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HOUSTON, Nov. 10

By Paula Dittrick

OGJ Senior Staff Writer

The US natural gas industry is working to ensure shale gas is produced in an environmentally safe manner and is working to disclose information that can help minimize public opposition toward shale development, an advisory committee to government said.

The Secretary of Energy Advisory Board Subcommittee on Shale Gas Production (SEAB) issued its second 90-day report on Nov. 10. It reviewed progress made on 20 recommendations the subcommittee outlined in its Aug. 18 initial report.

Separately, the American Petroleum Institute reported “many positive activities undertaken by industry and the state regulatory authorities.” API issued its own 10-page update regarding how industry has responded to the subcommittee’s recommendations.

John Deutch, subcommittee chairman and an MIT professor, called shale gas “one of the biggest energy innovations, if not the biggest, in several decades. …But to ensure the full benefits to the American people, environmental issues need to be addressed now, especially in term of waste water, air quality, and community impact.”

The subcommittee said a loss of public confidence could delay or stop anticipated expansion of shale gas production expected across the US. Some have forecast the drilling of 100,000 shale gas wells over the next several decades.

Shale gas production already accounts for about 30% of US gas production. Sec. of Energy Steven Chu convened SEAB at the direction of President Barack Obama. The second 90-day report will be forwarded to Chu following a public comment period. SEAB plans to review the public comments Nov. 14.

The two reports reflect 6 months of deliberations among a group of industry experts, environmental advocates, academics, and former state regulators.

Industry’s progress outlined

In its second report, the subcommittee noted operating companies are considering projects to measure and disclose air emissions statistics from shale gas wells. Discussions are under way regarding specific information collection, appropriate instrumentation, and subsequent analysis and disclosure.

The subcommittee recommended independent technical review of the methodology for measuring air emissions.

API said it’s interacting with the US Environmental Protection Agency on efforts to compile a more robust basis for emissions estimation methods for shale gas as part of a broader national greenhouse gas emissions inventory for the UN Framework Convention on Climate Change.

The Department of Interior announced Oct. 31 that it intends to require disclosure of the chemicals within hydraulic fracturing fluid used on federal land. DOI agrees with the subcommittee’s recommendations that disclosure should include all chemicals.

DOI also agrees with the subcommittee that chemicals should be reported on a well-by-well basis on a publicly available and searchable web site that can aggregate information.

“The Ground Water Protection Council and the Interstate Oil & Gas Compact Commission have taken an important step in announcing their intent to require disclosure of all chemicals by operators who utilize their voluntary chemical disclosure registry, FracFocus,” the subcommittee noted.

API noted that since FracFocus launched its web site in April, some 50 operators added information about more than 5,543 wells. That nearly doubles the volume of information that was reported to the subcommittee in July, API said.

“This site does more than just serve as a repository for disclosure data,” API said. “It also provides a wide array of reference materials from federal, state, and independent sources.”

Calling FracFocus a platform to address public concerns, API said industry continues to work with the GWPC and IOGCC to discuss expanding the platform’s capabilities and develop a more sophisticated site.

Several states, including Texas, Louisiana, and Montana, have incorporated the use of FracFocus in recent legislative and regulatory initiatives.

One subcommittee recommendation advocated the federal government support research and development efforts on shale gas. The Office of Management and Budget is in discussion with the DOI, DOE, EPA, and the US Geological Survey about unconventional gas R&D.

“As yet, there has been no agreement with OMB on the scale and composition of a continuing unconventional gas R&D program,” the subcommittee said in its latest report. “Failure to provide adequate funding for R&D would be deleterious and undermine achieving the policy objectives articulated by the president.”

API said it shares the subcommittee’s belief that industry and various levels of government must work together to develop shale gas in sustainable ways.

Original Article

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WASHINGTON — The Obama administration cautiously offered up more areas in the Gulf of Mexico and off Alaska’s coast to oil and gas drilling Tuesday but didn’t go far enough to satisfy Republicans pushing to greatly expand drilling as a way to create jobs and wean the country off foreign oil.

Interior Secretary Ken Salazar unveiled a proposal to hold 15 lease sales for areas in the Gulf of Mexico, including two in the eastern Gulf, and three off Alaska’s coast in the time frame from 2012 to 2017. The sales off Alaska, where native groups and environmentalists have objected to drilling, would be the first since 2008. They would be held late in the five-year time frame to allow for scientific evaluations in the Chukchi and Beaufort Seas, which Interior officials called a “frontier” for drilling. And they would be targeted to avoid areas with cultural and environmental sensitivities, officials said.

In the western and central Gulf, by contrast, the proposal puts all unleased acreage up for sale. There, drilling is more commonplace, infrastructure is well developed, and spill response plans have improved since the Gulf oil spill disaster in 2010.

