Monday, December 5, 2016

Shale Law Weekly Review - December 5, 2016

The following information is an update of recent, local, state, national, and international legal developments relevant to shale gas.

Army Corps Decides to Refuse Easement for Dakota Access Pipeline
On December 4, 2016, the United States Army Corps of Engineers (USACE) announced they will not grant an easement to allow the Dakota Access Pipeline to cross under Lake Oahe. According to the U.S. Army website, the Army’s Assistant Secretary, Jo-Ellen Darcy says there is a need to explore alternate routes for the pipeline. The Assistant Secretary says alternate routes will probably be considered by way of an Environmental Impact Statement.

Stone Energy Corporation Faces Royalty Violation Lawsuits
According to the West Virginia Record, Stone Energy Corporation now faces two lawsuits for contract violation claims. The article states that the plaintiff landowners entered into oil and gas leases for their properties in Wetzel County. These landowners claim the leases are invalid because the leases “do not state with particularity the specific deductions the lessee intends to take from the lessor’s royalty…” In addition, the article shows that the plaintiffs protest the post-production costs taken from the royalty payments, allegedly in violation of West Virginia law.

Environmental Protection Agency Releases Drinking Water Action Plan
On November 30, 2016, the Environmental Protection Agency (EPA) released a report entitled “Drinking Water Action Plan.” The plan “is a national call to action, urging all levels of government, utilities and other key stakeholders to work together - to reinvigorate the safe drinking water enterprise…” The number one priority area is promoting and building capacity for drinking water infrastructure financing and management. The other five priority areas include next generation oversight, strengthening source water protection, addressing unregulated contaminants, improving transparency for drinking water safety and reducing lead risks.

Accountability Office Says Biofuel Production Insufficient for RFS Program
On November 28, 2016, the U.S. Government Accountability Office published a study on the Renewable Fuel Standard (RFS) program titled “Program Unlikely to Meet Its Targets for Reducing Greenhouse Gas Emissions.” According to the study, “[l]ess than 5% of the 3 billion cellulosic biofuel RFS target was produced in 2015, and additional investments for commercialization seem unlikely.” The study says that advanced biofuels greatly decrease the amount of greenhouse gas released and with the current limited production of biofuels, reduction goals for greenhouse gas are unlikely to be achieved.

EPA and Slawson Exploration Co. Agree on Consent Decree for Clean Air Act Violations
On December 1, 2016, a consent decree was proposed between Slawson Exploration Co. and the U.S. Environmental Protection Agency (EPA). According to an EPA press release, the claims were based on Slawson’s alleged Clean Air Act violations for oil and gas production in North Dakota. EPA inspectors had discovered volatile organic compound (VOC) emissions visually and with optical gas imaging infrared cameras. Additionally, inspections uncovered impermissible pit flares, visible emissions from pit flares, open thief hatches, and other violations. The settlement requires the company to perform system upgrades with better monitoring and inspections. Also, “Slawson will spend at least an estimated $2 million to fund environmental mitigation projects and pay a $2.1 million civil penalty.”

EIA Reports on Increase in Natural Gas Pipeline Exports to Mexico
On December 1, 2016, the U.S. Energy Information Administration (EIA) released a report on increasing shale gas exports to Mexico. According to the report, U.S.has a natural gas pipeline capacity of 7.3 billion cubic feet per day (Bcf/d) for gas traveling to Mexico. They estimate that the current pipeline capacity will double by 2019. At present, four pipelines to Mexico are under construction and two more will be built by the end of 2018. The EIA suggests this increase in natural gas exports by pipeline is due to “strong growth in Mexico’s natural gas demand in the power sector, declining domestic production, and the lower prices of U.S. pipeline gas compared with more expensive liquefied natural gas (LNG) imports.”

Study Examines Induced Seismicity Effects of Hydraulic Fracturing in Canada
On November 17, 2016, a study was published by the American Association for the Advancement of Science in Science magazine online. The study examines induced seismicity in western Canada resulting from hydraulic fracturing. The study notes that “[h]ydraulic fracturing has been inferred to trigger the majority of injection induced earthquakes in western Canada, in contrast to the midwestern United States where massive saltwater disposal is the dominant triggering mechanism.” The study is called “Fault Activation by Hydraulic Fracturing in Western Canada” and was written by geophysics professor David Eaton and Xuwei Bao at the University of Calgary.

Australia Finds Underpaid Royalties in North West Shelf Venture
On November 28, 2016, the Australian National Audit Office released a report on deficiency in royalty revenue collected from the North West Shelf joint venture. The report had been prepared to determine “whether the Department of Industry Innovation and Science has effectively and efficiently administered the collection” of revenues. Deductions were claimed for operating costs and depreciations in capital assets, which reduced royalty payments. These errors in deductions were due to limited oversight. In the 18 month period leading to December 2015, over $5 billion in deductions were claimed for petroleum revenues. Overall, at least “$8.6 million in royalties has been underpaid.”

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Written by Jacqueline Schweichler - Education Programs Coordinator

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