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WASHINGTON, DC, Oct. 27

By Nick Snow
OGJ Washington Editor

Nearly half the outstanding stock in publicly traded US oil and gas companies is held by public and private pension and retirement plans, including 401(k) plans and individual retirement accounts, a new study commissioned by the American Petroleum Institute found. By contrast, corporate management of these companies owns less than 3%, including just 0.5% for the integrated firms, API added.

The study by Robert J. Shapiro and Nam D. Pham of Sonecon LLC, a Washington economic advisory firm, also concluded that benefits of this broad ownership increased in recent years as the price of crude oil rose from $58.41/bbl in 2006 and $93.05/bbl in 2008 to $101.66/bbl over this year’s first 9 months.

“The resulting higher prices have produced, in part, the strong returns of US oil and gas companies and benefits for their broadly distributed owners,” it said.

“The good news from this study is that the high returns generated by the industry in the last 5-6 years are being distributed quite broadly to retirees and middle class Americans as the values of their homes and other assets have declined,” said Shapiro, Sonecon’s cofounder and chairman, in an Oct. 26 teleconference.

API released the study, which updates one from 2007, as most publicly traded oil and gas companies, drilling contractors, and service and supply companies begin to release their latest quarterly financial results, according to Kyle Isakower, API’s vice-president of regulatory and economic policy. “There was no intent, when we commissioned the study, to use it for any particular policy action or discussion,” he said. “That being said, we can see a fortuitous nexus of timing in its coming out now with its message.”

Shapiro said the study goes farther than information the US Securities and Exchange Commission requires. “The SEC is interested mainly in corporate officers, financial institutions, and institutional investors, which holds about 70% of most companies’ shares, but they often hold the stock on individual investors’ behalf,” he explained. “So while the data answer the SEC’s questions, they don’t necessarily answer what the rest of the country wants to know.”

The study found that in 2011, pension funds held the largest share of US oil and gas companies with 31.2%, followed by individual investors with 21.1%, asset management companies (including mutual funds) with 20.6%, IRAs with 17.7%, other institutional investors with 6.6%, and corporate management with 2.8%.

“While most institutional investors do not release information on the characteristics of those whose assets they manage, the data clearly show that these institutional investment entities hold a large share of US oil and gas companies on behalf of middle-class Americans,” the study said. “For example, some 21% of industry shares are held through mutual funds, and the typical owner of mutual fund shares is a middle-class household. In 2011, some 52.3 million households, or 44.1% of all American households, owned mutual funds. Moreover, the median annual income of mutual funds owners in 2011 is $80,000, including 7% of US households with annual incomes below $25,000.”

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By Vickie Welborn

An agreement announced Wednesday that paves the way for the first liquid natural gas export plant built in the U.S. in nearly 50 years will allow domestic producers to ship shale gas supplies to the world. It’s too soon to know what effect that will have on Hayneville Shale production in northwest Louisiana; however, benefits are expected.

“While the most direct, initial benefits of this partnership will be present in the numbers of jobs created in South Louisiana, this project is important to this area in that it keeps the investment cycle moving. I believe that this speaks to the strength of the Haynesville Shale and the volume of natural gas that is being produced here,” said Jodee Bruyninckx, Louisiana Oil and Gas Association’s North Louisiana director.

“This area will see the indirect benefits from this project as it provides a broader market, an international one, for the fruits of the Haynesville production. Companies have shown a commitment doing business in the state of Louisiana, and this project is a continuation of that commitment.”

London-based BG Group Plc signed the $8 billion deal with Sabine Pass Liquefaction LLC, a subsidiary of Cheniere Energy Partners of Houston, to build the liquefied gas facility at an export plant at Sabine Pass in west Cameron Parish. Cheniere proposes to sell 3.5 million tons of liquefied natural gas to BG Group for 20 years.

