Oil and Gas Lawyer Blog

Published on: September 30, 2013

New UT Study Continues Methane Green House Gas Debate

A report recently released by the University of Texas’ Cockrell School of Engineering, “Measurements of methane emissions at natural gas production sites in the United States,” has re-energized the debate between industry and environmental groups over whether natural gas is good for the environment.

UT’s report is a peer-reviewed paper reporting on the results of measurements of methane emissions at 190 onshore natural gas sites in the US. It was sponsored by the Environmental Defense Fund, Anadarko Petroleum, BG Group, Chevron, Encana, Pioneer Natural Resources, Shell, Southwestern Energy, Talisman Energy USA, and Exxon. The study is part of a larger series of studies being sponsored by EDF to determine how much methane is emitted by natural gas exploration, production and transportion in the US. The issue is important because, on the one hand, burning of methane releases less carbon dioxide into the atmosphere than coal or oil, and on the other hand, methane is itself a powerful greenhouse gas that contributes to global warming. Over the first 20 years after it is released, methane is 72 times more potent than carbon dioxide as a greenhouse gas.

Those environmental groups who oppose further development of hydrocarbon resources argue that, because of methane emissions, natural gas is not a good alternative to other fossil fuels. They have argued, based in part on estimates of methane emissions from completion operations on wells using hydraulic fracturing, that the increased development of natural gas resources made possible by fracing is bad for the environment. The industry, and some environmental groups, see natural gas as a plus, a “bridge fuel” to development of renewable energy.

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Published on: September 23, 2013

Energy Statistics

By John McFarland

I subscribe to the Economist, and it recently sent its subscribers a booklet, Pocket World in Figures, that contains rankings of 198 countries in categories ranging from longest river to biggest cities to number of refugees to living standards, etc. Here are some interesting statistics related to energy from that booklet:

Top 10 Oil Producers 2012 (‘000 bbls/day)

Saudi Arabia 11,530

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Published on: September 20, 2013

Flooding in Colorado Should Raise Concerns in Texas

By John McFarland

The historic floods in Colorado have inundated hundreds of oil and gas wells, dislodging tanks and threatening significant pollution of the flood water.

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The disaster has raised questions across the country about regulation of drillsite locations in areas that could be subject to flooding. The Colorado Oil and Gas Conservation Commission Wednesday released a statement that it “is aggressively assessing the impacts of the flood to oil and gas facilities,” including by mapping drilling sites within flooded areas, tracking reports from the ground, and sending out inspection teams. A similar disaster occurred in 2010-2011 in North Dakota, where floods from thawing snow along the Missouri River caused flooding of wells, resulting in contamination of flood waters by fracking fluids, drilling mud and saltwater. That flood prompted changes in North Dakota’s regulation of wasterwater storage. The North Dakota Industrial Commission amended its rules to prohibit the use of open pits except in cases of emergencies. Companies can still store drilling waste in open pits for up to 72 hours after drilling a well or after securing approval from the commission.

Here are stories and additional photos of the impact of Colorado’s flooding on its oil and gas sites:

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Published on: September 12, 2013

Texas Oil Production Exceeds Iran’s

By John McFarland

Texas pumped 2.575 million barrels of oil per day in June, exceeding Iran’s production of 2.56 million barrels/day. Texas now ranks ahead of seven members of OPEC in oil production.

The U.S. is now the world’s largest exporter of refined fuels, including gasoline and diesel. The U.S. met 87 percent of its energy needs in the first five months of 2013. This is expected to be the highest annual rate since 1986. Net imports of oil and petroleum products will fall to 5.4 million barrels a day by 2014, down from 12.5 million in 2005, according to the Energy Information Administration. It is expected that the U.S. will pump 7.75 million barrels/day by the end of the year. West Texas Intermediate’s price is now above $107/bbl.

Meanwhile, the Houston Chronicle reported that a “growing number of experts” are now saying that the increased production of oil will result in a significant decline in prices. Amy Myers Jaffe, executive director for energy and sustainability at the University of California at Davis, recently wrote that “The most likely scenario – absent war – is for oil prices to decline significantly.” She sees a repeat of the decline in oil prices from the 1980s. If you superimpose a curve of oil prices from the 1980s over today’s price curve, “we’re already on the other side of the hump,” said Jaffe. The decline will be a result of rising supplies and falling fuel demand, exacerbated by higher fuel prices, less driving, less demand from emerging nations like China, the rising dollar, replacement of oil with cheaper natural gas, and OPEC’s inability to cut production enough to prop up prices. “Don’t lose sight of the fact that [oil prices are] a cycle. We get in this mania that whatever the price is it’s going to be that forever.”

Published on: September 10, 2013

RRC Rules Aginst Klotzman in EOG Allocation Well Permit Case

By John McFarland

The Texas Railroad Commissioners voted unanimously today to reject the recommendation of its examiners denying EOG’s allocation well permit and instructed the examiners to prepare an order and findings granting EOG’s permit. For my prior posts about this case, see here, here and here.

Published on: September 3, 2013

Julia Crawford Loses Appeal of her XL Keystone Pipeline Fight, Vows to Fight On

By John McFarland

Julia Trigg Crawford has waged a well-publicized fight to prevent condemnation of an easement across her farm for the XL Keystone Pipeline. On August 27, the 6th Court of Appeals in Texarkana denied her appeal of TransCanada Keystone Pipeline’s award of an easement over her property. Crawford has vowed to appeal to the Texas Supreme Court.

