Oil and Gas Lawyer Blog

The US Environmental Protection Agency has recently issued its report on greenhouse gas emissions under its Greenhouse Gas Reporting Program, which for the first time includes comprehensive reported emissions from the petroleum industry. The report covers 8,000 facilities in nine industry sectors for 2011, and total reported emissions were 3.3 billion metric tons of carbon dioxide equivalent (CO2e). Total reported emissions of CO2e from petroleum and natural gas systems were 225 million metric tons CO2e.

"CO2e" is a way to compare the global-warming potential of different greenhouse gases - their potential to trap heat in the atmosphere -- by converting their emissions to the equivalent global-warming potential of carbon dioxide. Greenhouse gasses include carbon dioxide, methane (natural gas), nitrous oxide, and flourinated gases. Each of those gases has a CO2e. The CO2e of carbon dioxide is "1". The CO2e of methane, the principal greenhouse gas emitted by the petroleum industry, is 19.1, meaning that one ton of methane has the same global-warming potential of 19.1 tons of CO2. (One ton of methane equals about 48,700 cubic feet.) The debate over whether natural gas is actually less harmful to the environment than coal involves, in part, the question whether the global-warming potential of methane leaked into the atmosphere offsets the fact that burning methane emits less carbon dioxide than burning coal. Because leaking one ton of methane has the same effect as emitting 19.1 tons of carbon dioxide, the facts concerning leaks of methane are important to that debate.

By far the largest industry sector accounting for total CO2e emissions is the power generation industry, which accounted for 67% of the total reported emissions in 2011. By contrast, the petroleum and natural gas system sector accounted for less than 7% of total emissions:

EPA's estimate of total U.S. greenhouse gas emissions from all sources (including, for example, vehicles and house furnaces) for 2011 is 6.822 billion metric tons CO2e.

Here is EPA's summary of greenhouse gases from petroleum and natural gas systems in the U.S.:

Here is a breakdown by percentage of total:

 

"Petroleum and Natural Gas Systems" includes the entire path of oil and gas from production through distribution:

 

 

The E&P industry is continuing to face public criticism of its use of fresh groundwater in fracing wells and its failure to disclose the chemicals added to frac water.

On February 5, the Investor Environmental Health Network (IEHN) issued a press release announcing that shareholders have filed resolutions with Cabot O&G, Chevron, Exxon Mobil, EOG Resources, ONEOK, Pioneer Natural Resources, Spectra Energy, Range Resources and Ulta Petroleum challenging the companies "to quantifiably measure and reduce environmental and societal impacts" of their exploration activities. The resolutions focus on water issues, asking the companies to disclose the amount and sources of water used, how they track and measure naturally occurring radioactive materials (NORM) in frac water, whether and to what extent the companies use closed-loop systems in handling frac water, and what efforts are being made to reduce the amount of fresh water used. Shareholder proposals were filed by Calver Investments, Green Century Capital Management, the New York City Office of the Comptroller, the New York State Common Retirement Fund, the Sisters of St. Francis of Philadelphia, and Trillium Asset Management. IEHN and the Interfaith Center on Corporate Responsibility published a report in 2011, "Extracting the Facts: an investor guide to disclosing risks from hydraulic fracturing," intended to list and encourage best risk management practices by E&P companies, including reducing and disclosing all toxic chemicals, minimizing fresh water use by substituting non-potable sources, and using closed-loop systems to store waste waters.

Last week, New York Comptroller Thomas DiNapoly announced that the state's pension fund had reached an agreement with Cabot O&G to disclose its practices for minimizing the use of toxic chemicals in frac fluids. DiNapoli withdrew his shareholder proposal submitted for Cabot's upcoming proxy statement. DeNapoli has negotiated similar agreements with Hess, Range Resources and SM Energy.

Halliburton, which provides frac fluids for the industry, has developed a "green" frac fluid called CleanStim that uses only food-industry additives. Halliburton production manager Nicholas Gardiner said that Halliburton has developed a chemistry-scoring system for fracfluids, with lower scores being better. CleanStim has a zero score, he said, but is "relatively more expensive" than many traditional fracking fluids. Terry Engelder, a geologist at Penn State, said: "Eventually industry would like to end up with a mix of just water, sand, and food-grade additives. Companies are learning to deal with fewer and fewer additives."

