HARRISBURG, Pa. (AP) — The Republicans’ big election victories in Pennsylvania and on Capitol Hill could be Christmas-come-early for the drilling companies that are rushing to exploit the Marcellus Shale, the biggest known deposit of natural gas in the nation.

Republican Gov.-elect Tom Corbett is seen as a lot friendlier toward the industry than outgoing Democrat Ed Rendell, who has clashed with natural gas companies over both taxes and tougher new clean-water regulations.

Also, the GOP takeover of the U.S. House will almost surely doom efforts in Congress to impose federal regulation over gas drilling.

Among many Republicans, there is elation. GOP strategist Karl Rove told participants in an oil and gas industry conference in Pittsburgh last week that they can now expect “a period of sensible regulations.”

“As a signal, is it good? Yes,” said a more cautious-sounding William Garner, a Houston lawyer and former investment banker who specializes in the natural gas industry. “But will it make a difference? Time will tell.”

Among other things, the incoming governor opposes any attempt to slap a gas-extraction tax on the industry. Pennsylvania is the largest gas-drilling state without such a tax, and Rendell tried and failed to persuade the Legislature to approve one. Corbett has also said he will lift Rendell’s executive order preventing the issuing of any more drilling leases in state forests.

A drilling boom has been under way since 2008 in the Marcellus Shale, a vast underground geologic formation that extends from West Virginia and eastern Ohio through Pennsylvania into southern New York. Some geologists estimate it could yield enough natural gas to supply the entire East Coast for 50 years.

Its huge commercial potential was underscored earlier this week when oil giant Chevron struck a $4.3 billion deal to buy Atlas Energy, a major Marcellus Shale driller.

Combining a new process of horizontal drilling with a technique known as hydraulic fracturing, or fracking, drillers are unlocking vast deposits there and in other formations around the U.S. such as the Barnett Shale in Texas — a boom that could ensure cheap and plentiful natural gas for many years to come for homeowners, factories and power plants.

The drilling frenzy in the Marcellus Shale is also credited with enriching landowners and pumping new life into trucking companies, short-line railroads, quarries and steel-pipe makers, as well as the restaurants and hotels hosting out-of-state drilling crews. An industry-financed study by Penn State projected that the boom would generate tens of thousands of jobs and hundreds of millions of dollars in state and local taxes in the coming years.

However, the use of fracking — in which millions of gallons of water, sand and toxic chemicals are injected into each well to break apart the shale and release trapped gas — is raising pollution concerns across the Northeast.

While the industry maintains that fracking has been proved safe over the decades, homeowners are coming forward with tales of wells producing brown, foul-smelling water or water polluted with methane and chemicals.

In the northeastern Pennsylvania town of Dimock, a hotspot of Marcellus Shale exploration, some residents no longer use their polluted well water and can light their taps on fire because of methane they say seeped into their wells because of drilling.

The Rendell administration intends to bill Houston-based Cabot Oil & Gas Corp. the $12 million cost of installing a water line to serve 14 families in Dimock. Cabot denies the methane is connected to its drilling.

The gas drilling business got what it wanted in the election of Corbett, who received nearly $1 million in donations from the industry. Among his first actions this week was to name Christine Toretti, a national GOP committeewoman and owner of a Pennsylvania drilling company, as co-chair of his transition team.

Without giving specifics, Corbett on Wednesday promised a “reasonable” regulatory stand that protects the environment. He will be able to appoint a new head of the Department of Environmental Protection, which under Rendell has tried to aggressively deal with the problems brought by the gas rush.

“I look at this as an industry that’s going to be here long after all of us in the room are gone,” Corbett said. “It is going to be a great industry and we need to develop it properly. We need to develop it protecting the environment and growing jobs in Pennsylvania.”

Congress exempted fracking from federal clean water regulations in 2005, but some lawmakers have been pushing to undo that.

Sen. Bob Casey, D-Pa., sponsor of a measure that would subject fracking to regulation by the Environmental Protection Agency, predicts a bleaker landscape now for his bill.