The Court of Appeals’ opinion says that Ms. Crawford had two arguments: first, that the Texas statutes granting pipelines condemnation authority do not apply to interstate pipelines; and second, that Keystone had failed to meet the showing required by the Texas Supreme Court in Texas Riceland Partners v. Denbury Green Pipeline-Texas, 363 S.W.3d 192, 202 (Tex. 2012) that the pipeline must show “a reasonable probability … that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.” The Texarkana court held that Keystone had met that burden. The court also held that the relevant Texas statutes do grant condemnation authority to interstate common carrier pipelines.

The portion of the XL Keystone pipeline from Cushing, Oklahoma to Port Arthur, Texas is nearing completion. That segment of the pipeline has been able to proceed even though the Obama administration has not yet approved the segment of the system that would carry heavy crude from Canada across the northern segment of the XL Pipeline system.

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Published on: August 21, 2013

Fracing in the News

By John McFarland

I subscribe to a news clip service on the oil and gas industry, where I get a lot of my ideas for this blog. Almost half of the news stories for August 20 had something to do with hydraulic fracturing (“fracing” or “fracking” – the latter spelling seems to have become predominant in the media, although the industry continues to use the former). Most of the fracing stories have to do with the controversy over its environmental consequences – is it safe or not? Does it reduce carbon emissions or not? Does it pollute groundwater or not? Does it need more regulation or not? Recently the debate over fracing is bubbling up in Europe, expecially the UK, and in the California legislature.

An interesting article reflecting on the debate is in The Guardian, titled “Fracking debate: what does the battle for lead-free air teach us?” The author compares the current debate to past debates over the toxicity of lead — the discovery in the 18th century that lead was poisonous when ingested, and the more recent debate over the safety of lead in gasoline. In both instances environmentalists warned of its danger, the industry opposed its elimination, and politicians waffled. The article’s conclusion:

So what lessons can we draw from the story of lead? First, that society will enthusiastically adopt new technology without considering the consequences. Second, that you cannot rely on industry to act in the public interest, even when their practices are going to pollute the entire planet. Third, that politicians are no more responsive to issues of public health than they were in the 18th century. Fourth, that remedial action only happens when individuals make their voices heard above the clamour of vested interest. And finally disinformation is a standard industry tactic whenever profits are under threat.

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Published on: August 19, 2013

Good Buda Wells in Zavala County

By John McFarland

Some big horizontal wells have begun producing in Zavala County from the Buda formation (below the Eagle Ford) that may open up Zavala County for additional wells comparable to the best Eagle Ford Wells. This Hughes well, now having a history of production for a year, shows no sign of letting up:

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Here’s another Buda well, completed by Sage Energy:

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Here’s a well recently completed by Texas American Resources, headquartered right here in Austin:

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Published on: August 14, 2013

Gasland Part II

By John McFarland

Here is the Washington Post’s review of Josh Fox’s sequel documentary Gasland Part II, recently shown on HBO. I’ve previously written about Fox’s controversial criticisms of hydraulic fracturing, including a “counter-documentary” called FrackNation. In following news coverage of the growth of shale exploration and development in the popular media, I have learned that the media does not do a good job of covering complex issues like hydraulic fracturing, global warming, and gun control, issues that are easily exploited by parties on both sides of the issue by invoking scare tactics and consipiracy theories to frighten the public. I have also seen how such complex, controversial topics are politicized, like so much of public discourse today, into black and white, red and blue, with no middle ground, making it very difficult for the ordinary citizen to become informed about the facts and policy issues that political leaders should be investigating and deciding. Where is Walter Cronkite when we need him?

Published on: August 12, 2013

Does Hydraulic Fracturing Deplete Water Supplies?

By John McFarland

I recently ran across an article on the Energy In Depth website titled “Turning Natural Gas Into Water: Hydraulic Fracturing Doesn’t Deplete Water Supplies.” Energy In Depth is a website of the Independent Petroleum Association of America dedicated to “a research, education and public outreach campaign focused on getting the facts out about the promise and potential of responsibly developing America’s onshore energy resource base ” The article responds to an argument made by many organizations concerned about the large quantities of water used in fracing. The concern is that, while many uses of water return that water to the water cycle, water used in fracing is usually disposed of by injecting it underground, where it will never return to the water cycle.

Energy In Depth’s response to this argument is that, while injecting the used frac water — called “flowback” — does remove that water from the water cycle, the burning of the gas (or oil) produced by the wells creates more water than was used in the fracing of the wells. So, the argument goes, fracing of wells actually “creates” new water that is added to the water cycle. EID’s article goes on to calculate that, while a typical Marcellus gas well will remove 4 million gallons of water from the water cycle, that well will produce two billion cubic feet of gas which, when burned, will yield about 22 million gallons of “new” water. Within the well’s first six months of production, the gas it produces will create more than 4 million gallons of water when burned as fuel. Problem solved!

I asked a hydrologist friend of mine to look at EID’s calculations. He agreed that their math is correct, but he cautioned that the problem is not so simple. EID’s argument assumes that the energy created by burning the natural gas from EID’s typical well would not have been created by the burning of other fossil fuels. If, in other words, the gas is burned to create electricity, and if that electricity would have been created by burning coal if the well had not been drilled, then the net result is that water has been lost to the water cycle by injecting the flowback from the well.

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