The Texas House Energy Resources Committee held a hearing last week about fracing and water use. Industry spokesmen testified that they are using more brackish water and reusing flowback frac water; recycling water; and covering their retention ponds that store fresh water to limit evaporation. A spokesman for Fountain Quail Water Management said that 900 million gallons of flowback water have been recycled back to freswater in the Barnett Shale over the past nine years. He also announced formation of the Texas Water Recycling Association. A Devon Energy spokesman saidd that Devon had recycled about 700 million gallons of frac water since 2005. He said it costs 50 to 75% more than disposing of the water by injection. NBC News reported on a new water desalination technology that can clean up brackish water so that it can be used in fracing.

Meanwhile, Texas' law on disclosure of chemicals in frac fluds has come under criticism because of its trade-secret "loophole." A Bloomberg report said a sample of frac fluid disclosures from 370 wells reported in August 2012 showed that Baker Hughes averaged 9.1 non-disclosed ingredients per well, Halliburton averaged 9.3, and Superior Well Services averaged 32.5. Lon Burnam, the Democratic state legislator who co-authored the law, said that "this disclosure bill has a hole big enough to drive a truck through."

 

On another topic: a final good-bye to Aubrey McClendon, who has resigned from Chesapeake, the company he founded. He receives a nice parting gift of $45.2 million over the next four years and $33.5 million in restricted stock. He was previously removed as Chairman of the Board because of heavy criticism of alleged conflicts of interest and the company's poor market performance. It will be interesting to see how Chesapeake survives without him. While much of the criticism of his tenure is undoubtedly deserved, his huge contribution to the natural gas boom of the last ten years should not be forgotten.

A client recently suggested that I should write about landfarming - the practice of disposing of drilling mud and cuttings by spreading it over land.

Drilling mud is the common term for the fluid used in the process of drilling a well. It is made up of a mixture of clay (bentonite) in a base of either water, diesel or mineral oil. It also contains an organic material such as lignite to stabilize the slurry and a material such as barite to increase its density. The drilling mud is circulated through the wellbore - pumped down the inside of the drill stem, through the drill bit, and up the outside or annulus of the hole as the well is being drilled. The drilling fluid carries the cuttings made by the drill bit back up and out of the hole, and it helps to cool the drill bit. The clay also coats the outside of the open hole to help seal off porous geologic strata. The drilling fluid is circulated through a pit or tank, where the cuttings settle out, and re-injected into the hole.  Usually an earthen "reserve pit" is constructed for this purpose.

The actual content of drilling mud varies with conditions in the hole and the formations being drilled. In the Eagle Ford, for example, water-based mud is typically used for the vertical section of the hole, and oil-based mud is used for the horizontal section.

After drilling is completed, the drilling mud and cuttings in the reserve pit must be disposed of. These wastes are exempt from federal regulation, and state regulations vary. Landfarming of water-based mud is a generally accepted method of disposing of the contents of the reserve pit in most states.

In Texas, oil and gas exploration and production is regulated by the Texas Railroad Commission, and its rules regarding disposal of drilling fluids are at 16 Texas Aministrative Code Section 3.8, commonly called Rule 8, or "The Pit Rule." That rule defines "landfarming" as "a waste management practice in which oil and gas wastes are mixed with or applied to the land surface in such a manner that the waste will not migrate off the landfarmed area."

In general, Rule 8 allows wastes remaining in reserve pits to be disposed of either by burial on-site or by landfarming on-site. But the rule requires the consent of the surface owner for landfarming:

RRC Rule 8 (16 TAC, Part 1, Sec. 3.8):

(3) Authorized disposal methods.

    (C) Low chloride drilling fluid. A person may, without a permit, dispose of the following oil and gas wastes by landfarming, provided the wastes are disposed of on the same lease where they are generated, and provided the person has the written permission of the surface owner of the tract where landfarming will occur: water base drilling fluids with a chloride concentration of 3,000 milligrams per liter (mg/liter) or less; drill cuttings, sands, and silts obtained while using water base drilling fluids with a chloride concentration of 3,000 mg/liter or less; and wash water used for cleaning drill pipe and other equipment at the well site.

    (D) Other drilling fluid. A person may, without a permit, dispose of the following oil and gas wastes by burial, provided the wastes are disposed of at the same well site where they are generated: water base drilling fluid which had a chloride concentration in excess of 3,000 mg/liter but which have been dewatered; drill cuttings, sands, and silts obtained while using oil base drilling fluids or water base drilling fluids with a chloride concentration in excess of 3,000 mg/liter; and those drilling fluids and wastes allowed to be landfarmed without a permit.

