North America Shale Blog

North America Shale Blog

Pennsylvania Governor Reinstates Ban on Oil and Gas Leasing in State Parks and Forests

Posted in Oil and Gas, Pennsylvania

On Thursday, January 29, 2015, Pennsylvania’s new governor, Tom Wolf, signed Executive Order 2015-03, thereby reinstating a moratorium on new leases for oil and gas development in state parks and forests. Wolf’s moratorium restores a ban instituted by Governor Ed Rendell just prior to his leaving office in 2010. Republican Governor Tom Corbett had lifted Rendell’s moratorium by Executive Order 2014-03 on May 23, 2014.

Wolf, who campaigned heavily on a promise to ban fracking on state lands, insists that he generally supports fracking, but was concerned with “striking the right balance” because “[o]ur state parks and forests are unique assets that should be preserved, protected, and utilized by our residents for recreational purposes.” Continue Reading

2015 Texas Legislative Session Includes Twin Bills Concerning Municipal Fracking Bans

Posted in Oil and Gas, Texas

With the opening of the 84th Session of the Texas Legislature on January 13, 2015, two of the more closely watched bills in the energy arena will be House Bill 539 (HB539) and House Bill 540 (HB540).

HB539, filed on December 17, 2014, by Representative Phil King (R) of Weatherford, relates to “the procedural requirements for the adoption of a municipal regulation, limitation, or prohibition on the production, storage, or transportation of oil or natural gas.” The bill proposes to require any municipality seeking to enact an “oil and gas measure,” which the bill defines as “a municipal ordinance or other municipal measure … to regulate, limit, or prohibit the production, storage, or transportation of oil or gas,” to prepare a Fiscal Note and an Equalized Education Funding Impact Statement.

The Fiscal Note must state the fiscal implications of the potential oil and gas measure for the state and local governments; the probable cost to the state that will result from the measure, including potential lost tax revenue, lost fees, lost royalty income, and diverted state funds; and the amount of money the municipality adopting the measure will be required to annually remit to the state as reimbursement for the cost to the state resulting from the oil and gas measure. Continue Reading

Layoffs in the Energy Sector – Are Employers Prepared?

Posted in Oil and Gas

Over the past few weeks, the media has focused intently on the oil and gas industry’s extensive layoffs. Well known energy companies have made front-page news with their announcements of their significant layoffs that have often resulted in the termination of thousands of employees or a significant percentage of their workforce. This trend, it appears, is only beginning, and many employers in the industry or that work closely with the industry will face tough decisions regarding their employees. This is, by and large, common knowledge. As a result, employees, plaintiffs’ attorneys, and government agencies charged with upholding labor and employment law are paying close attention. As companies prepare to conduct future layoffs, they must be vigilant in ensuring that they are complying with federal and state laws and tackling the layoffs in the most efficient and practical way possible. Below are some quick tips for employers to consider as they contemplate and plan actions affecting their workforce. Continue Reading

The “LNG Permitting Certainty and Transparency Act”—A Positive Step Toward Expediting U.S. LNG Export Projects

Posted in Natural Gas

Restrictive regulations and permitting processes that operate at glacial speed (as opposed to market speed) pose the primary hurdles to greater U.S. exports of liquefied natural gas (LNG). In response to a chorus of complaints from industry, Senators John A. Barrasso (R-WY) and Martin Heinrich (D-NM) recently introduced the “LNG Permitting Certainty and Transparency Act,” the 114th Congress’s first legislation aimed at increasing U.S. exports of LNG.[1] Along with Barrasso and Heinrich, Senators Cory Gardner (R-CO), Heidi Heitkamp (D-ND), John Hoeven (R-ND), Tim Kaine (D-VA), Shelley Moore Capito (R-WV), and Michael Bennet (D-CO) also served as original cosponsors of the Act.[2]

Rep. Bill Johnson (R-OH) subsequently introduced H.R. 351, an identically named bill with virtually identical legislative language, in the House on January 14, 2015.[3] Both bills aim to create an anvil upon which prospective LNG exporters can use the courts to hammer the Department of Energy (DOE) into making faster decisions on project approvals.