“If anything, there are more votes against it,” he said Tuesday.

Whether events ultimately unfold to the industry’s liking remains to be seen.

The election doesn’t affect a web of state and federal regulatory bodies that could stand in the way of drilling, industry analysts said. The EPA, for example, could try to regulate fracking without congressional approval.

Rolf Hanson of the Associated Petroleum Industries of Pennsylvania, an industry lobbying group, said: “I for sure don’t see this as, ‘All of a sudden things are going to be rosy for the industry and we’re going to get a free pass.’”

Original Article

BATON ROUGE — With a new political year only weeks away, members of Congress and the Louisiana Legislature are being asked by special interest groups and others to continue legislating solutions to the Gulf of Mexico’s plight in the wake of the BP oil disaster.

Lawmakers are considering bills to make up for lost recreational opportunities, correct damages to wildlife resources and mitigate the environmental impact on the state’s marshes.

While Congress is already mounting a so-called “lame-duck session” — the GOP will soon take over the Democrat-controlled House and President Barack Obama’s approval ratings are at an all-time low — the state Legislature is in the beginning phases of preparing for its April 2011 regular session.

On the federal level, the Environmental Defense Fund, a New York-based nonprofit advocacy and research organizations, is encouraging Congress to pass legislation that would devote a significant portion of the BP fines to Gulf Coast restoration.

In a poll commissioned by the groups and released last week, it found that nearly eight out of 10 voters, or 78 percent, from the Gulf states of Alabama, Florida, Louisiana, Mississippi and Texas say they favor creation of a special fund for the Gulf region and the Mississippi River Delta.

Such a fund would include penalty payments from BP for violating the Clean Water Act and the Oil Pollution Act.

Under current law, any penalties paid by BP would be deposited into the federal treasury, even though the money is directly related to the Gulf Coast.

In early August, U.S. Sen. Mary Landrieu, a Democrat from New Orleans, re-introduced her Restoring Ecosystem Sustainability and Protection on the Delta Act, known as the Respond Act, which called for no less than 80 percent of the civil and criminal penalties charged to BP under the Clean Water Act to be returned to the Gulf Coast for “long-term economic and environmental recovery.”

It likewise stipulated that the money paid by BP under the Natural Resources Damages Assessment should be used to fully fund the coastal-restoration projects authorized by the Water Resource Development Act in 2007, including the Morganza-to-the-Gulf hurricane protection project in Terrebonne.

“Gulf Coast states need a dedicated and robust stream of funding to restore and protect our coast for the long term,” Landrieu said.

On the House side, Congressman Steve Scalise, R-Metairie, has introduced the Gulf Coast Restoration Act, which also includes the 80 percent benchmark.

Scalise’s bill further includes authorizations for conservation, protection or restoration of coastal areas; mitigation of damage to fish, wildlife, or natural resources; and the implementation of federally approved marine, coastal, or comprehensive conservation management plan.

U.S. Sen. David Vitter, a fellow Metairie Republican, said he likes both bills and would work “closely” with Landrieu, but would more likely move forward with a Senate version of Scalise’s proposal because it’s “more focused” and does a better job of positioning Louisiana.

“We’ve made the sacrifice for decades to supply our nation’s energy needs. We paid the direct environmental price in this BP oil disaster. We should receive the lion’s share of the fine revenue,” Vitter said. “It’s just that simple.”

On the state level, the Louisiana Wildlife Federation is proposing habitat-restoration work and public-access projects to administration officials and the Legislature.

LWF’s habitat recommendations include the restoration of Gulf-side barrier beachfronts like dunes, vegetation and natural tidal inlets, all of which were affected by the escaped oil and subsequent response efforts.

The group also wants to see the restoration and stabilization of small, isolated islands in the Breton Sound as well as the Barataria, Timbalier and Terrebonne basins, which serve as critical nesting and roosting habitats for birds and marine life like dolphins, sea turtles, redfish, speckled trout, blue crabs, shrimp and oysters.