First, the RRC does not require a permit for on-lease disposal of water-based drilling fluids. If the waste is to be disposed of by burial, the drilling fluids must be "dewatered" before burial. The rule defines "dewatering" as "to remove free water."

Second, if the operator wants to dispose of water-based drilling mud by landfarming on the lease, it must have the permission of the landowner, and the fluids must have a chloride (salt) content of less than 3,000 mg/l.

There are also commercial landfarming operations that take spent drilling mud and dispose of it for operators. Those operations do require a permit from the RRC, and many such permits have been granted. A list of recent permits can be found here. he RRC has specific requirements for such permits, including testing the soil and the drilling fluid for chloride content and heavy metals. A recent story about a criminal investigation of such a commercial operation raises questions about how well the RRC regulates such sites.

Note that disposal of reserve pit contents by burial does not require consent of the surface owner. Unless the oil and gas lease prohibits disposal by burial, the operator will be able to bury the pit contents over the objection of the surface owner. If the mineral owner also owns the surface estate, the lessee may seek to negotiate the right to landfarm pit contents in the lease itself. If the surface owner does not own any minerals, the operator may offer to compensate the surface owner for the right to landfarm pit contents.

Texas A&M's AgriLife Extension Service has published a good summary of the risks and hazards of landfarming pit wastes, which can be found here. Among A&M's conclusions:

- Oil may be contained in water-based drilling mud, part of the materials produced during the drilling operations. Excess amounts of oil  - in excess of 1% of the volume of the waste disposed of - are generally toxic to plants.

- Chlorides (salts) in drilling fluid can be detrimental to soils. Soil is generally considered salt-affected or "saline" when the electrical conductivity of the saturated paste extract exceeds 4 millimhos per centimeter.

- Drilling fluids can also contain boron, arsenic, barium, chromium, copper, lead, nickel and other heavy metals that can be harmful in certain concentrations.

A&M recommends that any agreement to allow landfarming should specify testing protocols for possible harmful elements, both in the soil and in the drilling fluids, by a qualified professional; specification of the proper rate of application, and possibly requirements for application of soil amendments to promote treatment of the waste; requirements for mixing the waste into the soil; and requirements for re-seeding and reclamation when the landfarming is complete, possibly with a required bond to assure performance.

FrackNation is a documentary by Phelim McAleer and Ann McElhinney, journalists from Ireland, in response to Josh Fox's Gasland. It recently premiered in several locations and now can be seen on Mark Cuban's cable channel AXS. I watched it this week, and it can be seen again on AXS February 2 at 2:30 pm Eastern time. It is worth watching and has received favorable reviews.

 

McAleer and McElhinney have previously done documentaries on global warming (Not Evil Just Wrong) and gold mining in Romania (Mine Your Own Business) that challenge conventional wisdom on environmental topics. McAleer got the idea for this new film when he confronted Josh Fox at a press conference in Chicago about scenes in Gasland showing tap water being lit on fire. McAleer pointed out that natural gas has been in well water long before the boom in hydraulic fracturing in Pennsylvania.

McAleer and McElhinney got their funding from Kickstarter, where 3,305 backers donated $212,000 to back the movie. (They're all listed in the movie credits.)

Kyle Smith of the New York Post writes that "McAleer, a whimsical Irish journalist with a pleasingly avuncular air, explains in a robustly entertaining and informative doc how Fox was wrong to imply fracking is unregulated and proves methane has been in some drinking water since long before fracking." Kevin Begos writes in USA Today that the film "discredits some of the most extreme anti-fracking rhetoric," but "it also sometimes goes too far in dismissing legitimate concerns."  The New York Times writes that the film is "no tossed-off, pro-business pamphlet", and that it is "methodically researched and assembled" and "provocative." Grover Norquist wrote on the Huffington Post that Fracknation "eviscerates Gasland's credibility and makes clear that its director knowingly lied again and again."