The drilling plans are the latest iteration of President Barack Obama’s strategy for energy production, which has continually shifted to account for political realities, high gasoline prices and environmental disasters such as last year’s Gulf oil spill. Weeks before that disaster, the White House had talked of expanding offshore drilling off Alaska, in the Atlantic and throughout the eastern Gulf, in part to help move stalled climate-change legislation through Congress. It pulled back late last year after the blowout of BP’s Macondo well caused the largest offshore oil spill in U.S. history.

In May, with Republicans in Congress passing bills to speed up and expand offshore drilling and with the public outraged over high gasoline prices, Obama directed his administration to extend existing leases and to hold more frequent sales in the federal petroleum reserve in Alaska to boost oil production.

Tuesday’s proposal goes slightly further by putting parts of the Cook Inlet, Chukchi and Beaufort seas back up for sale. President George W. Bush had opened up those areas for drilling in 2008, as part of a proposal that included drilling off the West and East coasts, and in the eastern Gulf.

Obama scrapped drilling off Virginia in early 2010, barred drilling in Alaska’s Bristol Bay and never considered drilling off the Pacific coast, where opposition is widespread.

Besides the Gulf and the Alaska leases, the proposal includes a sliver in the eastern Gulf about 150 miles off the Florida coast. The rest of the eastern Gulf is off limits due to a congressional moratorium.

The plan drew mixed reviews Tuesday from the leaders of two Louisiana oil and gas industry organizations.

“The good news is there is a (five year) plan. The bad news is it’s not any different,” Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, said.

The plan is very important because, once it’s approved, only areas included in the plan can be leased for oil and gas exploration for five years, John said

“It’s a little disappointing because it doesn’t open up any new areas that we’ve been talking about for years,” he said. “No other land will be available for leasing outside this plan.”

Both John and Don Briggs, president of the Louisiana Oil and Gas Association, said the plan leaves untapped domestic energy resources in Alaska and east and west coasts.

“We have some great concerns that the new plan will actually cut off access to necessary resources and set us back as a nation in our pursuit for energy security,” Briggs said.

The result may be continued high energy prices for U.S. consumers, he said.

The Obama administration plan is not final, and John, a former congressman, said he expects to see some in congress lobbying for changes to the five-year plan to open up additional areas for exploration and drilling. For instance, Virginia’s governor and other leaders asked that their offshore lands be included in the plan for potential exploration and drilling, but the state was omitted from the plan, he said.

Environmentalists expressed dismay at the decision to proceed with drilling in the Arctic.

The announcement came on a day when a near-record storm was expected to pound the western Alaska coast. The focus was in the Bering Sea, but the National Weather Service said winds of 65 to 70 mph with gusts to 90 mph also were expected along the Chukchi Sea coast.

“How do you drill a relief well? How do you put a containment system in place in those conditions? It is a very challenging situation up there to say the least,” said Marilyn Heiman, the Arctic Program Director for the Pew Environment Group.

William H. Meadow, the president of The Wilderness Society, said in a statement the lease sale plan “continues to take America down the road of putting big oil first, threatening our few remaining pristine areas with drilling and spilling.”

“It is too soon for the administration to say that they will have the necessary science, the proven spill-response techniques, and the needed response capacity and onshore infrastructure by the time of their proposed Arctic Ocean lease sales,” he said.

The American Petroleum Institute, an oil industry trade group, was also not pleased. Erik Milito, head of the group’s production section, called it “a missed opportunity” to address rising energy demand, jobs and the deficit. Royalties from energy production on public lands are one of the largest sources of income to the federal government.

The plan falls well short of proposals passed in the House and touted by Republicans running for president, who want to vastly expand drilling. They have accused the president of stifling American energy.

Still, from 2008 to 2010, oil production offshore increased from 446 million barrels to 600 million barrels.

“No new drilling or new lease sales will occur during President Obama’s term in office,” predicted Washington Republican Rep. Doc Hastings, chairman of the House Natural Resources Committee. Hastings sponsored three measures that passed the House earlier this year to speed up drilling approvals and open up areas along the East and West coast, Alaska and eastern Gulf to production.

“The Obama administration’s draft plan places some of the most promising energy resources in the world off-limits,” said Hastings.

Lawmakers from Alaska, who have pushed to tap its energy resources, hailed the plan as a positive step Tuesday.

But Sen. Lisa Murkowski, the top Republican on the Senate energy panel, and other Alaskan lawmakers, said the permitting process would ultimately determine the success of the lease sales.

Shell Oil Co. paid the federal government $2.1 billion for petroleum leases in the Chukchi Sea off Alaska’s northwest shore in 2008, the last time federal waters in Alaska were auctioned off. But nearly four years later, the oil giant has yet to drill an exploratory well because of lawsuits brought by environmental groups and delays in its air pollution permit.

The company hopes to start drilling in 2012.