“Restoring our barrier island and headland habitats is vitally important to the health of a variety of wildlife and fish species,” said LWF Executive Director Randy Lanctot. “Our recommendation also includes smaller islands, many of which were heavily impacted by the oil. Because they are isolated from predators, these little islands are attractive to colonial nesters like brown pelicans, herons, egrets and other wading birds.”

Other projects recommended by LWF to mitigate for lost recreational opportunities include:

n New management of public use at Elmer’s Island, including support for habitat inventory and supervision by the Louisiana Department of Wildlife and Fisheries to assure safe and respectful use.

- Restoration of public use at Fourchon Beach, which should be placed under the direction of the South Lafourche Beachfront Development District.

- Rehabilitation of the “fishing pier” known as “the old bridge” on Caminada Pass at Grand Isle. Partially destroyed by fire in September 2009, the bridge has served thousands of recreational crabbers and anglers for decades.

-        Establishment of a public recreation area, known as a “State Seashore,” along the 12- to 14-mile length of the Caminada Headland between Caminada and Belle Passes in conjunction with the Caminada Headland Ecosystem Restoration Project.

Original Article

SINGAPORE Nov 11 (Reuters) – Oil reached a 25-month high for a fifth consecutive session on Thursday as strong industrial output sent demand in China to a record and a surplus subsided in top consumer the United States.

U.S. crude for December CLc1 rose 64 cents to $88.45 a barrel at 0709 GMT, after touching $88.54 earlier, its highest since October 2008. ICE Brent LCOc1 added 64 cents to $89.60.

China’s industrial production grew 13.1 percent in October from a year earlier, boosting oil use in the world’s second-largest consumer by 12 percent to a record 8.92 million barrels per day (bpd). [ID:nTOE6AA03C] [ID:nBJK000086]

Crude inventories in the U.S. unexpectedly fell last week, while declines in fuel stockpiles exceeded forecasts, government data showed on Wednesday, as the nation’s oil demand increased by 2.9 percent on a rolling four-week basis. [EIA/S]

“The oil market is currently dominated by positive news,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore. “We think prices are on their way for a test of the $90 mark, at least in the Brent market.”

Original Article

The United States is the world’s largest energy importer, a statistic that has impacted its economy and foreign policy for decades. But is it about to become a major exporter of one type of domestic fuel?

A Houston-based company took a small, tentative step in that direction on Thursday, by saying it was working on a deal to supply liquefied natural gas from Louisiana to one of China’s largest independently owned natural gas companies.

There are still hurdles. The exporter, a subsidiary of Cheniere Energy Inc. still needs a government permit to send gas to China. The Energy Department issued it an export permit in September, but it needs to be expanded to include China. And the signed memorandum of understanding with the Chinese company disclosed Thursday is far from a done deal.

However, Cheniere already has a site in Sabine Pass, La., and support of local officials, though an expensive liquefaction facility still needs to be built. It is also working on a deal with investment banker Morgan Stanley to trade the gas, similar to its deal with a subsidiary of China-based ENN Energy Trading Co. Also on Thursday, Chesapeake Energy Corp. Chief Executive Aubrey McClendon told investors at a conference he has been in talks with Cheniere to supply gas to the proposed facility.

Charif Souki, chairman and chief executive of Cheniere, said the interest from these two companies confirms the global appetite for U.S. natural gas. He said when he announced his intention to create an export facility this summer “all the pundits said you won’t do it because you won’t get the permits, it is too expensive and there is no market.” The deal with the Chinese company, formerly known as XinAo Gas, is proof, he says, there’s a ready market.

In recent years, the U.S. has gone from a natural gas shortage to a gas glut. New exploration and drilling technologies have unlocked enormous amounts of gas in Texas, Louisiana, Arkansas, Pennsylvania and elsewhere. The abundance of gas has driven prices down, even as demand for the fuel is predicted to remain flat in the U.S., according to the International Energy Agency.