One of the most interesting segments of the film is a discussion about the role of popular media in the debate over the safety of oil and gas drilling and its effect on the environment. Mainstream media are justly criticized, in my opinion, for failing to adequately investigate claims made by radical groups on both sides of the debate before giving them credence by including their views in their publications. Josh Fox has made a business out of his movie and has become a media celebrity. His film was nominated for an academy award, and he has appeared with Hollywood celebrities. Fox is now working on a sequel for HBO, Gasland 2. In part as a result of this media frenzy, a moratorium was imposed on hydraulic fracturing in the State of New York. It is impossible for the general public to separate fact from fiction. Where is Walter Cronkite when we need him? The whole debate is in dire need of serious investigative journalism - but that costs money, and it doesn't sell adds.

 

The University of Texas' Burear of Economic Geology has issued a draft report updating an earlier report on water use by the oil and gas industry in Texas. Among its conclusions: Movement of shale plays into oil-rich areas of the Eagle Ford and West Texas's Permian Basin have resulted in increased use of brackish water for frac'ing, improvement in reuse technologies, and lower fresh water consumption, but also more demand on groundwater in regions of South and West Texas.

Some excerpts:

In the Eagle Ford, although the number of wells completed has increased rapidly, the intensity of water us (gallons per foot of completed interval) has decreased almost in half in four years. The report attributes this decreas in intensity to higher use of "gel" fracs that can carry proppant with much less water. Water use is significantly higher in the down-dip gas window of the play (as high as 1400 gal/ft) vs. the oil window (800 gal/ft). Here are graphs from the draft report about the Eagle Ford's water use:

 

Here are some other interesting statistics and projections from the draft report:

Estimated percentages of recycling / reused and brackish water use in principal areas in 2011:

Estimated groundwater / surface water split (does not include recycling / reuse):

 

Summary of projected water use by mining industry in Texas:

 

Historical water use in Texas - all categories -- 2001-2010:

 

News items of interest:

The University of Pennsylvania's Center of Excllence in Environmental Toxicology has organized a group of researchers from UPa, Columbia, Johns Hopkins and the University of North Carolina to study whether the drilling in the Marcellus Shale play is hazardous to human health.

http://green.blogs.nytimes.com/2013/01/21/taking-a-harder-look-at-fracking-and-health/ 

Here is a recent presentation by one of UPa's professors, Trevor M. Penning, on public health issues of hydraulic fracturing:

http://www.med.upenn.edu/ceet/documents_user/MarcellusShale_Penning3.pdf

A report by the New York Health Department, leaked to the New York Times, says that hydraulic fracturing can be conducted safely.

http://www.nytimes.com/2013/01/03/nyregion/hydrofracking-safe-says-ny-health-dept-analysis.html?hp&_r=1&

Here is a report by StateImpact Texas on recent earthquakes in the Barnett Shale, possibly caused by injection wells:

http://stateimpact.npr.org/texas/2013/01/18/oil-and-gas-related-earthquakes-texas-regulators-speak-no-evil/ 

The City of Fort Worth has now banned new disposal wells within its city limits.

New "sand plant" in San Antonio - U.S. Silica Holdings and BNSF announced construction of a plant near San Antonio that can store and deliver 15,000 tons of sand to the Eagle Ford. The sand will come from U.S. Silica's mine in Ottawa, Illinois.

http://stateimpact.npr.org/texas/2013/01/18/oil-and-gas-related-earthquakes-texas-regulators-speak-no-evil/

Colorado recently adopted rules requiring operators to test groundwater before and after drilling. The rules require operators to test up to four water wells within one-half mile of a well prior to drilling, one year after drilling, and again six years after drilling.

 http://cogcc.state.co.us/RR_HF2012/Groundwater/COGCC_APPROVES_PIONEERING_NEW_GROUNDWATER_PROTECTIONS.pdf

The State of Alaska also recently issued proposed new rules regulating hydraulic fracturing:

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6970099

The Federal Advisory Committee established by the U.S. Department of Commerce in December 2010, has issued a new draft report warning of the consequences of global warming. The report says that strong scientific evidence has been produced sthat human activities, especially the burning of fossil fuels, are primarily responsible for climate change, and that climate change, if not dealt with, will increase health problems, wildfires, exreme weather conditions, and human welfare in general.

http://green.blogs.nytimes.com/2013/01/14/an-alarm-in-the-offing-on-climate-change/

Congress renewed the wind energy industry's tax credit for another year. Notably, the extension applies to any project commenced during 2013, instead of projects completed by year-end. Wind energy was the largest source of new capacity for electric generation in the U.S. last year.  at 3:11 pm on Christmas day, wind power supplied nearly 26% of electricity demand in the area served by the Electric Reliability Council of Texas.

