Energy and Environmental Update
FAA approves drilling plan for Pittsburgh airport. On March 27, Consol Energy obtained Federal Aviation Administration (FAA) approval to drill for oil and gas at the Pittsburgh International Airport. The FAA approved the plan after conducting an environmental assessment and issuing a finding of no significant impact. The FAA consulted with the Environmental Protection Agency (EPA), US Fish & Wildlife Service, Federal Housing Administration and the Army Corps of Engineers before making its finding. Consol Energy intends to drill 45 wells across 6 well pads. The company expects the project will generate $1 billion in investment for the region, and royalty payments to Allegheny County could exceed $450 million over the next twenty years.
Alaska issues hydraulic fracturing regulations. On April 1, the Alaska Oil and Gas Conservation Commission issued final regulations governing hydraulic fracturing activities within the state. The Commission first proposed regulations in December 2012 and has revised the draft regulations several times. The regulations require oil and gas developers to share trade secrets with the state, but allow developers to protect confidential information from public disclosure. The regulations also include requirements for background water quality testing and notification of nearby landowners before and after hydraulic fracturing occurs.
Colorado: Report finds proposed statewide ban on hydraulic fracturing would harm economy. An April 1 report by the Leeds School of Business at the University of Colorado-Boulder found that a statewide ban on hydraulic fracturing would have a significant, detrimental effect on the state’s economy. Between 2015 and 2040, such a ban would reduce jobs by 93,000, reduce GDP by $12 billion, and cost state and local governments $985 million in lost tax revenue. The report was issued in response to a ballot initiative by Local Control Colorado, which would allow local governments to ban hydraulic fracturing. The issue has also taken on political overtones, as Republican Senate candidate Cory Gardner is seeking to use his opposition to the ballot initiative to distinguish himself from Democratic incumbent Mark Udall.
Pennsylvania: Local residents challenge EPA UIC permit for failure to consider seismicity. Residents and officials in Brady Township, Pennsylvania are challenging a permit issued by EPA under the Safe Drinking Water Act Underground Injection Control (UIC) program, alleging that the Agency failed to properly consider potential pressure and seismicity issues. The lawsuit, titled In re: Windfall Oil and Gas is pending before the EPA Environmental Appeals Board (EAB). The well at issue is a Class II well intended to inject oil and gas wastewater. While opponents of hydraulic fracturing have repeatedly urged EPA to regulate hydraulic fracturing waste under the UIC programs rules for hazardous waste, this is the first challenge alleging that EPA failed to consider the potential effects of seismicity on underground sources of drinking water.
Texas: Texas Railroad Commission hires seismologist. The Texas Railroad Commission announced that it has hired Dr. David Craig Pearson to serve as its in-house seismologist. The Commission committed to hire a seismologist in response to public concerns that recent seismic activity near Azle, Texas was linked to underground injection wells used to dispose of hydraulic fracturing wastewater. Dr. Pearson earned his Ph.D. from Southern Methodist University and has worked in the oil and gas industry and as a staff member at the Los Alamos National Laboratory.
China increases projections for shale gas development. Recent projections for shale gas development by Hong Kong-based Gavekal Gragonomics show that China is on pace to meet the 2015 target of 6.5 billion cubic meters of gas production. The report cited three primary reasons for increasing its forecast. First, China approved a 40% increase in the price that operators can charge for natural gas, making key markets such as Beijing and Shanghai more profitable. Second, state-owned Sinopec now projects that it will produce 5 billion cubic meters of gas from the Fuling Shale field in 2015 and 10 billion cubic meters by 2017. Third, China’s National Energy Administration announced that it will require pipeline producers to open access to all third-party producers. While Sinopec is expected to produce the majority of China’s shale gas in the term, opportunities for smaller, independent oil and gas development companies are increasing.
Chevron Phillips Chemical begins construction of ethane cracker. Chevron Phillips Chemical, a joint venture between Chevron and Phillips 66, recently broke ground on a new ethane cracker in Baytown, Texas. The facility will convert ethane from natural gas development in ethylene, which will then be converted into polyethylene pellets in a nearby Chevron Phillips Chemical facility. The project, which is estimated to cost $6 billion and create 400 jobs, is expected to be completed by 2017. Increased production of natural gas liquids has decreased the cost of ethane production in the United States when compared to other countries. Approximately 20 companies are taking steps to construct, expand or restart ethane crackers.
FracTracker Alliance launches mapping program for oil and gas wells. The FracTracker Alliance, a foundation-funded non-profit, recently launched an interactive map allowing users to locate 1.1 million oil and gas wells in the United States and Canada. The program allows users to focus specifically on shale extraction wells or on specific shale plays. FracTracker relies on publicly available data and noted that there are significant differences in data availability by state. At present, the program includes 21 states and British Columbia, although Texas is not included in the mapping program due to proprietary issues related to well location.
ICF study highlights benefits of allowing crude oil exports. A recent study commissioned by the American Petroleum Institute has found that permitting crude oil exports will create domestic jobs while reducing the price of gasoline. The study, conducted by ICF International and EnSys Energy found that easing the ban on crude oil exports would create as many as 300,000 jobs while reducing the U.S. trade deficit by $22 billion by 2020. At the same time, consumers could expect to see a 3-4 cent reduction in gasoline prices. Permitting certain crude oil exports would also allow oil producers to better match the demand by U.S. refineries and consumers.
Pennsylvania: Environmental group critical of air pollution monitoring. A recent article published by the Southwest Pennsylvania Environmental Health Project (EHP) concludes current methods of collecting emissions data, as well as the analyses of these data, are not sufficient to accurately assess impacts from hydraulic fracturing. EHP argues the use of EPA’s NAAQS compliance monitoring criteria do not provide sufficient information to assess risks from acute exposure. EHP urges that more localized, continuous monitoring should be used to account for periods of higher emissions and to reflect local weather conditions.
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