Natural gas line crosses 201 miles of northern Louisiana

Allen Fore said the United States’ best chance for energy independence is natural gas, and his company is among those delivering it throughout North America.

And one of Kinder Morgan Energy Partners’ key distribution lines is the 507-mile Midcontinent Express Pipeline, of which more than a third crosses northern Louisiana.

“It’s one of the largest projects of its kind of the past 20 years,” said Fore, Kinder Morgan’s director of community relations who spoke Thursday to the Monroe Rotary Club.

The $2 billion natural gas pipeline stretches from Oklahoma to Alabama, including a 201-mile stretch through northern Louisiana.

It has a capacity to transport 1.5 billion cubic feet of natural gas per day, which can be increased to 1.8 billion by adding compression.

“That’s enough to supply about 4 million homes a day,” Fore said.

Kinder Morgan, an energy transportation company that delivers the natural gas but doesn’t own it, spent two years building the pipeline.

“Think of it as an interstate toll way,” Fore said. “We just charge a toll to the companies using our infrastructure.”

Fore estimated that the Midcontinent Express Pipeline project, which was completed in August 2009, created 5,000 to 6,000 construction jobs. The economic activity created an almost year-long spike in Ouachita Parish sales tax collections.

“We filled up your hotels and restaurants and maybe even a tavern or two,” Fore said.

Though those jobs were temporary, Fore estimated the company will continue to pay more than $20 million annually in local property taxes.

But he said more such infrastructure is needed to deliver natural gas throughout the country.

“Everybody talks about reducing our reliance on foreign energy,” Fore said. “That talk can become a reality with more projects like this.

“We have a 100-year supply of natural gas in the (U.S.) and new reserves are being found every day. Everything we’re transporting is domestic. If we have the infrastructure we can get to that goal of complete energy independence.”

Original Article

HOUSTON — A senior BP executive is again avoiding committing the oil giant to using relief wells to seal to the Gulf of Mexico well that blew out in April.

The comments by Senior Vice President Kent Wells today indicated there may still be disagreement between BP and Retired Coast Guard Adm. Thad Allen, the government’s point man on the spill response. Even though a cap stopped the flow of oil in mid-July, Allen has long insisted the relief wells will be the final solution.

Wells danced around a question posed by federal investigators probing the causes of the April 20 explosion that killed 11 people. He says there are “multiple options” to stop the flow of oil and the relief wells are “the ultimate backup if everything else fails.”

Original Article

WASHINGTON — The Obama administration’s moratorium on deepwater drilling reflected “how unprepared both government and industry were for an incident” like the BP oil spill, but as drilling companies meet the new regulatory regime imposed since the suspension of operations, they ought to be able to go back to work, according to a report released Thursday by the Bipartisan Policy Center.

“The Department of Interior’s drilling moratorium has served the productive purpose of allowing time for both industry and government to prepare for a safer, more vigilant, and dependable future for U.S. offshore drilling,” experts said in the 21-page report issued in response to a request by the national oil spill commission. The report goes on to say that new, higher standards imposed by the Department of Interior since the moratorium was imposed “will achieve a significant and beneficial reduction of risk” and “will provide an adequate margin of safety to responsibly allow the resumption of deepwater drilling in the Gulf of Mexico.”

If the Obama administration heeds the center’s advice, it could mean some drilling operations in deepwater would resume before the six-month suspension is due to expire Nov. 30.

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Michael Bromwich, the new head of Interior’s Bureau of Ocean Energy Management, who will be a key figure in making that call, thanked the center for its work, but he was noncommittal about whether the moratorium might be lifted ahead of schedule.

“I appreciate that the Bipartisan Policy Center has acknowledged the work that we have and are doing to raise the bar since the Deepwater Horizon incident,” he said.

Jason Grumet, president of the center and part of the small working group of energy and environmental experts who prepared the report, also cautioned that “even if the moratorium is lifted next week, our expectation is that it is going to take some time for the companies to make the technological demonstrations and seek the third-party certifications and develop the new plans in order for the Interior Department to then evaluate the permit application such that they can get back to work.”