http://www.star-telegram.com/2013/01/02/4520113/tax-credit-may-breathe-life-into.html

A good article about drilling in an urban environment, in the unincorporated community of Gardendale, Texas, near Midland:

http://www.guardian.co.uk/environment/2012/dec/31/fracking-in-towns-texas-oil

A good article about air monitoring equipment installed in the Barnett Shale by the Texas Commission on Environmental Quality:

http://www.star-telegram.com/2012/12/21/4502934/in-barnett-shale-monitors-make.html

Reuters calls Chesapeake's future "murky":

http://business.financialpost.com/2012/12/27/chesapeake-endures-rocky-year/?__lsa=8071-a840

 

The U.S. Fish and Wildlife Service is scheduled to decide whether the Lesser Prairie Chicken should be listed as an endangered species. Its Texas habitat is in the Panhandle and West Texas.

The bird's habitat extends into Colorado, New Mexico, Kansas and Oklahoma:

 

The listing could have an adverse impact on oil and gas exploration and wind energy projects in the habitat area. David P. Smith, an environmental lawyer with my firm and expert on oil and gas exploration in endangered habitats, was quoted in the Texas Tribune as saying that the Obama administration faces the challenge of deciding between two green priorities -- endangered species and wind power.

"This is really one of the first times when they're talking about listing a species that could have direct and significant impacts on the ability to deliver renewables," Mr. Smith said.

The Texas Groundwater Protection Committee has a new website that provides a wealth of information and links for those interested in groundwater resources and regulation in Texas. The Committee was created by the Texas Legislature in 1989 to provide coordination among nine state agencies that deal with groundwater: the Texas Water Development Board, the Texas Commission on Environmental Quality, the Texas Railroad Commission, the Department of State Health Services, the Texas Department of Agriculture, the Texas State Soil and Water Conservation Board, the Texas Alliance of Groundwater Districts, Texas A&M AgriLife Research, the Bureau of Economic Geology, and the Texas Department of Licensing and Regulation. The TGPC's website provides helpful links to maps of Texas aquifers, groundwater management areas and groundwater conservation districts, regulations covering drilling of water wells, groundwater conservation and contamination, injection and disposal wells, and classroom resources. Bookmark this site.

I recently heard an interview with George Mitchell, the independent operator who found the key for combining hydraulic fracturing technology and horizontal drilling to unlock vast reserves of gas in the Barnett Shale, the first shale play. And it only took him 17 years to figure it out. Now 93 years of age, Mr. Mitchell was interviewed by American Public Media's Marketplace radio program. You can view the interview here.

Mr. Mitchell has some unorthodox views for a wildcatter. First, his foundation, the Cynthia and George Mitchell Foundation, has given millions of dollars to support development of clean energy resources. And he supports a carbon tax on hydrocarbons.

Mr. Mitchell also supports tough regulation of independent operators. "I've had too much experience running independents," Mitchell says. "They're wild people. You just can't control them. And if it doesn't do it right, penalize the oil and gas people. Get tough with them." Earlier this year, Mr. Mitchell told Forbes magazine that he is in favor of federal regulation of hydraulic fracturing by the U.S. Department of Energy. 

Mr. Mitchell and NY Mayor Micheal Bloomberg recently teamed up to write an Op Ed piece in the New York Times supporting the development of natural gas reserves with the new fracing technology and pledging their foundations to support efforts to develop responsible regulations to assure that drilling can be done safely:

Several states, including Colorado, New York and Ohio, are taking the lead in this regard, recognizing the need to establish an appropriate framework for regulatory safeguards. It appears that Texas, as the pioneer of hydraulic fracturing in shale formations, is poised to step forward in developing promising state guidelines as well. More such leadership is needed.

To jump-start this effort, each of our foundations will support organizations that seek to work with states and industries to develop common-sense regulations that will protect the environment -- and ensure that the industry can thrive.

We will encourage better state regulation of fracking around five key principles:

     Disclosing all chemicals used in the hydraulic fracturing process;

     Optimizing rules for well construction and operation;

     Minimizing water consumption, protecting groundwater and ensuring proper disposal of wastewater;

     Improving air pollution controls, including capturing leaking methane, a potent greenhouse gas; and

     Reducing the impact on roads, ecosystems and communities.

