Bcf less than the 293 Bcf stored on Nov. 22, which was 9.3% below the five-year average. Pacific Region gas storage on Dec. 27 was up 31 Bcf from a year ago.

In the South-Central Region, gas storage levels on Dec. 27 were 1.093 Tcf, 0.7% below the five-year average and down 73 Bcf from the 1.166 Tcf in storage on Nov. 22, which was 1.4% below the five-year average. The Dec. 27 gas storage level for the South-Central Region was up 218 Bcf from a year ago.