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling requested that the policy center review the moratorium after the commission was deluged with complaints about the negative economic repercussions of the suspension on drilling on the Gulf economy. Specifically, the commission wanted to know what the federal government should consider in determining which activities could safely resume once the moratorium was lifted.

“We always said it was appropriate to call a timeout and huddle, but that a six-month moratorium was arbitrary and capricious,” said Lt. Gov. Scott Angelle, among the Louisiana officials pressing the hardest to end the moratorium. “The courts agreed with us, and now a bipartisan policy group agrees. It’s time to go back to work and start issuing permits.”

Grumet said that while the members of the center’s working group agreed not to offer a “value judgment” on the moratorium, “one value judgment we did make is that the need to impose an industrywide moratorium does demonstrate how profoundly unprepared the industry and government was for an incident of this magnitude.”

The center is a nonprofit organization established in 2007 by former Senate majority leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell.

Original Article

WASHINGTON, DC, Aug. 26 — More robust science is clearly needed in federal offshore oil and gas planning, several witnesses told US President Barack Obama’s independent commission on the Gulf of Mexico oil spill and offshore drilling on Aug. 25. But they disagreed on whether it should come from agencies outside the US Department of the Interior or be increased within DOI’s Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE).

Some witnesses said that BOE, when it was the US Minerals Management Service, became too dependent on the oil and gas industry for scientific guidance. This posed a conflict of interest since MMS was responsible for regulating federal offshore oil and gas activities and collecting revenues from onshore and offshore leases, they suggested.

They recommended that BOE start to use more scientific expertise from the US Environmental Protection Agency, National Oceanic and Atmospheric Administration, and other federal agencies to develop oil and gas strategies that consider broader environmental impacts. Two other witnesses, former MMS Directors S. Lisa Birnbaum and Randall B. Luthi, responded that increasing scientific expertise within the agency would be more effective.

Several environmental organizations have charged that MMS’s culture emphasized leasing and development without adequately considering impacts on other resources. “As a society, we are really good at gathering information and using the best available technology to analyze that information and incorporate it into our decision-making,” one witness, World Wildlife Fund Pres. Carter Roberts, told the commission.

“Yet our approach to oil has been antiquated at best, utterly dependent on information supplied by oil companies about what they can gain without adequate science to understand what could be lost,” Roberts said, adding, “It is time to bring science back into our decision-making.”

Three-year delay

Roberts recommended that DOI appoint an independent environmental science director who would work with other federal agencies to analyze necessary data without the competing pressure of also collecting royalties and fees. Roberts said there will need to be assurances that collected information is reliable, and suggested that no area be opened for leasing for 3 years while the data is analyzed. Federal science agencies and the US Coast Guard also should be directed to establish specific drilling permit requirements, he said.

A second witness, Margaret R. Caldwell, director of the Center for Ocean Solutions at Stanford University, said EPA, NOAA, and similar federal entities should be formally designated federal oil and gas cooperating agencies because their scientists are uniquely capable of advising BOE and DOI about environmental risks. “Once they have received this designation, BOE will have to engage them early and frequently in the planning process and respond to their recommendations,” she said.

Caldwell added that the US Outer Continental Shelf Lands Act (OCSLA) already designates coastal states and the US attorney general as primary federal oil and gas planning consultants. Bringing other federal agencies with their scientific expertise would improve the process, she said.

Some commission members showed interest in seeing more scientists from other federal agencies supply their views to the former MMS, which became BOE as part of a major reorganization by US Interior Sec. Ken Salazar on May 19 that included formally separating the agency’s minerals revenue management program from its leasing and resource management responsibilities.

William K. Reilly, a former EPA administrator who co-chairs Obama’s spill commission with former Florida Gov. and US Sen. D. Robert Graham, said he was very interested in seeing BOE consult NOAA and the White House Council on Environmental Quality more often. He also expressed disappointment that neither entity apparently was approached before the administration’s Mar. 31 announcement that it was considering an expanded offshore leasing program.

