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A lawsuit by environmental groups over Anglo-Dutch supermajor Shell’s oil drilling in the Gulf of Mexico may become a “backdoor moratorium” that curtails US development, said Marvin Odum, the company’s US president.

The Natural Resources Defence Council of New York and Oakland, California-based Earthjustice said Obama administration approval of a Shell exploration plan for the Gulf’s deep waters violates environmental laws and should be withdrawn, according to petitions filed on 9 June.

“This suit has the potential to virtually halt exploration in the Gulf, serving as a backdoor moratorium,” Odum said in remarks prepared today for a speech at the US Chamber of Commerce in Washington, according to a Bloomberg report.

“Many of us here today may have different opinions on the drilling moratorium in the Gulf after last year’s spill. But it was long and painful both in terms of jobs and economic losses.”

Shell, Europe’s largest oil company, was first to win approval for its deep-water drilling plans after the BP oil spill led the US to toughen the environmental reviews.

The 20 April 2010 explosion of a drilling rig led President Barack Obama to ban deep-water exploration until mid-October.

Odum said the US regulatory system is “reactionary” and overburdened. He cited Alaska, where The Hague-based company has not been allowed to drill after spending more than $2 billion to acquire offshore leases, Bloomberg reported.

“There are some encouraging signs,” he said. “The president created a cabinet-level inter-agency working group on energy development and permitting in Alaska. This is an important step and recognition that the current regulatory apparatus was not up to the challenge of efficiency permitting a project such as this.”

Shell needs about 35 permits to drill as many as two wells a year in the Beaufort Sea and as many as three a year in the Chukchi Sea from 2012 through 2013.

These waters may produce 700,000 barrels of oil per day for 40 years, Peter Slaiby, Shell Alaska’s vice president, said yesterday.

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NEW ORLEANS (AP) — Two major petroleum companies have evacuated offshore operations in the southwestern Gulf of Mexico with the approach of Tropical Storm Don.

The storm is expected to make landfall Friday in southeastern Texas.

Royal Dutch Shell said it planned to have 195 workers evacuated from its Perdido Spar deepwater development by the end of Thursday. The company said it has shut down production, but did not provide figures on how much would be closed off.

ExxonMobil said it is evacuating an undisclosed number of non-essential workers from its offshore operations in the region. ExxonMobil said its production shutdown would total about 8,000 barrels of oil per day, along with 50 million cubic feet of natural gas per day.

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By Nick Snow

Oil & Gas Journal

WASHINGTON, DC — US Environmental Protection Agency statements on health benefits from lowering the ozone National Ambient Air Quality Standards grossly misrepresent what EPA actually estimates as possible benefits from reducing public ozone exposure, a new study commissioned by the American Petroleum Institute concluded.

“If based on ozone benefits alone, not one of EPA’s estimates of the benefits of reducing ozone to a tighter alternative ozone standard is as large as the costs of attaining that respective ozone standard,” the study by NERA Economic Consulting said. “All cost more than the ozone benefits they might provide.”

“The regulatory impact analysis is creating a misleading impression that the benefits would be reasonable,” said NERA Economic Consulting Senior Vice-Pres. Anne E. Smith, the study’s author, in a July 28 teleconference. “EPA’s own numbers show that the costs would be much greater than the benefits.” She was scheduled to meet with White House Office of Management and Budget officials later in the day.

“In fact, the ozone benefits would be small, and the costs of more stringent standards dwarf them,” said API Scientific and Regulatory Affairs Director Howard Feldman, who also participated. “No other rules could be more detrimental to economic growth, and they fly in the face of President Obama’s regulatory reform initiative.”

The study said EPA’s ozone benefits estimates from the proposed tighter standards does not consider that the agency has escalated those benefits by always including benefits due to ozone-related mortality. It said EPA’s independent scientific advisory committee found no causal link between ozone and mortality during its considerations, but the agency now presume that link as part of its reconsideration.

Despite this change that the scientific advisory committee does not support, “EPA’s net benefits estimates for ozone standards tighter than 0.75 ppm are all still deeply negative,” the study said.