At present, U.S. federal regulators have given full and final approval to four LNG projects with a combined export capacity of approximately 7 billion cubic feet per day (BCF/d)—Cheniere Energy’s Sabine Pass facility, Freeport LNG, Cameron LNG, and Carib Energy.[4] Several other projects appear sufficiently advanced that passage of the LNG Permitting Certainty and Transparency Act would accelerate their ability to get shale gas-based LNG into the global marketplace.

The Bill’s Core Provisions

The latest version of the proposed Act would force the Secretary of Energy to make a final decision on any application for authorization to export natural gas under Section 3(a) of the Natural Gas Act within 30 days (versus 45 days for the earlier Barrasso/Heinrich version) of:

(1) the conclusion of the review to site, construct, expand, or operate the liquefied natural gas export facilities required by the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.);

(2) or the date of enactment of this Act, if the NEPA review for a proposed export project has already concluded.[5]

The bill would consider NEPA review “concluded” when the lead agency (typically the Federal Energy Regulatory Commission or FERC):

(1) Publishes a Final Environmental Impact Statement (EIS);

(2) Publishes a Finding of No Significant Impact; or

(3) Determines that an application is eligible for a categorical exclusion pursuant to National Environmental Policy Act of 1969 (42 U.S.C. 4321 et. seq.) implementing regulations.[6]

In a civil suit brought under the Act, if the court found that the Secretary of Energy failed to issue a decision on the application as required under subsection (a), the Court would be required to order the secretary “to issue the decision not later than 30 days after the Court’s order.”[7] Additionally, courts would be required to set civil actions brought under the Act for expedited consideration and would have to set the matter on the docket “as soon as practical after the filing date of the initial pleading.”[8]

The Act’s Practical Impacts

Despite the robust enforcement levers the Act proposes, it would not address a major obstacle to expanding U.S. LNG exports: the ponderous environmental review process for export projects, which can take between 18 and 30 months and cost $100 million for proposals to export LNG to countries with which the U.S. does not have free trade agreements (FTAs).[9]

However, it would force the DOE to make much faster decisions on whether to grant commercially advanced facilities permits allowing them to export gas to countries that do not have free trade agreements with the U.S., a cohort that includes Japan, Ukraine, and other large potential customers for U.S. LNG.

At present, the DOE takes much longer than 30 days to issue final approvals. For instance, Cheniere’s Corpus Christi export facility—which will have the ability to ship 2.1 BCF/d of gas—received its final environmental approval from FERC nearly four months ago but the DOE has still not granted it final approval to export gas to countries that do not have FTAs with the U.S.[10]

Bottom Line: The Act Is a Positive First Step Toward Reducing Regulatory Impediments to Greater U.S. LNG Exports

Industry players recognize that U.S. LNG exporters can capitalize on abundant domestic gas supplies and a large base of pre-existing pipeline and terminal infrastructure to become highly competitive, low-cost global suppliers. Key members of Congress, meanwhile, increasingly view U.S. LNG exports as a form of geopolitical leverage that can help a number of European countries potentially reduce dependence on gas supplies from Russia.[11]

Hammering this point home, Russia is again using natural gas supplies to manipulate Europe. On January 15, 2015, Gazprom announced it plans to shift all Russian gas that currently transits Ukraine to a pipeline through Turkey.[12] If carried through, this will isolate Ukraine and force EU consumer countries to build costly new pipelines connecting Turkey to the EU gas distribution network.

World-class U.S. geology and infrastructure, geopolitical events, and two powerful industry and political interest constituencies are creating a more permissive environment for LNG exports from the U.S. The House and Senate already display healthy bipartisan support for LNG exports, and it is likely that a reasonably strong form of these bills—or at least the objectives they seek to attain—will survive the legislative process and pass in the next few months.