Already consulting

The existing process allows NOAA and other agencies with specific ocean responsibilities to comment at various stages of BOE’s 5-year OCS planning program development, NOAA Administrator Jane Lubchenco testified. The agency she leads has been particularly active since Obama became president, she said, adding, “Not all our concerns were acted upon. They were listened to, however, and many were incorporating into the final decisions.”

Lubchenco appeared most concerned about NOAA and similar agencies getting more responsibilities without bigger budgets, but added that she thinks environmental reviews are necessary at each offshore resource planning and leasing step. “I think there has been an honest attempt to make the best use of the information that’s available,” she said. “There have been instances where other information hasn’t been available, or we haven’t had enough time,” an apparent reference to a 30-day time limit established under the 2005 Energy Policy Act for responding to drilling permit applications. Salazar has asked Congress to repeal that requirement, and the US House made that a provision of its spill response bill.

CEQ Chairwoman Nancy H. Sutley, who testified alongside Lubchenco, said that the March offshore leasing announcement was not intended to preempt National Environmental Policy Act and Oil Pollution Act requirements. “We’ve had good cooperation going forward,” she said, adding that BOE already generates a lot of its own information from several sources which sometimes may not be well integrated because it is so massive.

Commission member Frances G. Beineke, president of the Natural Resources Defense Council, nevertheless suggested that the right kind of information wasn’t entering the federal offshore oil and gas planning process. “A lot of articles suggested that within MMS, a lot of scientific questions weren’t getting enough attention,” she said.

Birnbaum, who was MMS director from July 2009 until she resigned on May 27, noted that the agency hired its first science advisor, Alan D. Thornhill, in March to discuss science’s role at MMS and how to make it more robust. “There’s no question that more investment in science is needed, and I believe it should be at BOE, where it can focus on specific questions related to areas being considered for leasing,” she said.

‘At least co-equal’

“I’m a little bit dismayed to hear that scientists at other agencies felt they weren’t being heard,” Birnbaum continued in her first major Washington appearance since testifying before the US House Natural Resources Committee on May 26. “At the very least, science at MMS needs to be raised so it’s at least co-equal with other agencies.”

“We were actually very proud of what MMS scientists were doing,” said Luthi, who was MMS director from July 2007 to January 2009 after being deputy director of DOI’s US Fish and Wildlife Service. “There was one whale migration study in the Gulf of Mexico which was unprecedented.”

Other witnesses suggested that MMS was not able to keep scientific pace as the oil and gas industry moved into deeper water because the White House’s Office of Management and Budget kept cutting the agency’s scientific budget. This may have been because OMB felt data would not be needed because congressional moratoriums and presidential withdrawals kept oil and gas activity out of most of the federal OCS during the 1980s and 1990s, and the money could be spent for more immediate purposes elsewhere, they said.

MMS’s attention was dominated by royalty matters during that time, which kept it from considering emerging deepwater OCS issues, noted Thomas R. Kitsos, who was deputy and acting MMS director from 1998 to 2001. The agency’s overall budget also contract under Democratic as well as Republican administrations, according to Tyler Priest, global studies director at the University of Houston’s CT Bauer College of Business.

Birnbaum recommended that BOE upgrade technical requirements for offshore equipment and procedures, and create a more substantial body of regulation beyond the oil and gas industry’s recommended standards and practices. “While the US Coast Guard is responsible for implementing new OCS regulations, it has never acted on MMS’s invitations to comment before enactment,” she said.

“It was industry, not government, that developed the deepwater technology and equipment, and therefore it was not only necessary, but highly beneficial, to develop and maintain connections with industry to keep abreast of and regulate the latest technology and safety issues,” said Luthi, who became National Ocean Industries Association president on Mar. 1. “I was never under the impression that industry was calling the shots, but we certainly sought [its] input, and I believe rightly so.”

Original Article

HOUSTON, Aug. 26 — Pressure pumping capacity in North America, crucial to activity in burgeoning unconventional oil and gas plays, is set to increase by 40-45% through the end of next year, says Simmons & Co. International.