Three main flaws

“In its analysis, EPA is unable to identify how the nation will comply with these new standards,” Feldman said. “EPA has proposed stringent new standards that are out-of-cycle, not supported by science, and would have devastating economic consequences. It should move forward with the normal 5-year review now under way.”

API has been working hard to change the administration’s mind, according to Khary Cauthen, the trade association’s government affairs director. “Our industry understands the value of air quality to our society, and has worked very hard over the years to reduce the emissions in the air we all breathe,” he said during the teleconference. “It is our hope that in the next month, the president will become involved and ask that this rule be pulled back and moved into the normal regulatory cycle.”

EPA does not even know how the new standards would be met, he continued. “Larger industries certainly would be more heavily impacted, but no business would remain untouched. The standards would be so close to background ozone levels that operations would close and business moved elsewhere,” Cauthen said. “This isn’t a recipe on how to rebuild an economy. All of this could affect the economic lives of millions of Americans. They need to know about the consequences and make their voices heard.”

Feldman conceded that EPA is not legally required to consider proposed regulations’ economic consequences, but added that they have to inform the agency administrator’s final decisions. “Past administrators have looked at how standards would be implemented, and have set them at attainable levels,” he said. “There’s no reason to move the goal posts now as we are trying to reach the present standard.”

API also announced that it is launching an advertising campaign to get citizens to telephone the White House and express concern about EPA’s proposed regulation. “You can’t work in a factory that was never built,” a print advertisement from the Coalition for American Jobs’ campaign says.

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By America’s Natural Gas Alliance

Published: Thursday, Jul. 28, 2011 – 4:02 pm

AUSTIN, Texas, July 28, 2011 — /PRNewswire/ –  Background: America’s Natural Gas Alliance (ANGA) Texas State Lead, David Blackmon, issued the following statement on the formation of the Eagle Ford Shale Task Force. The Task Force is comprised of a broad spectrum of diverse stakeholders and was formed to open lines of communication between all parties, establish best practices for Eagle Ford Shale development, and promote the significant economic benefits.

“ANGA is very encouraged by Texas Railroad Commissioner David Porter’s announcement of the Eagle Ford Task Force and the diversity of interests represented on the panel.  The forethought shown in the formation of such a pivotal group and its impressive level of community engagement clearly demonstrates a keen understanding of the Eagle Ford region itself.

“Addressing public concerns and operational issues that arise in a transparent and proactive manner is the best way to ensure the public and interested third parties that the tremendous resource potential of the Eagle Ford formation is being developed in a safe and responsible manner.

“We are very hopeful that the diversity of interests represented on the Task Force will lend a maximum level of credibility to the panel’s activities with the public at large and with the news media.  By creating a broad-based group and committing to conduct its activities in a transparent manner, we believe Commissioner Porter is doing a tremendous public service for the oil and natural gas industry, the Eagle Ford region, and the people of Texas.”

America’s Natural Gas Alliance (ANGA) represents 31 of North America’s leading independent natural gas exploration and production companies. ANGA members are dedicated to increasing the appreciation of the environmental, economic and national security benefits of clean, abundant, American natural gas. Learn more about ANGA at www.anga.us.

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By Ariel Cohen and Anton Altman

A report released last week by the Baker Institute at Rice University, “Shale Gas and U.S. National Security,” focused on the foreign policy benefits of this domestically produced fuel. The authors undertook the study in light of the tremendous growth in discoveries of natural gas from shale in North America and the technological innovations that made it possible. There exists as much as 2,000 trillion cubic feet of salvageable natural gas in North America alone, or roughly 100 years’ worth of gas consumption worth for the United States.

This new U.S. natural resources wealth has far-reaching implications for foreign policy. In a world in which energy is playing a central role in the economies of all nations, both developing and developed, those blessed with energy abundance have long held sway in world affairs, not always for the better. Think of Russia, Iran, and Saudi Arabia.

The discovery of vast shale gas resources in North America allows for domestically produced and environmentally clean energy alternatives not just for the U.S. but for our allies as well.