The latest research, including peer-reviewed studies out of Carnegie Mellon University and Argonne National Laboratory, suggests that if properly extracted and distributed, the impact of natural gas on the climate is significantly less than that of coal. Safely fracking natural gas can mean healthier communities, a cleaner environment and a reliable domestic energy supply right now.

. . .

We can frack safely if we frack sensibly. That may not make for a great bumper sticker. It does make for good environmental and economic policy.

The Texas Railroad Commission has recently published revised draft regulations specifically aimed at assuring that fracing and well completion operations are conducted safely and adequately protect groundwater resources.

I agree with Mr. Mitchell. Drilling technology is much more complex than it was ten or twenty years ago. Fracing involves managing very high pressures and toxic chemicals. Wells now cost $8 to $10 million. Texas needs to take the lead in assuring that these operations are conducted with the best available technology and safety practices, and the Railroad Commission needs to crack down on operators who don't follow those practices.

 

Texas' Sunset Advisory Commission has issued its recommendations for changes at the Texas Railroad Commission. The report can be found here.

The RRC was up for regular Sunset review in 2010, and the Sunset Commission issued a report recommending several changes then, including abolishing the three-member elected Commission and replacing it with a single appointed Commissioner. Largely due to debate over that recommendation, most of the Sunset Commission's 2010 recommendations were not enacted, and the Legislature told the Sunset Commission to issue a new report for its 2012 legislative session.

In its current report the Sunset Commission no longer recommends replacing the three elected Commissioners. It recommends changing the Commission's name to the Texas Energy Resources Commission; limiting the time when Commissioners can solicit campaign contributions and prohibiting a Commissioner from accepting contributions from any party with a contested case before the Commission; requiring a Commissioner running for another elected office to resign; and requiring the Commission to adopt a recusal policy rule.

Other proposed changes in the current report of interest to mineral owners include:

- removing the $20 million cap on the Oil and Gas Regulation Cleanup Fund, used to plug "orphaned" wells in Texas. There are an estimated 7,400 orphaned wells that remain unplugged. In fiscal 2012 the RRC plugged 764 orphaned wells.

- giving the RRC authority to impose a pipeline permit fee and to regulate the safety of interstate pipelines.

- requiring the RRC to develop an enforcement policy and penalty guidelines for oil and gas-related violations.

- requiring contested cases to be heard by administrative law judges at the State Office of Administrative Hearings, rather than by examiners who are members of the RRC staff.

In its discussion of the RRC's enforcement policy, the Sunset Commission reports that, since its 2010 Sunset review, the RRC has added 10 new full-time field inspectors (it now has 97 full-time inspectors and 55 additional staff that dedicate part of their time to field inspections). In fiscal 2012 the RRC conducted more than 118,000 inspections and found more than 55,000 violations; it issued 217 penalties and assessed more than $1.9 million in fines. The RRC also uses lease severance - revoking an operator's permit to sell production from a lease - as a method of enforcement. The RRC reported that the RRC issued 11,589 severance notices in fiscal 2012. In 63% of those cases where the RRC sent an operator a notice of severance, the violations were corrected after receiving the notice and an additional 22% of violations were corrected after the lease was severed; the remaining 15% were referred for enforcement action. The Sunset Commission notes that the RRC has adopted penalty guidelines by a new rule that assigns penalties based on the risk posed, the severity of the violation, and instances of repeat violations; and that the RRC is in the process of revising and "field testing" changes to its enforcement policies, requiring field personnel to refer all "major" violations for enforcement action even if the operator comes into compliance after the violation is found. The report says that "recent trend data does suggest an increase in the number of cases referred for enforcement." But the report notes that only 2% of the 55,000 violations were referred for enforcement in fiscal 2012. The report recommends that the Legislature require the RRC by statute to develop an overall enforcement policy that includes criteria for classifying violations and standards for which type of violations to forward for enforcement action.

I continue to believe that responsibility for enforcement of environmental laws related to the oil and gas industry should not reside in the same agency that enforces drilling and spacing regulations and is responsible for promoting development of oil and gas in the State. Moving contested cases to SOAH may help.

