Sidley Shale and Hydraulic Fracturing Report

Energy and Environmental Update


CSSD to Begin Independent Audits of Natural Gas Operations in the Marcellus Shale. The Center for Sustainable Shale Development (CSSD) announced that four member companies—Chevron Corp., Consol Energy, Inc. EQT Corp., and Royal Dutch Shell PLC—have agreed to participate in voluntary audits of their drilling and hydraulic fracturing operations in the Marcellus Shale. The audits will assess conformity with 15 CCSD performance standards. The standards go beyond what is required in many states’ regulations and include extensive pre-drilling surveys, above-ground storage tanks with double-lined reserve pits, and limitations on venting and flaring gas during well development and workovers. CSSD is a collaborative organization whose members include environmental organizations, philanthropic foundations, and energy companies.

New Mexico: Mora County sued over hydraulic fracturing ban. On January 10, SWEPI LP, a subsidiary of Royal Dutch Shell PLC, filed a lawsuit in federal court alleging that Mora County’s anti-drilling ordinance violated the U.S. Constitution and state law. The ordinance bans all oil and gas development, prohibits the use of water for hydraulic fracturing, and limits the legal rights of corporations. SWEPI alleges that the ordinance violates the First Amendment, the due process and equal protection clauses of the Fourteenth Amendment, the Commerce Clause, and is preempted by the Supremacy Clause. A complaint alleging similar claims was filed in 2013 by landowners, lessees, and trade associations.

Texas: Regulators Claim Limited Authority to Address Seismic Activity. After announcing plans to hire a seismologist to work with other state researchers to study the cause of seismic activity located near injection wells used to dispose of hydraulic fracturing wastewater, the Texas Railroad Commission Chairman explained that the Commission has limited authority to address the issue. Speaking at a public hearing, Chairman Smitherman explained that there are no provisions related to seismic activity in the current or proposed rules for Class II injection wells in Texas. He further stated that even if seismic activity were linked to an injection well, the Commission lacks authority to investigate surface damage and would have to comply with procedural requirements before shutting down a well.


European nations to form coalition to promote LNG exports. A dozen European nations are working with U.S.-based oil and gas trade associations to form a coalition to promote exports of liquefied natural gas (LNG) from the United States. The coalition, which will be called LNG Allies, is expected to include Austria, the Czech Republic, Estonia, Finland, Latvia, Lithuania, Poland, Romania, the Slovak Republic, Croatia, Hungary, Slovenia, and Greece. These countries currently depend heavily on Russia for natural gas and are seeking to loosen U.S. restrictions on natural gas exports in order to provide a significant alternative supply source.

Australia: Shell sells stake in LNG Project. Royal Dutch Shell PLC announced plans to sell for $1.14 billion its interest in the Wheatstone LNG project, an LNG project under development in Western Australia. Shell’s interest will be purchased by the Kuwait Foreign Petroleum Exploration Co., another member of the joint venture project that is led by Chevron Australia Pty Ltd. The $29 billion Wheatstone LNG project, which began construction in 2011, is expected to include an 8.9 million ton-per-year LNG export facility. Shell also owns a 25% stake in the Gorgon LNG project in Australia, which began construction in 2009 and is expected to begin production in 2015.


IHS Global Insight Report projects low natural prices for next 20 years. A recent report by IHS Global Insight, “Fueling the Future with Natural Gas: Bringing It Home,” projects that natural gas prices could remain in the $4-5 per BTU range for the next 20 years. Based on its analysis, IHS projects that the significant increase in demand that is expected for natural gas over the next two decades can be supplied from low-cost resources without requiring a significant price increase, as continued improvements in technology have also lowered the cost of producing natural gas. IHS also cited a number of potential growth markets, such as the conversion of trucking fleets to natural gas, which could increase long-term demand for natural gas.

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