Meanwhile, demand for gas is surging in Asia as economies there expand. And gas is still bought in most Asian contracts at a price pegged to crude oil. This means that gas bought in Louisiana for $4 per million British thermal units can be resold for three times as much in China. That difference potentially makes it worthwhile to pay for shipping and for the cost of paying Cheniere to liquefy gas, a process of lowering the temperature to 260 degrees below zero Fahrenheit for transport. Once there, the gas would be reheated for use.

The U.S. has exported gas to Japan from Alaska for years. The Cheniere facility would be much larger, capable of exporting up to two billion cubic feet of gas daily—about ten times as much as the Alaska facility.

Original Article

This week, the Environmental Protection Agency released guidelines for oil and natural gas companies to measure and report the greenhouse gas emissions produced by their operations annually.

The final rule says that oil and natural gas facilities that emit 25,000 metric tons of carbon dioxide equivalent or more per year must track that information starting in January and report it to the EPA annually, beginning March 2012.

The EPA rolled out the requirement for certain industrial operations, such as cement and steel manufacturers, in January. It took some more time to finalize the rules for oil and gas reporting.

What does that level of emissions mean? For perspective, the EPA offers this comparison for 25,000 MTCO2e:

* Annual greenhouse gas emissions from the energy use of approximately 2,300 homes

* Annual greenhouse gas emissions from approximately 4,600 passenger vehicles

About two weeks ago, the Pennsylvania DEP published the results of some short-term air sampling at Marcellus Shale gas compressors and condensate tank sites in Washington and Greene counties done this spring. It did not find levels dangerous to human health.

The full report can be downloaded here.

It spells out the data in parts per billion and micrograms per cubic meter. Natural gas operations emit methane and other “anes” such as ethane, propane and ethane, in smaller measures.

The DEP report helpfully outlines which parts of natural gas extraction and processing can cause emissions:

* Pad, impoundment and road construction: emissions from diesel engines from trucks and construction equipment.

* Dilling: emissions from diesel engines.

* Fracing: emissions from diesel engines, evaporation of wastewater.

* Flaring: emissions from burning gas.

* Condensate tanks: emissions from venting during tank filling.

* Compressor stations: emissions from diesel engines, fugitive emissions from compressor equipment, pipes and tanks are possible.

Original Article

Democrats — vanquished yet still powerful — have hinted at several bi-partisan-to-be proposals, such as finding “middle ground” with Republicans on energy policy. Yet, despite giving post-election lip service to truly bi-partisan pursuits like natural gas development, the White House and Democratic leadership are already working on other ways to “skin a cat” in pushing their agenda to pick winners and losers in the energy sector.

Prior proposals to implement a national cap-and-trade system have proven to be a non-starter not only on Capitol Hill, but also for the American citizenry. Given these failed attempts, the Obama administration is now turning to its Environmental Protection Agency (EPA) to impose significant restrictions on carbon emissions. Some congressional Democrats are also seeking to appease the alternative energy lobby by instituting a national renewable electricity standard (RES), a mandate that fails to account for both the diverse nature of America’s electricity generators and unique nature of regional power demands. These backdoor solutions to rejected policies offer cause for concern.

EPA’s march to regulate greenhouse gas emissions — overriding what should have been legislative provisions formulated by elected officials with regulations enacted by activist bureaucrats — is not only economically-harmful, but also irregular and perhaps illegal. Its recent activism has resulted in unilateral and arbitrary policymaking that affects virtually every U.S. business and consumer. Especially given our economy’s sluggish recovery, EPA’s costly proposed regulatory regime, and its accompanying expansion of the size and reach of the government, is the last thing we can afford.

Given the technology currently available, renewable energy sources like solar and wind will never account for more than 1% of world energy demand without massive government hand-outs; it is thermodynamically impossible. Fossil fuels will dominate the global energy landscape for decades, definitely well after this century. China and many other developing nations know this all too well. In fact, over the last few years, we have witnessed the largest transition of power in peaceful times. This is because energy means power, and the Chinese are securing oil and gas resources the world over.

