Fracking Regulations in Wyoming – April 12, 2015

Today we talk about five things that happened between March 29 and April 12:

  1. Jeb Bush Hits Energy Policy in Colorado
  2. Bloomberg Reloads in Attack on Coal Plants
  3. New Statistics Show Lots of Gas in U.S.
  4. Royal Dutch Shell Moves to Buy BG Group
  5. EDF Wins Mistrust and Admiration from Enviros

Our interview is with John Robitaille, from the Petroleum Association of Wyoming.

Click below to listen or find us on iTunes or Stitcher.

1.  Jeb Bush Hits Energy Policy in Colorado

On April 7, 2015, Jeb Bush, who is “actively considering” running for president, made an appearance at an event hosted by the Colorado Oil and Gas Association.  As explained by the Denver Post:

Former Florida Gov. Jeb Bush, a potential Republican presidential candidate, on Tuesday said the oil and gas sector is vital to jump-starting the nation’s economy and protecting its security.

Bush made his comments during a meeting in a ballroom at Denver’s Brown Palace Hotel.

The room was filled with energy industry executives, members of the business community and prominent state Republicans, including Senate President Bill Cadman, former House Speaker Frank McNulty and state party chairman Steve House.

He gave some fairly generic opening remarks praising the oil and gas industry, but he did get more into the technical details than most other candidates have:

He shared his support for liquefied natural gas (LNG) exports, especially as a way to counter Russia’s influence in Europe.  This stance was initially somewhat controversial among Republicans, but the party seems to be lining up behind exports:

Crude oil exports definitely still remain controversial, but Jeb Bush is all in for removing the export ban:

Even though he fully supports free trade in oil and gas markets, Mr. Bush does support some incentives for natural gas use in vehicles:

In light of the Jeb Bush speech on energy, it is interesting to take a look back at where the other candidates are on these issues.  Sen. Marco Rubio (R-FL), who is also widely expected to run, staked out a similar free-trade policy in a March 2015 speech:

In light of these two speeches and Hillary Clinton’s expected announcement today, it may be worth looking all the way back to 2012 and perhaps the most comprehensive energy speech given by any of the expected candidates.  Hillary Clinton gave a speech on energy in October 2012, near the very end of her time as Secretary of State, where she laid out a vision that is not that different than Sen. Rubio or Gov. