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Oil and Gas Roundup — Feb. 7

February 07, 2014
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Photos debunk key anti-HF claim

Newly released photos of a flaming water well have renewed skepticism of claims by environmental activists and federal regulators that hydraulic fracturing made drinking water supplies in Parker County, Texas, flammable.

The 2005 photos show that drinking water in the area contained sufficiently high methane concentrations to be ignited years before a company blamed by environmentalists for water contamination began drilling in the area.

The Environmental Protection Agency in December 2010 issued an endangerment order against Range Resources, saying the oil and gas company either caused or contributed to groundwater contamination in Parker County.

Independent analyses of the case contradicted the EPA’s claims, which the agency released in collaboration with environmental activists in the state. EPA’s inspector general in December exonerated agency officials of wrongdoing in that collaboration, though questions about the agency’s close relationship with environmental groups remain unanswered.

The agency later settled with Range and withdrew its order. However, environmentalists continued to tout the Parker County case as an example of the environmental dangers of hydraulic fracturing, also known as fracking.

A flaming garden hose in Parker County served as a potent image in environmental activist Josh Fox’s 2012 film Gasland Part II. Fox and others have blamed fracking, an innovative oil and gas extraction technique, for polluting nearby drinking water with flammable methane.

Fracking supporters contend that such methane concentrations often appear naturally in water supplies near natural gas wells. Photos released through the legal proceedings against Range, first made publicly available on Wednesday, could bolster their case.

The photos show a flaming water well in Parker County, about a half mile from the gas well that allegedly contaminated the water well shown in Gasland. However, the photos were taken years before Range began drilling in the area.

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Salazar: Science backs safety of hydraulic fracturing

The science is there, hydraulic fracturing is safe, and it is important that the information get out to the public, said former U.S. Secretary of the Interior and U.S. Sen. Ken Salazar. Salazar served as a keynote speaker at the NAPE Business Conference on Wednesday at the Houston George R. Brown Convention Center.

The U.S. energy landscape is changing once again. From the rush to acquire unconventional assets to harvesting undeveloped plays and returning cash, the oil and gas industry is shifting gears, this time looking to address issues surrounding the sustainability of the revolution in U.S. energy supplies. Salazar spoke to the theme of the conference, “Sustaining the U.S. Oil and Gas Revolution” by speaking to attendees about respective roles of public policy and private enterprise and provided insight on relevant national and global governance.

Salazar pointed to an EIA forecast predicting that foreign oil imports to the US will fall to 25% by 2016. “That is a revolution,” he said, but to sustain the momentum, we need to look at how we’ve collaborated and recognize the challenges we’ll face as an industry, he said, turning to his time as Secretary of the Interior when he was “at the point of the spear” during the Macondo disaster. The response that followed the Deepwater Horizon incident was a testament to the degree of collaboration possible, he said, pointing out that through the lessons learned, "The Gulf of Mexico is now one of the safest places to operate in the world," he said.

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Debt limit deal will not be tied to Keystone pipeline

House Republicans said Thursday there’s no place for the Keystone XL oil pipeline in legislation to raise the debt limit.

“The Keystone pipeline creates job, but it really is not a debt-ceiling type issue,” Rep. Joe Barton of Texas, a top Republican on the House Energy and Commerce Committee, said during a discussion at POLITICO’s “Energy & the 113th Congress” event.

Barton said he expects President Barack Obama to ultimately approve the pipeline, which would carry oil-sands crude from Alberta, Canada, to refineries along the Gulf Coast.

Rep. John Shimkus of Illinois, another top Republican on the committee, said momentum toward approving the pipeline makes congressional action on the issue less urgent.

“We think it’s moving in the right direction, so I think that’s why we’ve got some other fish to fry,” Shimkus said, adding, “It’s not as pressing.”

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Spike in oil-by-rail fueled by regulatory delays, experts say

Rapidly developing oil and gas production in North Dakota, Texas and other states is outpacing the construction of new pipelines and other infrastructure to carry those fuels to market, energy experts and former government officials warned Thursday.

A white paper released by the United Transportation Advisers consultancy blamed regulatory delays for discouraging swift pipeline construction — and ultimately encouraging oil producers to begin moving increasing amounts of crude by less-efficient rail.

According to the rail industry, 400,000 carloads of crude traveled by rail in 2013, compared to just 10,000 four years earlier. In North Dakota, as much as 90 percent of the oil produced from the Bakken formation this year will be transported by rail, up from 60 percent last year, according to forecasts cited by the white paper.

Increased oil-by-rail traffic — to supplant insufficient pipelines — raises the risks of catastrophic accidents, said the report’s authors, Nixon White House energy adviser Jack Rafuse and former Unocal Pipeline Vice President of Vern Grimshaw.

“Delays in the regulatory process are forcing energy producers to forgo the use of pipelines in lieu of less-efficient shipping modes, which in turn could lead to an increase of avoidable accidents,” the pair said. “By failing to act, regulators are effectively mandating inefficiencies into the system, which disrupt the market and stifle investment and development.”

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Utica shale play hits milestone with 300 producing wells

The Utica shale region now has 300 producing oil and gas wells, another milestone for the young play.

The latest update from the Ohio Department of Natural Resources shows 300 active wells out of 707 wells drilled. There are 38 rigs and 1,074 permits issued for horizontal drilling, the report says. The play cleared 1,000 permits in December.

Last week there were 14 new permits issued, mostly to Chesapeake Energy Corp. and in Harrison County, which holds 172 well permits.

Cheseapeake, the most-active driller in the Utica play by a large margin, said Thursday that it will spend 20 percent less on its capital expenditures than it did last year.

The Oklahoma City-based company said it plans to spend between $5.2 billion and $5.6 billion in 2014. While it will spend less, it will focus on drilling in U.S. shale regions with natural gas liquids that should offer high returns.

The bulk, 35 percent, of Chesapeake’s 2014 budget is scheduled for drilling in the Eagle Ford shale field in Texas. The company is dedicating 15 percent to the Utica play.
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