(Daily Advertiser Senior Reporter Claire Taylor contributed to this story).

Original Article

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By Times-Picayune Staff

The Obama administration on Tuesday proposed a five-year plan to open up six areas for oil and gas drilling, including unleased portions of the Gulf of Mexico and along Alaska’s coast, a cautious approach that the head of the Interior Department said “will help us continue to reduce our dependence on foreign oil and create jobs here at home.” Interior Department Secretary Ken Salazar unveiled the program Tuesday, which proposes 15 potential lease sales in 2012-2017, with five annual lease sales in the western Gulf beginning next fall, and lease sales in the central Gulf starting in spring 2013.

Two lease sales will be held in 2014 and 2016 for tracts in the eastern Gulf that are not currently under a congressionally-mandated leasing moratorium, set to expire in 2022, and three more sales would be scheduled in “frontier areas” off Alaska’s coast, including the Beaufort and Chukchi seas, and the Cook Inlet.

Salazar said the proposed Alaskan lease sales, the first since 2008, would balance a need for developing energy resources with environmental and cultural considerations, and would be set late in the schedule to provide time to study the area and plan and develop spill response preparendness and infrastructure. The areas included in the proposal are considered to be where resource potential and interest is strongest, he said.

The proposal does not reverse course from the White House’s position last year to drop plans for drilling off the eastern Gulf Coast, including Florida, and portions of the Atlantic Coast, a decision that officials said was precipitated by the Deepwater Horizon disaster.

The Interior Department is required under the Outer Continental Shelf Lands Act to prepare a five-year program detailing a schedule of oil and gas lease sales, indicating the size, timing and location of proposed leasing activity while addressing a range of economic, environmental and social considerations.

“The view is that we should tailor exploration and leasing activity in an appropriate way that coincides with the different environments and the communities involved,” David Hayes, deputy secretary of the Interior Department, said in a conference call Tuesday with reporters.

But saying their glass was half-full, news of the proposal drew mixed reaction in political and environmental circles, as Republican lawmakers quickly pounced on the lack of additional drilling being allowed in the Atlantic and Pacific oceans, which they said could have been used to spur job creation and reduce the country’s dependence on foreign oil.

“It’s a good sign that Sec. Salazar finally produced a five-year plan, but unfortunately it’s a huge missed opportunity,” U.S. Sen. David Vitter, R-La., said in a statement. “The administration threw out the previous five-year plan and their new plan eliminates vast resources that should be available to our nation’s energy producers. Limiting Gulf of Mexico access as well as access on the Atlantic and Pacific coasts just perpetuates this administration’s attempts to shut down offshore energy production.”

The chairman of the House Natural Resources Committee, Rep. Doc Hastings, R-Wash., said in a statement that by excluding new areas off the Atlantic, Pacific and Arctic coasts, the Obama administration was continuing to “re-impose an offshore drilling moratorium.”

That sentiment echoed throughout the offshore oil and gas industry. “This ill-conceived plan leaves us looking in the same areas we have looked for over a generation and would cast our energy reliability and security lot to the whims of other, often unfriendly nations,” Randall Luthi, head of the National Ocean Industries Association, the national trade group that represents offshore industry, said in a statement, which labeled the overall announcement “deeply disappointing.”

In a more tempered assessment, which called the proposal “a good first step,” Erik Milito, upstream director at American Petroleum Institute, urged the Obama administration “to reconsider its decision to exclude other offshore regions” from lease sales until 2017.

Environmentalists also expressed concern about the plan, albeit for different reasons, decrying the proposal for offshore development in the Arctic.

“The administration’s new five-year plan is good news for Atlantic coastal states, especially Virginia and Florida. However, the Arctic and the Gulf are still in harm’s way,” said Jacqueline Savitz, a senior campaign director for Oceana, an international organization for ocean conservation. “As we watch the BP oil continue to foul the Gulf of Mexico, it’s crystal clear that fundamental, industry-wide safety and response failures must be addressed before moving forward with such an aggressive program in the Gulf.

Officials at Shell Oil have said the company hopes to begin exploratory drilling off the coast of Alaska next summer.

Last March, months after the White House scrapped plans in the wake of the BP oil spill to open new coastal areas for offshore drilling, an Interior Department report found that more than two-thirds of federal leases in the Gulf of Mexico were not producing oil and natural gas. Federal leasing regulations give companies five to 10 years to develop a lease, a process that can cost upward of $100 million, industry experts say.

Out of 34 million acres leased offshore in the Gulf, oil and gas companies had been given the go-ahead for exploratory or development drilling on just 10 million acres. Of that acreage, 6.3 million acres were actually producing oil, according to figures.

The Obama administration is scheduled to hold the first oil and natural gas lease sale in the Gulf since last year’s BP oil spill in New Orleans on Dec. 14, which will include all available unleased areas in the Western Gulf Planning Area off the Texas shore.