The announcement is “incredible news for Louisiana,” state Department of Natural Resources Secretary Scott Angelle said. “The Sabine Pass LNG export facility has opened Louisiana’s energy industry to new markets and new consumers, and this first agreement solidifies the opportunities for new exploration and jobs in both the energy industry and support industries all across the state.”

“In addition to new jobs, the investment into the Sabine Pass LNG export facility, coupled with the BG Gulf Coast contract and future contracts brings opportunities for the development of new and existing businesses and increased revenue for state and local governments as they work to fund services such as education and transportation.”

Construction of the plant is expected to start in 2012, with exports beginning in 2015.

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by Jennifer A. Dlouhy

The Environmental Protection Agency is briefly delaying proposed regulations that would curb pollution from oil and gas drilling, after objections from industry leaders.

Under the move, the EPA is giving energy companies and the public another 30 days — until Nov. 30 — to weigh in on the possible regulations, which were first proposed in July. The agency had said it would issue a final rule by Feb. 28, 2012, but the EPA’s change is also delaying that timeline by roughly a month.

The proposed regulations cover the natural gas industry from initial drilling of wells, through production at the sites and the eventual transportation of the fossil fuel.

The mandates would represent the first federal air standards for wells that are hydraulically fractured. The technique, which involves blasting mixtures of water, sand and some chemicals deep underground to release natural gas and oil from dense shale formations, has been linked to increased smog in some western states.

Oil and gas industry leaders said Tuesday they welcome the additional time.

Matt Todd, with the regulatory and scientific affairs department of the American Petroleum Institute, said the trade group supports “reasonable methods for controlling air emissions” at oil and natural gas production operations. He noted that many companies have already voluntarily adopted the practices the proposed rule would mandate.

But, he added, “we are concerned that, unless properly crafted, (new rules) could hamper our ability to safely meet the nation’s energy needs.”

The EPA’s proposal would cut smog-forming volatile organic compounds at oil and gas sites by a quarter, including a roughly 95 percent reduction in the volatile organic compounds released from new and updated gas wells that are hydraulically fractured.

The mandates would apply to the roughly 11,400 wells that are fractured — and the estimated 14,000 wells that are refractured — each year, as well as storage tanks and other equipment used by the oil and gas industry.

Currently, during one stage of the hydraulic fracturing process, a mix of fracturing fluids, water and reservoir gas surge to the surface _ with this flowback typically lasting from three to 10 days. The mixture generally includes methane, volatile organic compounds and other chemicals.

But EPA says companies could capture the natural gas that escapes into the air at the drilling sites and then sell the harnessed fossil fuel.

In proposing the rule, agency officials said the change would result in a net savings of nearly $30 million annually, while at the same time slashing air pollution from an oil and gas production method that is being used nationwide.

The Clean Air Act requires such updated emission rules for the oil and gas industry. Environmentalists sued the EPA to force the update.

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WASHINGTON, DC, Oct. 24
By Nick Snow
OGJ Washington Editor

The US Bureau of Safety and Environmental Enforcement (BSEE) issued a notice to offshore lessees that consolidates guidance and information to help operators meet requirements under the previously issued Safety and Environmental Management Systems (SEMS) rule. Operators must implement a SEMS program by Nov. 15, BSEE noted on Oct 24.

BSEE’s predecessor agency, the US Bureau of Ocean Energy Management, Regulation, and Enforcement, issued the offshore workplace safety rule in October 2010 following the Macondo deepwater well incident and oil spill. BSEE said the requirements apply to all US Outer Continental Shelf oil and gas operations and the facilities now under the agency’s jurisdiction, including drilling; production; construction; well workover, completion, and servicing; and pipeline activities.

It said the notice contains no new requirements, but collects and consolidates guidance that has emerged from workshops and discussions with industry and other interest groups in the past year. In the interest of maximizing transparency, the notice also addresses issues relating to how BSEE will implement its SEMS compliance program, and describes the anticipated interactions between BSEE personnel and the operator community, the agency said.

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