In a research note, the investment bank said it expects further drilling increases, pushed by additions to the land rig fleet, to help absorb the new capacity—but not enough to keep the utilization rate from slipping.

Simmons estimates North American pressure pumping capacity at 7.2 million hp, of which 6.2 million hp is in the US, excluding the Gulf of Mexico, and the rest in Canada.

The firm notes that disclosures vary among companies and that horsepower totals include some capacity not related to the hydraulic fracturing essential to completion of horizontal wells in shales and tight sands. And it believes some companies quote brake rather than hydraulic horsepower, which would further overstate total capacity.

“Our guess—and we emphasize the word ‘guess’—is that roughly 400,000 hp in our 6.2 million US industry horsepower tally is not truly frac horsepower that could be used for today’s horizontal fracs,” Simmons says.

It says pressure pumping service providers report they are “effectively sold out” and have waiting lists extending well into this year’s fourth quarter. In some regions, it adds, operators are trying to schedule frac dates in the first quarter of 2011.

At present, the Haynesville shale gas play of Louisiana is the largest pressure pumping market. But the Bakken oil shale play in the Williston basin and Eagle Ford gas and oil play in South Texas, where rig counts are rising, might eclipse the Haynesville later next year, Simmons says.

The firm estimates current utilization of pressure pumping capacity in the US at 92%. By the end of 2011, the utilization rate might slip to 81%, it says.

It bases its capacity utilization projection on assumptions of a net increase in horizontal drilling rigs of 110 with activity increasing in the Eagle Ford, Marcellus, Bakken, and Permian plays and declining in the Haynesville, Cotton Valley, Fayetteville, and Bakken; an increase in average frac stages per well in the Eagle Ford and Bakken; a 3% improvement in drilling efficiency across all basins; and an increase of 2.7 hydraulic hp in the US pressure pumping market.

“We also assume that by the end of 2011 effective market capacity will be more heavily impacted by the wear and tear on the industry fleet as we assume that on any given day nearly 9% of the fleet is down for maintenance and/or overhaul,” the firm says.

An adjustment to the expected slippage in the utilization might be a return to 12-hr work days from the 24-hr days to which service providers have moved in some areas.

Original Article

NEW YORK — Natural gas prices on Thursday slumped to a record low for the year after the government reported a rise in U.S. supplies.

The contract for September delivery gave up 5.4 cents to settle at $3.817 per 1,000 cubic feet on the New York Mercantile Exchange. Earlier in the day, it hit a 2010 low of $3.794.

The price of natural gas, which is used to produce electricity, tends to drop this time of year as the weather begins to cool and people turn off their air conditioners. Analysts said natural gas contracts should continue to fall over the next few months, and that should eventually push down energy costs for homes and businesses.

Meanwhile, retail gasoline prices continue to be pushed down by lower oil prices since the beginning of August.

Pump prices have dropped for 16 straight days. They fell less than a penny overnight to a new national average of $2.688 for a gallon of unleaded regular, according to AAA, Wright Express and Oil Price Information Service. A gallon of gas is 5.4 cents cheaper than a month ago but 6.6 cents more expensive than the same time last year.

Natural gas prices typically rise again as winter approaches and home owners crank up the heat. But overall, PFGBest analyst Phil Flynn said natural gas should become cheaper as drillers tap into larger sections of underground shale. America’s vast natural-gas shale deposits are just beginning to be exploited, and the industry is expected to produce much more in coming years.

“Last September, we saw natural gas prices crash down to about $2.50 (per 1,000 cubic feet), and we saw producers cut back a bit” and waited for prices to rebound, Flynn said. “But because of shale gas, that point of pain — the point where they cut back — has been dropping.”

Oil prices increased for a second day after six straight days of declines, as the dollar fell and investors latched onto a government report that new requests for unemployment benefits fell sharply last week.