Even with cap-and-trade legislation now dead (yes, really this time), these backdoor approaches to imposing a similar agenda would amount to economic hara-kiri for the U.S. — negatively affecting our energy supply while devastating our economy, jobs and daily way of life. Surely hard-working Democrats in this country should find a lot in common with hard-working Republicans when it comes to these issues and in protecting what has been the envy of the world: our lifestyle.

What is most ironic about EPA’s proposed overreach is that, while U.S. quality of life has continued to rise, the quality of our air has improved, as well. Even Vice President

Al Gore affirmed this, noting:

Throughout our economy, skills, intelligence, and creativity are replacing mass and money — which is why, in the past 50 years, the value of our economy has tripled, while the physical weight of our economy as a whole has barely increased at all.

Relative to other nations, U.S. efforts undertaken to protect the environment have been considerable. From dumping controls and agricultural innovation to scrubbers on power plants and advances in water treatment, very few nations can match America’s commitment to environmental preservation

Original Article

WITH the global economy uncertain over the strength and sustainability of the economic recovery, oil and gas companies continue to be susceptible to the various long-term challenges that have been confronting the industry.

Highlighting the deep issues: Under construction offshore oil platform rigs in Port Fourchon, Louisiana. Incidents such as the Gulf of Mexico spill have sparked widespread scrutiny of the industry

Incidents such as the Gulf of Mexico spill have sparked off widespread scrutiny over the industry for the wrong reasons. Through recent interviews with oil and gas analysts, we distilled the top 10 risks that the industry is most concerned with in the year ahead, and discuss five of the most pressing ones here – first of which is the issue of uncertain energy policy.

The vagueness of energy policy across leading nations is not a new issue, and the fact that there was no definitive outcome from the Copenhagen climate conference in December last year does not help. The US has not been able to adopt a clear position in its energy policy, and there are suggestions for a number of changes in regulations and tax laws that could discourage the growth of the oil and gas industry. This uncertainty has been further exacerbated by the Gulf of Mexico spill, with many regulators reviewing their safety regulations for offshore activities. Suffice to say, the oil and gas industry can expect a renewed and expanded regulatory focus on safety and environmental risk preparedness and mitigation in the near future.

The lack of clarity in policies will hinder the ability of companies to make appropriate investment decisions. For example, an energy policy which intends to shift away from oil because of environment factors would reduce oil demand; an energy policy that intends to increase regulation, inspection times and potential liabilities, will drive costs up. Understanding and anticipating the national energy policy of the country in which oil and gas operations take place could be helpful in mitigating this issue.

Access to sufficient oil and gas reserves at reasonable costs is another constant challenge faced by the industry. The costs and risks that companies are exposed to increase as explorations are conducted in more difficult environments, such as the Canadian oil sands, the Artic or deep water reserves. In addition, political factors also play a key role given that restrictions, and in some cases prohibitions, are placed on reserve access. In developing countries, political unrest or the nationalisation of resources might lead to disruptions in supply. Potential increased competition for reserves between international oil companies (IOCs) and national oil companies (NOCs) further compounds the issue. The latter’s advantage of having the backing of sovereign funds, local government support and greater proximity to emerging markets in Asia, is likely to increase pressure on the IOCs.

The need to control costs is largely driven by the need to improve cash flows as well as to sustain profitability and shareholder value. Last year, many companies focused on cost controls to preserve margins. As the economy improves, companies should look to sustain those cost cuts. Also, they will need to plan for project cost inflation. Both operational and production costs will rise, especially given potential new mandates around safety and the environment. Increasing the focus on rigorous working capital management to raise liquidity levels should thus be a priority.

With the current economic climate still uncertain, many developing countries now face a sharp decline in income from their sovereign investments and tax regimes. Consequently, oil and gas companies are exposed to the risks of increased taxes and other measures from the governments as a substitute. In addition, IOCs are susceptible to renegotiation of joint venture agreements with NOCs and agreeing on new models which may favour local governments. The risk of worsening fiscal terms in the industry also applies to the developed countries, whereby governments are considering higher taxes, lower incentives for exploration, new royalties and other measures.

