Shale Law Weekly Review - December 18, 2017

Written by Jacqueline Schweichler - Education Programs Coordinator

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

Pipelines: Forest Service Will Allow Mountain Valley Pipeline Construction in National Forest

On December 1, 2017, the United States Forest Service announced that it will allow for the construction of the Mountain Valley Pipeline Project (MVP project) within the Jefferson National Forest. The Forest Service will amend the Jefferson National Forest Land and Resource Management Plan by changing standards to allow for pipeline construction. The MVP project is a 303 mile pipeline that will reach from northwestern West Virginia to southern Virginia. The pipeline will cross 3.6 miles of national forest and impact approximately 83 acres.

Pipelines: Sierra Club Files Petition for Review of Water Quality Certification Granted to Mountain Valley Pipeline

On December 8, 2017, the Sierra Club and several environmental groups filed a petition for review of the Water Quality Certification for the Mountain Valley Pipeline project (MVP project) issued by the Virginia State Water Control Board and the Virginia Department of Environmental Quality. The Water Quality Certification was granted with several conditions. The MVP project must maintain a 50 foot riparian buffer, may not refuel or store materials within 100 feet of wetlands, and must limit the area of construction disturbance near bodies of water. The Mountain Valley Pipeline will transport 2 million dekatherms per day of natural gas from the Marcellus and Utica shale formations to destinations  across Virginia.

International Development: Australian Territory Releases Draft Report of Hydraulic Fracturing Study

On December 12, 2017, the Northern Territory Government of Australia announced that the Independent Scientific Inquiry had released its draft final report on the potential impact of hydraulic fracturing in the area. The report identifies the risks of hydraulic fracturing with onshore unconventional gas reservoirs and contains recommendations for risk mitigation. The report concludes that the challenges and risks are manageable. The Independent Scientific Inquiry recommends the use of new technology, high engineering standards, monitoring and reporting, transparency, and regulatory reform. The report is entitled Hydraulic Fracturing of Onshore Unconventional Reservoirs in the Northern Territory.

International Development: World Bank Will No Long Finance Oil and Gas Production

On December 12, 2017, the World Bank Group announced in a press release that they will no longer be financing oil and gas production after 2019. The World Bank has made this decision to support countries working to meet greenhouse gas emissions goals under the Paris Agreement. They also state that they may provide financing under exceptional circumstances to poor countries where the benefit of energy access for the poor fits within Paris Agreement commitments. Additionally, in 2018 the World Bank will begin collecting data and reporting greenhouse gas emissions from any investment projects it finances.

Production and Operation: Pennsylvania Independent Fiscal Office Releases Report on Natural Gas

On December 6, 2017, Independent Fiscal Office for Pennsylvania released a report analyzing natural gas production data within the state.  For the third quarter of 2017, Pennsylvania produced 1,2326.2 bcf natural gas and had 8,073 producing wells. Total production has increased by 4.8 percent and the number of producing wells increased by 9.3 percent. The report is entitled Natural Gas Production Report - July to September.

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Chevron Plans Shart Rise in US Shale Investment - UG_Center

"New Shale Era: The Age Of The Engineer" - Oil and Gas Investor

"Environmental Groups File Lawsuit to Try to Block Pipeline"  -US News

"Ohio EPA asks Rover to halt drilling again" - Shale Gas Reporter

" World Bank to end financial support for oil and gas extraction" - The Guardian

"Will consumers benefit from Pa. gasoline pipeline reversal?" - The Inquirer

"US Fuels the World as Shale Boom Powers Record Oil Exports" - Rigzone

"Several Southern West Virginia counties to receive $8 million from oil and natural gas property taxes" - The Register-Herald

"Plum OKs fracking in rural, industrial zones"  - TribLive

"Bakken Gas Flaring Cut in Half by North Dakota Oil Producers" - Oil and Gas 360

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.

See our Global Shale Law Compendium and this week’s article, Shale Law Governance in Pennsylvania - Legislation from 2013 to 2016.

Check out this week’s Shale Law in the Spotlight: Natural Gas Severance Taxes in the United States (Texas, Oklahoma, Louisiana, and Wyoming)

Stay informed with our monthly Agricultural Law Brief located here.

Shale Gas Weekly Review – July 22, 2016

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

Independent Fiscal Office Expects Impact Fee Collections to Continue Declining in 2016

On July 15, 2016 the Pennsylvania Independent Fiscal Office (IFO) released a research brief entitled “Impact Fee Update and 2016 Outlook.” Impact fees collected by the Commonwealth are distributed among various programs throughout Pennsylvania, including local governments, environmental initiatives, and emergency services. These impact fee revenues decreased by $35.8 million in 2015 and, according to the IFO, this downward trend is likely to continue. All three scenarios presented by the IFO for 2016 show a decline in impact fee collections. In the first scenario, the current trend continues and the IFO predicts that impact fee revenues will decrease by $15.2 million. If there is an increase in drilling, the best case scenario, the estimated loss decreases to $5.4 million. In the worst case scenario, where there is a reduction in the fee schedule and the current trend regarding new wells continues, the IFO predicts that impact fee collections will decrease by $56.5 million.

Pennsylvania DEP Unveils Updated Version of its Interactive Mapping Tool for Oil and Gas Wells

In July 2016, the Pennsylvania Department of Environmental Protection (DEP) unveiled an updated interactive mapping tool for viewing conventional and unconventional oil and gas wells in Pennsylvania. Both non-producing and producing wells can be viewed on the updated map based on information the DEP has access to from permit applications, reports submitted by well operators, or authorization requests.