The RRC's reputation for enforcement was not helped by a recent report by StateImpact Texas of violations by a commercial disposal facility near Beaumont owned by Pemco Services . The Texas Environmental Enforcement Task Force, run out of the Travis County District Attorney's office, recently won a criminal conviction and a $1.35 million fine against Pemco for violation of its permit to dispose of drilling fluid by "landfarming". The facility was permitted by the RRC, but the RRC failed to require Pemco to comply with its permits for several years, according to the article. ""For over a decade the company was out of compliance with their permit and there was little done to regulate them," said Patricia Robertson, the task force's environmental crimes prosecutor." Pemco was pumping  unauthorized stormwater from the landfarm into Peveto Bayou, in voilation of the permit. The prosecutors alleged that, from 2002 to 2009, nearly 57 million gallons of drilling fluids were deposited on the landfarm in voilation of the permit, yet the RRC failed to take any enforcement action. RRC spokesperson Ramona Nye responded to a reporter's request for comment, saying that the RRC "tries to get voluntary compliance to correct violations 'before enforcement action is sought.'" Nye said that the RRC decided not to take enforcement action "as long as Pemco complied with Commission directives to stop accepting waste at the facility and to take actions necessary to close this site." Based on this report, it appears that the RRC still has work to do on its enforcement policy.

Recent news of interest:

Keystone Pipeline in East Texas - Fuelfix has published a series of articles on construction of the Keystone Pipeline in East Texas, providing some great photos, including this one:

Not a small operation. And this one, of protesters who camped in trees, causing the company to re-route a segment of the line:

TransCanada has 4,000 workers installing this 36-inch line through 500 miles of Texas and connecting to Cushing, Oklahoma. It will be capable of moving 700,000 barrels of Canadian tar sand crude to the Texas Gulf Coast.

Shale Jobs Could Affect Voting in Swing States - Forbes says that development of the Utica Shale in Ohio is leading a job recovery there, with estimates of 200,000 jobs by 2015, $12 billion in new wages and $22 billion in increased economic output. Five of the states that stand to gain the most from the shale boom are political swing states. "Or measured another way: the number of new workers that will come from hydrocarbon expansion equals one-fifth to three-fourths of all those people counted as unemployed or underemployed in at least 20 states, including those in Wisconsin, Colorado, Iowa, Ohio and Pennsylvania."

Wind Energy Tax Credits - Also on the political front, a little-mentioned issue in the presidential campaign is the tax credit for wind energy, which expires at the end of this year. Obama wants it extended, Romney does not. Some swing states are among the nation's leaders in new wind power projects. Navigant Consulting produced a study saying that loss of the tax credit could cost 37,000 jobs. Texas Governor Rick Perry opposes extending the credit, although Texas leads the nation in wind energy, and companies are now spending huge sums erecting transmission lines into North and West Texas to distribute electricity from wind projects already constructed or on the drawing board. But Sam Brownback, Republican governor of Kansas, and the two Kansas senators, want it extended. The Kansas City Star has a good article on the issue.

Improving Technology Could Extend Shale Boom - Here is a good article from Reuters on the potential for improved shale technology to further extend the shale boom.  According to reporter Robert Campbell,

The prospect for technological advances in shale oil and gas extraction is one of the major reasons why some opponents of peak oil theories, like Nansen Saleri, a former Saudi Aramco executive who now heads upstream technology consultancy Quantum Reservoir Impact, are optimistic about the prospect for liquid fuels production. 'In a few years the techniques used today for fracking will be viewed as primitive,' Saleri said in an interview this summer.

Range Resources Continues its Cutting-Edge Battles - David Poole, General Counsel for Range Resources, was honored by the Dallas-Fort Worth Chapter of the Association of Corporate Counsel and D CEO magazine for his work in leading the legal fight against the EPA's allegations that Range had contaminated groundwater in Parker County, Texas. Partly as a result of Range's success in that case, Al Amendariz, then regional EPA adminstrator, resigned, after EPA dropped its suit. Meanwhile, Range battles a separate suit in Washington County, Pennsylvania alleging that its frac'ing operations there have contaminated groundwater.

 

Three interesting stories:

Guar, a bean grown mostly in India, has become a hot commodity because of its use as an additive in frac fluid. See this CNBC Report. Indian farmers are getting rich, American farmers are looking into growing the bean, and Halliburton's income is down "due to increased costs, particularly for guar gum."

Protests are popping up all along the XL pipeline being built by Transcanada to transport heavy oil from Canada. Eight demonstrators were arrested in Wood County for chaining themselves to heavy equipment. Seven platforms have been built in trees and occupied by protestors within the pipeline right-of-way. Protestors appeared at the Texas Capitol. Actress Daryl Hannah has joined demonstrations along the pipeline route. See Austin Statesman article here.