[1] Nick Snow, “Barrasso, Heinrich introduce bill to increase LNG exports,” Oil & Gas Journal, 7 January 2015, http://www.ogj.com/articles/2015/01/barrasso-heinrich-introduce-bill-to-increase-lng-exports.html

[2] “Barrasso-Heinrich Introduce Bipartisan Bill to Speed Up American LNG Exports,” John Barrasso Senate website, 6 January 2014, http://www.barrasso.senate.gov/public/index.cfm/2015/1/barrasso-heinrich-introduce-bipartisan-bill-to-speed-up-american-lng-exports

[3] H.R. 351, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/114/BILLS-114hr351ih.pdf

[4] Ayesha Rascoe, “UPDATE 1-U.S. approves LNG exports from Sempra, Carib Energy projects,” Reuters, 10 September 2014, http://www.reuters.com/article/2014/09/10/usa-lng-exports-idUSL1N0RB1XC20140910; “Freeport LNG Receives Final FERC and DOE Approvals,” 17 November 2014, http://www.freeportlng.com/PDFs/11172014FreeportApprovalsfinal.pdf

[5] Draft Senate Bill, http://www.barrasso.senate.gov/public/Files/LNGPermittingCertaintyandTransparencyAct.pdf, accessed 15 January 2015.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Jennifer A. Dloughy, “Industry pans feds’ plan for gas exports,” FuelFix, 22 July 2014, http://fuelfix.com/blog/2014/07/22/industry-pans-feds-plan-for-gas-exports/

[10] “FERC Staff Issues Final Environmental Impact Statement on the Corpus Christi LNG Project (Docket Nos. CP12-507-000 and CP12-508-000),” 8 October 2014, https://www.ferc.gov/industries/gas/enviro/eis/2014/10-08-14-eis.asp

[11] “Hoeven, McCain, Murkowski, Barrasso Introduce the North Atlantic Energy Security Act,” 11 July 2014, http://www.hoeven.senate.gov/public/index.cfm/2014/7/hoeven-mccain-murkowski-barrasso-introduce-the-north-atlantic-energy-security-act

[12] “Gazprom Tells the EU It Will Shift All Gas From Transiting Ukraine to Going Through Turkey,” (“Газпром” обещал ЕС перевести весь украинский транзит газа в Турцию), oilcapital.ru, 15 January 2015, http://www.oilcapital.ru/export/260382.html

Crude-by-Rail Update: Municipalities in the Bakken Push Back Against Increasing Train Traffic

Posted in North Dakota, Oil and Gas, Transportation

Throughout the 19th and early 20th centuries, towns in the western United States grew and thrived around the railroad. In fact, the railroad tracks often became a central geographic feature within towns, birthing the colloquial phrase “the other side of the tracks.” But with increasing train traffic, largely due to unit trains transporting Bakken crude oil, many small-town residents complain that traveling to the other side of the tracks now takes considerably more time.[1]

Frustrated with delays caused by idle trains, two North Dakota towns have taken action to limit the time trains may block railroad crossings.[2] One town—Enderlin—passed an ordinance to that effect in October 2014.[3] Last week, the Enderlin City Council repealed its ordinance in response to a lawsuit and pending preliminary injunction motion filed by Canadian Pacific.[4] Continue Reading

Series of Small Earthquakes Hits Dallas Area

Posted in Hydraulic Fracturing, Texas

During a span of about 30 hours between the morning of Tuesday, January 6, and the early afternoon of Wednesday, January 7, twelve small earthquakes were confirmed by the United States Geological Survey in the Dallas area. While the tremors, ranging in magnitude from 1.6 to 3.6, have not appeared to cause any injuries or serious damage, local scientists and officials are investigating the causes of the unprecedented amount of seismic activity in the area. Since 2008, the Dallas area has experienced over 100 earthquakes. Prior to 2008, only one earthquake had been recorded in the Fort Worth Basin, which lies beneath the Dallas urban area. A team of researchers led by Professor Brian Stump, a seismologist at Southern Methodist University, is working with local city officials to study the causes of these quakes, although it may be several months before Stump and his team can collect and analyze enough data to make any conclusions. Continue Reading

Louisiana Denies Drilling-Related Permit in Scenic Waterway

Posted in Hydraulic Fracturing, Louisiana

Louisiana has denied a permit to an energy company seeking to use water from a state-designated scenic river for its drilling operations. The decision represents the first time in Louisiana’s history that a permit to draw water has been denied to a company intending to use water from a protected river for hydraulic fracturing.

