Monday, August 5, 2019

Shale Law Weekly Review - August 5, 2019

Written by:
Sara Jenkins - Research Assistant
Jackie Schweichler - Staff Attorney

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

Pipelines: Appeals Court Vacates Biological Opinion and Incidental Take Statement for Atlantic Coast Pipeline 
On July 26, 2019, the U.S. Court of Appeals for the Fourth Circuit vacated a decision by the U.S. Fish and Wildlife Service (FWS) regarding endangered species potentially affected by the construction of the Atlantic Coast Pipeline (Defenders of Wildlife v. U.S. Dep’t of the Interior, No. 18-2090). The Petitioners – Defenders of Wildlife, Sierra Club, and Virginia Wilderness Committee – filed suit after FWS issued a Biological Opinion and Incidental Take Statement for the pipeline. The Biological Opinion concluded that two species, the rusty patched bumble bee and the clubshell, would not be jeopardized by pipeline construction. Further, the Incidental Take Statement issued by FWS set an allowable limit on two other endangered species, the Indiana bat and the Madison Cave isopod, that could be harassed or eradicated during construction of the pipeline. Ultimately, the court vacated both the Biological Opinion and the Take Statement, finding that “FWS arbitrarily reached its no-jeopardy conclusions and failed to correct the deficiencies in the take limits” that the court had previously identified.

LNG Exports: FERC Announces New Division to Handle LNG Export Facility Applications 
On July 23, 2019, the U.S. Federal Energy Regulatory Commission (FERC) announced the creation of a new division under the Office of Energy Projects to handle incoming applications for liquified natural gas (LNG) facilities. The new division will be referred to as the Division of LNG Facility Review and Inspection and will include an expansion of personnel to a new Houston Regional Office. According to the announcement, the amount of LNG projects in the United States has grown, requiring more resources for FERC oversight. Additional staffers are needed in Washington D.C. as well as in the Houston area for “completing engineering reviews, coordinating safety reviews with the Pipeline and Hazardous Materials Safety Administration, . . . and preparing engineering analyses for inclusion in environmental documents.” 

State Regulation: Colorado Oil and Gas Conservation Commission Approves Oil and Gas Rule Amendments 
On July 31, 2019, the Colorado Oil and Gas Conservation Commission (Commission) approved 
amendments to the state Department of Natural Resources’s practices and procedures. These amendments added language to streamline the process for adjudicatory matters typically handled by the Commission's hearing officers (1:29:30). More specifically, rule 303h was amended to allow administrative judges to hear and make recommendations regarding drilling permit requests (1:29:30). Additionally, the Commission approved amendments to rule 530, which regulates involuntary pooling procedures. Under the amendments, an owner must own or obtain consent from the owners of a combined “forty-five percent of the mineral interests to be pooled” before submitting an involuntary pooling application (2:11:00). The amendments were approved by motion at the hearing, and no objections were noted (2:36:30).

Pipelines: FERC Issues Draft Environmental Impact Statement for Southgate Pipeline Project 
On July 26, 2019, the Federal Energy Regulatory Commission issued a draft environmental impact statement (EIS) for Mountain Valley Pipeline, LLC’s Southgate project (project). The draft EIS concluded that the project would result in “limited adverse environmental impacts.” Most of the impacts would be temporary, but other long-term impacts would affect forests or wetlands.  FERC recommended a number of mitigation measures in the EIS to reduce the adverse impacts to “less-than-significant” levels. Some of these mitigation measures included: requiring Mountain Valley to follow the mitigation plans outlined in their application for each specified environmental issue, requiring detailed maps and photos of all construction areas to be filed, and requiring Mountain Valley to develop and implement an “environmental complaint resolution procedure.”  According to FERC’s website, the project is expected to include 73 miles of natural gas pipeline in Virginia and North Carolina, and it would transport 375 million cubic feet of gas per day.

Induced Seismicity: Study Evaluates Fluid Injection Data to Predict Seismic Activity
On July 29, 2019,  Proceedings of the National Academy of Sciences published a study evaluating fluid injection data to predict seismic activity in Oklahoma. The study titled, Pore-pressure diffusion, enhanced by poroelastic stresses, controls induced seismicity in Oklahoma, focuses on predicting “induced seismicity linked to geothermal resource exploitation, hydraulic fracturing, and wastewater disposal.”  The study looked at data from 1995 to 2017, noting that increased seismic activity began in Oklahoma in 2008. The researchers examined 715 wells in north-central Oklahoma, observing the effect that deep, subsurface injection of saltwater had on potential fault slips. The study concluded that the “physics-based earthquake-forecasting” model could correctly predict seismic activity by considering “pore pressure and poroelastic stresses.” 

State Regulation: Texas State Auditor Releases Report on Texas Railroad Commission 
In July 2019, The Texas State Auditor released An Audit Report on Financial Management at the Railroad Commission. The audit found that the Railroad Commission (Commission) could improve in several areas including the tracking of cash transactions and strengthening security over its information systems. More specifically, the audit found that certain cash transactions lacked documentation to prove correct fees were paid or tracked upon receipt. Further, the audit found the Commission failed to maintain control over certain accounts that had access to its information systems. The Commission did not know the status of some user accounts including: duplicate accounts, accounts with incorrect access rights, and accounts of former employees. The Commission received high marks in other areas regarding collecting administrative penalties, processing refunds, and correcting data processing errors.

From the National Oil & Gas Law Experts:
George Bibikos, At the Well Weekly, (July 26, 2019)

Charles Sartain, Oil Fraudster Conspires with His Own LLC, (July 31, 2019)

John McFarland, Flaring in the Permian, (July 29, 2019)

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