Benchmark oil for October delivery added 84 cents to settle at $73.36 on the Nymex. In London, Brent crude jumped $1.54 to settle at $75.02 a barrel on the ICE Futures exchange. Oil has tumbled from a high of $82.55 earlier this month, and some investors are buying on the expectation that oil prices are set to rebound again, Flynn said.

“As long as Chinese demand remains strong and a case for global consumption strength next year is able to be argued, crude values could easily begin tracking north back toward the $80 area,” independent analyst Jim Ritterbusch said.

In other Nymex trading in September contracts, heating oil rose 3.86 cents to settle at $2.0092 a gallon and gasoline gained 4.46 cents to settle at $1.9085 a gallon.

Original Article

WASHINGTON — Leaders of the presidential commission investigating the oil spill on Wednesday rebuked the Obama administration for not consulting with its own scientists before unveiling plans to expand offshore drilling this spring.

The episode demonstrates that when it comes to drilling decisions, federal environmental experts and marine scientists are too often overlooked, said former Florida Gov. Bob Graham, the co-chairman of the panel.

“I would think that if you’re developing a policy to expand offshore oil and gas exploration to the extent that the president announced, that consultation with the agency responsible for oceans management … and your overall umbrella agency for environmental quality would be two of the people on the consultation list,” said Graham, a former Democratic member of the Senate.

William Reilly, the other co-chairman, who worked for the Council on Environmental Quality under the Nixon administration, said it would be unfathomable for similar drilling plans to be advanced without the group’s sign-off.

“I could not imagine that this decision would have been made when I was there that would not have involved” the council, he told reporters.

President Barack Obama’s drilling proposal would have allowed new oil and natural gas production in the eastern Gulf of Mexico as well as previously unexplored areas of the Atlantic and Arctic oceans. When Obama announced the plan March 31, he described it as a tough decision that followed more than a year of analysis by his top energy adviser and others in the administration.

But Wednesday, Nancy Sutley, the head of the White House-based Council on Environmental Quality, said the group “had not been specifically asked for anything” before the drilling blueprint was unveiled. And Jane Lubchenco, the administrator of the National Oceanic and Atmospheric Administration, said she “was not directly involved in reviewing the plans.”

The question of how much weight should be given to scientific experts and environmental analysis before green-lighting offshore drilling operations emerged Wednesday as one of the commission’s major concerns.

The panel is investigating the root causes of the oil spill and is expected to recommend changes designed to prevent a repeat of the April 20 Deepwater Horizon disaster.

Commission members signaled interest in beefing up environmental reviews done before the government holds oil and gas lease sales or approves individual exploration plans.

Environmental reviews

The Interior Department last week said it would, at least temporarily, stop waiving environmental reviews for deep-water projects. The department last year applied such a waiver to plans for BP’s doomed Macondo well.

Meg Caldwell, executive director of the Center for Oceans Solutions at Stanford University, urged more robust environmental studies at every stage of the drilling approval process, including so-called environmental impact statements, before the government approves companies’ exploration plans.

During its daylong hearing, the panel also homed in on regulatory lapses that may have paved the way for the blowout at BP’s well and contemplated ways to toughen oversight of the industry.

The Interior Department has already begun revamping the now-defunct Minerals Management Service and has replaced it with a new Bureau of Ocean Energy Management, Regulation and Enforcement.

Close ties with industry

But such changes won’t do enough to break the close ties between federal inspectors and energy companies, warned Elizabeth Birnbaum, the former MMS head who resigned under pressure five weeks after the Deepwater Horizon rig exploded.

Inspectors and rig workers “all live in the same towns,” Birnbaum told the panel. “Offshore inspectors have to live along the Texas and Louisiana coasts in order to fly offshore on daily inspections, and those areas are dominated by two industries – oil and gas, and shrimping.”

“Even if the agency brought in a completely new cadre of inspectors with no prior connection to the industry or to the affected communities, those inspectors would still have to live there,” she added.

Birnbaum’s testimony – her first public appearance since resigning – illustrates the challenge the government and lawmakers face in boosting oversight of the complex offshore drilling industry and developing a highly qualified, aggressive team of inspectors, while still keeping a distance from the industry.