 

Stonehenge Appalachia LLC Agrees to $1.5 Million Penalty for DEP Violations

In a news release issued July 18, 2016, the Department of Environmental Protection announced that it entered into a Consent Order and Agreement with Stonehenge Appalachia. Stonehenge agreed to pay $1.5 million in civil penalties for environmental damage that the DEP attributed to the company. The environmental damage includes, according to the DEP, allowing sediment discharge to continue unchecked, causing a landslide and filling two wetlands, and contaminating Pennsylvania waters through directional drilling activities.

Study Looks at Connection Between Asthma and Natural Gas Development

In a study published July 18, 2016, researchers concluded that an association exists between asthma exacerbations and unconventional natural gas development (UNGD). The study included three types of exacerbations: new asthma medication orders (mild), emergency room visits (moderate), and hospitalization (severe). All three types of exacerbations were found to be more likely occur in patients residing near the highest levels of UNGD activity. The study stops short of concluding that the UNGD activity causes exacerbations, noting only an association exists between the two.

Texas Study Examines Correlation Between Seismicity Development and Earthquakes

On July 17, 2016, a study  called “Ellenburger Wastewater Injection and Seismicity in North Texas” was released in an online version of Physics of the Earth and Planetary Interiors. This study is a compilation and assessment of approximately 24,000 injection volume and pressure measurements for the Ellenburger Formation in Northern Texas. In this study, the authors concluded that there is “not only correlation but causation: lower formation compressibility and higher pressures generally develop at the same time and location where earthquakes occurred” in the Ellenburg Formation. Additionally, the authors used this data to develop preliminary forecasts for the Ellenburger Formation where seismicity will continue or develop and concluded that additional data would be required to predict and prevent seismic hazard more efficiently.

U.S. House of Representatives Votes on U.S. Department of Interior Appropriation Bill

On July 14, 2016, the U.S. House of Representatives voted 231 to 196 to pass HB 5538, a 2017 fiscal appropriations bill from the U.S. Department of the Interior. The bill is now in the U.S. Senate awaiting a vote. In its current form, provisions of HB 5538 would deny funds to implement and enforce several proposed federal regulations against the oil and gas industry.

Volume of Natural Gas Traded in U.S. Increases for the First Time Since 2011

In May, Cornerstone Research released a report regarding 2015 FERC Form 552 submissions. In 2015, the overall trading volume of natural gas increased by 4.1%, ending the downward trend that persisted from 2011 to 2014. Production of natural gas in the United States rose by 5% and the EIA predicts that it will continue to increase until 2040, with consumption increasing more slowly.

PHMSA Issues an Amended Corrective Action Order to Texas Eastern Transmission LP

On July 19, 2016, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an Amended Corrective Action Order to Spectra Energy’s subsidiary Texas Eastern Transmission LP. This order followed an initial investigation by PHMSA into Texas Eastern Transmission LP’s natural gas pipeline, Line 27, that exploded on April 29, 2016, near Delmont, Pennsylvania. The preliminary investigation found that a pipeline that runs parallel to Line 27 “has shown a pattern of external corrosion with characteristics similar to the conditions that caused the failure on Line 27.” The amended corrective action order outlines fourteen mandatory corrective actions that Texas Eastern Transmission LP must make or the company will face civil penalties for failure to comply.

TransCanada Displays Commitment to Energy East Pipeline Project

On July 14, 2016, TransCanada signed a memorandum of understanding (MOU) with four labor unions, evidencing the company’s commitment to completing the Energy East Pipeline and employing over 14,000 Canadians during the nine years it will take to complete. The Energy East Pipeline will transport oil across Canada to the country’s eastern refineries.

Written by Chelsea Wilson and Jessica Deyoe - Research Assistants 

Impact Fee Revenues Expected to Decrease

Earlier this week, the Independent Fiscal Office (IFO) released its calendar year (CY) 2015 projections of the impact fee collections and its estimates of the resultant annual average effective tax rate (ETR).  The impact fee is imposed on specified unconventional natural gas wells that were drilled or operating in the previous calendar year.  The proceeds of the impact fee are used to offset the impact that unconventional oil and gas operations have on the rural areas of the Commonwealth.  The money raised is used to provide infrastructure improvements and repairs, emergency services, and other programs that are affected by unconventional oil and gas activities.

The IFO projects that the impact fee will bring in its lowest amount to date, $185.5 million.  The projection is based on data published by the Department of Environmental Protection’s oil and gas production reports for 2015.  The $185.5 million is $38.0 million less than last years collected amount.  There are a couple of primary reasons for the decrease in revenue.  The first is the lower fee schedule.  The annual average price of natural gas on the New York Mercantile Exchange was $2.66 which moved below the $3.00 per MMbtu threshold.  The fee schedule is adjusted downward when the average price falls between $2.25 and $2.99.  The second reason is that there were fewer new wells drilled in CY 2015.  There was a 42.9 percent decline in the amount of wells drilled in comparison to the previous year.  Gas wells pay the most in their first year of operation because as wells age they migrate down the fee schedule.

The research brief also projects the ETR.  The ETR is calculated to measure the “tax burden relative to natural gas sales.”  The ETR is “equal to the annual impact fee revenues divided by the total market value of unconventional natural gas production.”  The CY 2015 ETR is estimated to be 5.5 percent, an increase from 3.4 percent in CY 2014.  The 2015 increase can be attributed to the decline in natural gas prices.

Written by Stephen Kenney

Research Assistant

Center for Agricultural and Shale Law