Original Article

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Oil & Gas Journal

By Mark J. Kaiser & Yunke Yu
Louisiana State University, Baton Rouge

Conventional oil and gas production in Louisiana has been in steady decline for 4 decades, but in recent years, new technology and innovation has opened up a new resource play in the Haynesville shale that is expected to play an important role in the state for many years.

In the past 5 years, shale gas has reversed Louisiana’s gas production decline and promises significant growth potential in the future.

The purpose of this article is to present hydrocarbon production scenarios for Louisiana based on a transparent analytic framework and a well-defined set of assumptions. We disaggregate resource classes into three modules based on producing fields, undiscovered conventional fields, and undiscovered unconventional fields.

We employ a field-level evaluation for producing fields and categorize by primary product, resource category, geographic area, age, and production class. Undiscovered fields have not yet been discovered and are therefore conjectural. Undiscovered fields are classified according to conventional and unconventional categories and are treated using a probabilistic and scenario-based forecast to reflect the uncertainty levels in the resource categories.

In recent years the need for long-term forecasting has become more important for planning purposes and to facilitate efficient regulatory development and incentive programs as the largest oil and gas fields diminish in productivity and the promise of unconventional production is realized.

Louisiana is in the early stage of transitioning to a gas producing state, and the manner in which the Haynesville develops will play a critical role in deliverability and economic prospects in the future.

Click Here to View Entire Study

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By Richard Thompson

Times Picayune

WASHINGTON — The U.S. House of Representatives today is scheduled to consider legislation that would require standby rescue vessels within three nautical miles of active offshore oil and gas rigs.

If enacted, the measure would be the first significant safety measure approved by Congress since the 2010 BP oil spill.

It’s sponsored by Rep. Jeff Landry, R-New Iberia, who has been among the most vocal critics of post-spill regulations imposed by the Obama administration. His legislation has set off a battle between two of the state’s most influential industries and biggest campaign contributors.

The oil and gas industry opposes the provision as too expensive and unnecessary, while maritime companies, which stand to gain lucrative new business, are supportive.

“It puts members from Louisiana in a real pickle because two of the most important industry groups for our state are on opposing sides, ” said an aide to one Louisiana member who asked not to be identified because the issue is sensitive.

Landry, a freshman Republican who has railed against government regulation, said his proposal represents a common-sense approach to a critical problem — how to ensure the safety of rig workers in a major accident.

After the blowout of BP’s Deepwater Horizon in April 2011, which killed 11 workers, 115 others were rescued mainly because a supply boat, the Damon Bankston, was nearby, according to a Coast Guard report that recommended new requirements for standby vessels.

Had workers on the rig not taken a dinner break, Landry said, it’s likely the boat would have been on its way back to shore, and many more on the Deepwater Horizon would have perished, Landry said.

“You know me, I’m not a big regulatory type of guy, ” Landry said. “I looked at how we could codify safety standards to protect the workers with the minimum impact on the industry.”

Don Briggs, president of the Louisiana Oil & Gas Association, said the Landry provision, inserted into a Coast Guard reauthorization bill, would significantly increase costs.

“Companies already enforce a myriad of regulations that address personnel safety for offshore operations, ” Briggs said. “Having companies provide standby vessels will add a significant cost burden and have an adverse effect on the slow recovery of offshore drilling. Adequate response mechanisms are already in place and the addition of standby vessels is a redundant measure.”

He said Coast Guard helicopter search-and-rescue teams are already capable of finding and recovering “personnel that have been lost at sea.”

Rep. Pete Olson, R-Texas, has readied an amendment that would strip Landry’s language from the Coast Guard bill, and instead replace it with a proposal for a study on whether standby vessels are needed. That angered Landry, who contends he has minimized the impact on the oil and gas industry by giving companies a year to implement the new standards and by allowing standby vessels to serve more than one rig at a time.

“Here’s the problem with Congress, ” Landry said. “Every time we have a problem no one has the gall to deal with it. Instead, they want to punt and do a study.”

Under Landry’s legislation, rig operators would be required to keep a standby vessel no more than three miles from offshore installations while performing, drilling, plugging, abandonment or work-over operations. The vessel could be up to 12 nautical miles away while other less dangerous operations are being performed.

The oil and gas and maritime industries, which are battling over Landry’s bill, are major donors to Louisiana members of Congress.

For example, Landry has received $47,200 from sea transport company interests for his 2012 re-election campaign and $18,000 from oil and gas representatives, according to the Center for Responsive Politics. Rep. Steve Scalise, R-Jefferson, received $60,400 from donors affiliated with oil and gas companies, and $35,700 from those associated with sea transportation companies, while Rep. Cedric Richmond, D-New Orleans, received $7,500 from sea transport representatives.

Original Article