Europe benefits from U.S. gas wealth. The major exporter of natural gas to Europe has long been Russia, which managed to dominate natural gas consumers there. The authors of the Baker Institute’s study believe that shale gas discoveries in North America have the potential to reduce Russia’s (non-former Soviet Union) European natural gas market share from 27 percent in 2009 to about 13 percent in 2040 and reduce Moscow’s ability to use energy policy as a tool for political gains. This is because the U.S. is not going to buy as much liquefied natural gas (LNG) as was originally thought on the world market, and Europeans may benefit from the glut as supplies from Qatar, Nigeria, Algeria, and West Africa become cheaper.

This is in addition to the large shale gas deposits in European countries such as Poland, Romania, Ukraine, and others that are still in the process of being discovered. For example, The U.S. Energy Information Administration said in April that Poland had some 5.3 billion cubic meters of shale gas deposits.

Availability of cheap LNG in Europe is forcing Gazprom, the Russian state-owned natural gas behemoth, to reduce prices and partially decouple gas pricing mechanisms from the very high crude oil prices. This makes electricity prices in Europe grow slower than in the past.

Though Russian gas exports continue to grow, their destination is switching to China and Japan. A Sino–Russian deal for the supply of up to 68 billion cubic meters of Siberian gas a year is in the works, with only the price still being haggled over. As Russia’s ability to unduly influence political outcomes in Europe may decrease, its bond with China grows ever stronger.

A more diverse energy supply benefits consumers and limits the current dominant exporters in the energy market. According to the Baker Institute report, this enhances U.S. interests by “buttressing Europe’s abilities to resist Russian interference in European affairs and help countries in Central and Eastern Europe, including the Balkans, assert greater foreign policy independence from Moscow.”

In essence, providing more diverse domestic energy sources for ourselves and others mitigates Russia’s ability to exert political power through its energy weapon. Thus it appears that the discovery of large shale gas deposits in North America has some powerful positive repercussions worldwide.

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By Robert Bradely
Washington Times

The ethanol, wind and solar industries are running scared from a House proposal to reduce federal subsidies for renewable energy by 25 percent for fiscal 2012. A surefire sign of the trouble with big government is that you run out of other people’s money.

The environmental left is running scared, too, at least when it comes to wind and solar. Federal cutbacks, leftists fear, will shrink the business lobby needed for their grand energy-transformation plan. In the parlance of political economy, the teetotalers need the help of bootleggers to sell their message to the voters.

Federal cutbacks have put wind and solar on the spot. Despite decades of promises, these energy sources remain uneconomic and misaligned with the need for reliable, flexible power. Left unsubsidized and without mandates, electricity generated from wind or solar would not find nearly enough buyers.

Meanwhile, deficits rage and voters want fiscal sanity. Can you imagine the opinion-poll results if respondents were asked to choose between spending fewer taxpayer dollars on renewable energy or basic government services? I doubt the American Wind Energy Association or the Solar Energy Industries Association would commission such a poll.

Solar power actually has a market niche and would exist as a small energy industry in a nonpolitical world. Off the electrical grid, solar panels can absorb and store sunlight as electricity until scale economies allow far cheaper central-station power to be transmitted by high-voltage lines. In this sense, renewable energy can be a bridge to conventional energy, not the other way around, as is often touted.

But wind power is another story. Wind for making electricity is almost wholly an artificial industry that would die without government largesse. Such industrial-sized machines are very different from the small windmills on farms that pump water.

Wind cannot compete against either natural gas or coal in electrical generation. Wind technology has improved, but so have conventional energy technologies. General Electric’s newest combined-cycle plants can convert natural gas into electricity at 61 percent efficiency and can reach full power within 30 minutes of startup. Back in the 1970s, by contrast, the best efficiency rate was closer to 40 percent, and a full rev-up took hours.

Nor are we reaching a physical peak in fuel production for conventional power plants. The shale boom has ushered in a new era for oil and gas extraction. We are not running out of fossil fuels; we are running into them. Contrary to what critics have been claiming for decades, the hydrocarbon energy age is still young.

Politically correct renewable energy has had quite a feast at the public trough for decades. The American Wind Energy Association’s recent gala with Jay Leno shows just how rich this club of crony capitalists has become. Their laughs were at the expense of taxpayers, but taxpayers are poised to have the last laugh.