Keeping a buffer

Birnbaum suggested measures that could help keep a buffer, including regularly rotating the watchdogs over different assignments, barring inspectors from monitoring companies they have previously worked for and monitoring the rate of violations found by investigators.

One possible solution the commission is contemplating involves creating an industry safety program modeled after the Institute for Nuclear Power Operations, set up after the partial meltdown of the Three Mile Island power plant.

The energy industry already does some self-regulating, largely through standards developed by the American Petroleum Institute over the past 86 years.

API officials insisted the oil spill is a tragic aberration that bucks an industry commitment to safety.

Birnbaum told the commission she deeply regretted that the disaster happened on her watch.

“It was a tragedy for the 11 men who lost their lives and for their families and friends,” she said, “and an environmental disaster for the Gulf of Mexico.”

Original Article

Two of President Obama’s top environmental advisers told a panel investigating the cause of the BP oil spill Wednesday that they did not provide the environmental and scientific basis for the administration’s new five-year plan expanding oil and gas drilling off the nation’s coasts.

Speaking before the presidential oil spill commission, Jane Lubchenco, the National Oceanic and Atmospheric Administration’s administrator, and Nancy Sutley, chair of the Council on Environmental Quality, said that while they did offer comments about the proposal, the key decisions were made by the president and Interior Secretary Ken Salazar, who oversees U.S. oil and gas policy under federal law.

The replies came during the second public session of the commission, appointed in May by Obama to explore the causes of the explosion, improve spill responses and recommend ways to minimize a recurrence.

The seven-member panel must deliver a report to Obama by early January. William K. Reilly, former head of the Environmental Protection Agency, and Bob Graham, a former U.S. senator and Florida governor, head the commission.

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Obama unveiled his five-year drilling policy March 31, banning energy exploration off the Pacific Coast and some waters off Alaska while raising the possibility of drilling in parts of the eastern Gulf of Mexico and off Virginia and other southeastern states. The move was praised by some Republicans and moderate Democrats, along with oil and gas executives. But it sparked criticism from environmentalists that has intensified since the April 20 gulf oil-well explosion.

At the time of the announcement, Obama said, “It is one that Ken – Secretary Salazar – and I, as well as Carol Browner, my energy adviser, and others in my administration looked at closely for more than a year.”

Graham asked Sutley, “I gather from what you said earlier you were not one of those ‘others in my administration’ who had been tasked to look at this issue. Is that correct?”

“We had not been specifically asked for anything,” she replied.

Earlier in the questioning, Sutley told panel member Terry D. Garcia that she and her staff “weren’t asked . . . what level of environmental analysis is appropriate for the kinds of planning and decisions that – that result from that – that March announcement.”

NOAA submitted 26 pages of comments on the five-year plan on Sept. 21, 2009, that raised concerns about the environmental impact of drilling in the Arctic and the ability of energy companies to respond to a spill. Still, Lubchenco told Graham, “Mr. Chairman, I was not directly involved in reviewing the plans.”

A few minutes earlier, Lubchenco told Garcia, “I would say that the concerns that we raised were listened to and that many of them were incorporated into the final decision, but not all of them.”

The hearing in the Ronald Reagan Building in downtown Washington was more sparsely attended and less animated than the opening session in July in New Orleans, which drew several hundred people on each of two days and brought heartfelt testimony about the impact of the spill and of the drilling moratorium in testimony from local leaders and other residents.

The chairmen of the commission told reporters that Wednesday’s testimony surprised and disappointed them.

Graham said that he would have expected NOAA and the Council on Environmental Quality to be in on the discussions, adding that he was surprised by testimony that they were not.

“I’m disappointed that the Council on Environmental Quality particularly would not have been included,” said Reilly, who led the EPA during the 1989 Exxon Valdez spill.

Interior Department spokeswoman Kendra Barkoff said the plan “reflects nearly 500,000 comments from the public, numerous public meetings around the country and input from states, tribes and other federal agencies.”

Original Article