Comstock Resources, Inc., a Texas company that operates hydraulic fracturing projects throughout the Gulf Coast, submitted its application in June of last year to pump 12.6 million gallons of water from the Amite River to operate a well in East Feliciana Parish, a region just north of Baton Rouge. Once used, the river water would have been disposed of as hazardous waste. Continue Reading

Mexico Is Becoming the Single-Largest U.S. Shale Gas Export Customer

Posted in Shale

On December 2, 2014, President Enrique Peña Nieto inaugurated Phase I of the new Los Ramones Gas Pipeline, which could by year end 2016 double the volume of gas the U.S. exports by pipeline to Mexico.[1] Pipelines to Mexico already move a volume of gas equivalent to more than 16 million tonnes per year of LNG.[2]  Once Los Ramones reaches full capacity, U.S. gas producers will be able to export to Mexico more than seven times the annual gas volume that Osaka Gas and Chubu Electric—two of Freeport LNG’s largest LNG export customers—have signed up to purchase.[3]

The first 116 km stage of the pipeline project links Agua Dulce, Texas, to Los Ramones, Nuevo Leon. Phase II of the project is a 738 km line from Los Ramones into Mexico’s industrial heartland, including San Luis Potosí, Guanajuato, and Querétaro.[4] Phase II began construction in August 2014 and will likely enter commercial service by early 2016.[5] Continue Reading

U.S. Department of the Interior Launches Online Data Portal Giving Access To Revenue Data

Posted in Oil and Gas

Last Thursday, December 11, 2014, the Department of the Interior (“DOI”) became the latest governmental agency to open the doors to some of its data via a new online portal located at https://useiti.doi.gov/.[i]

Shale-Blog-1

The new portal is part of the U.S. implementation of the Extractive Industries Transparency Initiative (“USEITI”) and follows President Obama’s May 9, 2013 executive order, making open and machine-readable data the new default for government information:[ii]

“To promote continued job growth, Government efficiency, and the social good that can be gained from opening Government data to the public, the default state of new and modernized Government information resources shall be open and machine readable. Government information shall be managed as an asset throughout its life cycle to promote interoperability and openness, and, wherever possible and legally permissible, to ensure that data are released to the public in ways that can make the data easy to find, accessible, and usable. In making this the new default state, executive departments and agencies (agencies) shall ensure that they safeguard individual privacy, confidentiality, and national security.” Continue Reading

Poe Leggette & Alex Obrecht Present on the Safety Concerns that Face Crude-by-Rail Transportation

Posted in Oil and Gas, PHMSA, Transportation

BakerHostetler’s energy group co-head and a member of the energy team recently presented on the safety concerns that confront the transportation of crude oil by rail. Focusing primarily on federal regulation, the team explained the role and powers of the Department of Transportation (DOT), the Federal Railroad Administration (FRA), and the Pipeline and Hazardous Materials Safety Administration (PHMSA). Additionally, the team outlined the regulatory efforts to date and discussed the possible outcomes of the current crude-by-rail rulemaking.

Although no strangers to traditional oil and gas regulation, midstream and upstream companies entering crude-by-rail transportation may find themselves facing new regulators, primarily FRA and PHMSA. These agencies can exercise significant power over crude-by-rail transportation, including unannounced inspections,[1] emergency orders,[2] and traditional rulemaking. Noncompliance with the agencies’ mandates may also result in significant civil, and even criminal, penalties.[3]
Continue Reading