Failure to be seen as responding to climate change and oil’s perceived role as a driver of this change will have huge reputational risks for energy companies and the sector as whole. The European Union (EU) has introduced a number of environment goals and standards to reduce the level of carbon emissions by at least 20 per cent by 2020. It has also introduced the Emission Trading Scheme to provide an incentive to use renewable energy over fossil based fuels.

Similarly, China has created new environmental regulations to reduce levels of greenhouse gas emissions by incentivising the use of nuclear and renewable energy. Although these regulations are largely directed towards coal emissions, China’s growing importance as a sizeable global player will affect the climate debate in 2010 and beyond. Meanwhile, additional legislation pertaining to the oil and gas sector in the US is under consideration and it is expected that measures relating to increased environment and safety regulations, and civil penalties and fines levied for violations of environmental laws will kick in.

Governmental regulations aside, the industry also has to contend with increasing pressure from shareholders to disclose risks related to environmental concerns – an area of heightened scrutiny in the aftermath of the spill in the Gulf of Mexico. These disclosures should include risks associated with offshore drilling operations and potential environmental impact, in addition to the prevention, response and governance measures that companies have in place. Rather than treating climate and environment concerns as a separate issue, oil and gas companies should integrate the management of this risk into their routine risk assessment and business model.

In light of corporate social responsibilities and the economic and regulatory pressures the industry is exposed to, it is clear that the oil and gas business is a ‘risky’ one. Most of these risks discussed are not transient, although the risk profiles may evolve with time. Keeping on top of the mitigating strategies will be vital for keeping out of trouble, and ensuring that your current portfolio and future investments will be profitable and sustainable.

Original Article

Original Article

Only one deep drill permitted since official lifting

NEW ORLEANS, La. – Despite one month with no official moratorium, permitting for both shallow and deep water drilling continues to lag. Greater New Orleans Inc. released its Gulf Permit Index on Wednesday and highlighted that the Bureau of Ocean Energy Management, Regulation, and Enforcement has approved only one deep water well in the past month. That compares to a monthly average of six for the previous year, an 83 percent decline.*

Deep Water Permits

At no time was there an official moratorium on shallow water drilling. However, permits for that classification too have lagged. In May BOEMRE approved no new shallow wells, and over the past three months they have approved shallow water wells at less than half of last year’s rate. While shallow water permitting did start to appear comparable to historical levels in October, thus far November has seen zero approvals.

Shallow Water Permits

GNO Inc. estimates that for every deep well rejected approximately 700 direct Louisiana jobs fall by the wayside, and 350 jobs in the case of shallow wells. So they are “tracking and reporting” the number of permits issued “versus historical rates.”

“The concern is that we still have a de facto moratorium… Up to 30,000 jobs will be at risk in Louisiana if permits are not issued at a reasonable rate,” says Michael Hecht, president of GNO Inc.

Thomas Clements of Broussard, Louisiana, is owner and operations manager of Oilfield CNC Machining and relies heavily on drilling activity for clients. He has seen no change since the official lifting of the moratorium, and his revenue is down 54 percent since last year. Yesterday he was in Washington, D.C., and testified before the National Oil Spill Commission.

“We just don’t see any end in sight here… The drilling rigs are not moving because [the federal government] keeps coming up with new rules and regulations every week, so nobody knows what to do… another way of holding the industry back.” (Watch his testimony here on C-SPAN, beginning at 3:26:08.)

According to Don Briggs, president of the Louisiana Oil and Gas Association, many of his members do not foresee regular permits until mid-way next year, perhaps not until 2012. “The permitting process has become so complex,” he says, and given prior comments from federal officials, he is not surprised by what has followed the public lifting of the moratorium. Interior Secretary Kenneth Salazar referred to a “higher bar” for approval, and Michael Bromwich, director of BOEMRE, would not commit to permitting before the end of the year.

Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy. He can be contacted at fhodgson@pelicaninstitute.org, and one can follow him on twitter. This article originally appeared on the Institute’s home page.

* While BOEMRE has issued one permit this month, that does not appear on the diagram because a total for November will not be known until the end of the month.