Speakers at Hart Energy's third conference on Developing Unconventional Gas, at the convention center in San Antonio, called the Eagle Ford the top unconventional play in the world. See article here.

The debate about effects of Barnett Shale drilling and production on air quality in the Dallas-Fort Worth area continues. The debate started when Al Armendariz, then a professor at Southern Methodist University, published a study in 2009 concluding that increased drilling activity in the DFW area would greatly increase polllution and ozone levels. Armendariz postulated that in the nine counties included in the D-FW metroplex area, gas drilling produced about 112 tons per day of pollution, compared with 120 tons per day from vehicle traffic. His study was sponsored by the Environmental Defense Fund, and was heavily criticized by industry. Armendariz was later appointed head of the Dallas office of the EPA, and resigned earlier this year amid Congressional criticism of remarks he made about EPA enforcement policies.

As a result of Armendariz's study, the Texas Commission on Environmental Quality installed automatic air monitors at locations within the Barnett Shale area. Eight automatic gas chromatographs now sample air twenty times each day for 46 volatile organic compounds. The monitors cost $250,000 each and cost $100,000/year to operate. Readings from the sample analyses are posted by the TCEQ and can be found here.  According to an analysis by Powell Shale Digest, none of the 236,120 air samples taken by these devices have shown amounts of VOCs exceeding limits set by the Environmental Protection Agency.

There are also sixteen samplers in the DFW area that measure ozone. Powell's analysis of that data shows that ozone levels in the Barnett Shale have been dropping even as drilling activity in the area increased:

 

Powell Shale Digest concludes that

This scientific data from millions of tests run by the TCEQ in the Barnett Shale plus the shale gas production plots against the ozone levels show no influence caused by shale gas development and production on air quality. The Barnett Shale area of north Texas has been the most thoroughly tested air quality of any industry. This scientific data plus thousands of other tests run by the TCEQ laboratories in Texas totally contradict the fear of polluted air quality caused by shale development in the United States and throughout the world.

Notwithstanding the TCEQ's data, the debate continues:

A study published in the August 2012 issue of the Journal of the Air & Waste Management Association, Vol. 62, Issue 8, "The Potential Near-Source Ozone Impacts of Upstream Oil and Gas Industry Emissions," by Eduardo Olaguer of the Houston Advanced Research Center, concludes that, based on Olaguer's model of air dispersion, "under average midday conditions in June, regular emissions mostly associated with compressor engines may increase ambient ozone in the Barnett Shale by more than 3 ppb beginning at about 2 KM downwind of the facility, assuming there are no other major sources of ozone precursors."

Olaguer's study was immediately criticized by Energy in Depth, an industry research, education and public outrach organization, as a part of "the anti-shale crowd's agenda" containing multiple errors and oversights. Dr. Olaguer's response to Energy in Depth's criticism can be found here. He says that the TCEQ's monitoring network "remains to sparse to reliably draw conclusions about air emissions from individual oil and gas sites."

Dr.Ed Ireland of the Barnett Shale Energy Eduction Council also criticized Olaguer's paper as "grounded on some erroneous assumptions, a failure to consider existing air control regulations and some misinterpretations of other study results." Dr. Olaguer also responded to Dr. Ireland's critique: Dr. Olaguer's paper was peer-reviewed in three publications; and "the acqual effectiveness of [fedeal and state regulations on emissions] has yet to be studied in a satisfactory manner."

And so it goes.

The Texas Railroad Commission has been issuing new rules and proposed rules affecting oil and gas exploration activities that landowners should know about.

A new documentary by Scott Tinker and Harry Lynch is now being rolled out at select screenings. http://www.switchenergyproject.com/aboutfilm.php#about Dr. Tinker was Director of the Bureau of Economic Geology, a joint organization of the University of Texas and the State of Texas, and a professor at UT's Jackson School of Geology, as well as the State Geologist of Texas. Their film has won the award as best film at the Colorado Environmental Film Festival, and other film recognition. It is now being screened at selected cities across the country, and in Canada and Australia. I have heard Dr. Tinker speak, and he has a wide knowledge of energy issues. The film took three years to make. There are other good films at the Switch Energy Project website: http://www.switchenergyproject.com/topics/alltopics

Be sure to see the film if you get a chance.