Yet President Obama is digging in hard against any cutbacks in wind and solar subsidies. His “green dream team” – John P. Holdren, Lisa P. Jackson, Ken Salazar, Steven Chu, etc. – knows that a death spiral could be triggered if an industry contraction leads to future rounds of cutbacks. It is the political capitalism model in reverse: Declining government favor leads to less rent-seeking business.

Could this be the beginning of the end of the energy welfare state?

The anti-market environmentalists have only themselves to blame for their current predicament. They picked the wrong horse, or, more accurately, they picked the donkey to run against the horse. The meager flow of energy from solar and wind could never match the dense energy content of oil, gas and coal.

The future belongs to the efficient. The faster government-dependent energy gets cut down to size, the better it will be for the U.S. Treasury, for consumers and for the real energy entrepreneurs and capitalists.

Let’s start now.

Robert L. Bradley Jr. is CEO of the Institute for Energy Research and author of “Edison to Enron: Energy Markets and Political Strategies,” to be published next month by Scrivener Publishing and John Wiley & Sons.

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Washington (Platts)–28Jul2011/718 am EDT/1118 GMT

The US House of Representatives on Wednesday adopted an amendment to the Environmental Protection Agency’s fiscal 2012 spending bill cutting in half the agency’s funding for its greenhouse gas registry.

Representative Mike Pompeo, a Kansas Republican, sponsored the amendment, which cut $6.2 million from EPA’s account for upkeep of the GHG registry, which collects and maintains data on emissions from large stationary sources, such as power plants and refineries.

The amendment passed 235-191, with at least 11 Democrats voting to support it and 13 Republicans voting against, according to vote totals displayed on C-SPAN.

Pompeo accused EPA of collecting the data as a front for its “job killing” agenda to regulate GHG emissions. He said he would prefer to eliminate the program altogether, but viewed his amendment, which returned funding for the program to fiscal year 2009 levels, as a reasonable compromise.

Representative James Moran, a Virginia Democrat, blasted the measure as the “ignorance is bliss amendment,” arguing that the public has a right to know the level of pollution being emitted by large industrial sources.

Debate on the FY12 Interior, Environment and Related Agencies Appropriations bill is expected to continue through at least most of this week. The bill drastically cuts EPA and Department of Interior funding and includes dozens of provisions blocking Obama administration priorities.

Senate Democrats have said they will not pass the House bill and the White House has threatened a veto.

–Nick Juliano

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By Paula Dittrick

Oil & Gas Journal

HOUSTON, July 26 — US crude oil prices dropped on the New York Mercantile Exchange July 25, which analysts attributed to cautiousness by traders because talks appeared to have stalled in Washington, DC, regarding an agreement to raise the government debt limit and avoid a default by Aug. 2.

The US Congress is divided as lawmakers pursue rival budget plans, potentially bringing the government closer to a debt default that could undermine global markets.

Standard Bank analyst Leon Westgate described crude oil prices as “half-heartedly tracking the dollar,” and he noted both North Sea Brent and West Texas Intermediate “are consolidating and trading sideways.”

US light, sweet crude’s discount against Brent crude was $18.74 at the close of trading July 25, narrowing from $18.89 on July 22.

Westgate expects energy prices to be influenced by US government debt limit talks “the new few days.” Meanwhile, oil futures trading volumes were light July 25.

“As with the wider commodity markets, participants are looking towards the US and the debt ceiling negotiations,” he said.

Energy prices

The September contract for benchmark US light, sweet crudes decreased by 67¢, to $99.20/bbl July 25 on the New York Mercantile Exchange. The October contract dropped 60¢ to $99.60/bbl. On the US spot market, WTI at Cushing, Okla., dropped 66¢ to $98.90/bbl.

Heating oil for August delivery dipped 2.02¢ to $3.1078/gal. Reformulated blend stock for oxygenate blending for the same month edged down by 0.37¢ to $3.126/gal on NYMEX.

The August contract for natural gas inched down by 1.3¢ to $4.386/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., remained unchanged at $4.465/MMbtu.

In London, the September IPE contract for North Sea Brent dropped 73¢ to $117.94/bbl. Gas oil for August dipped $4 to $978.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 33¢ to $113.33/bbl.

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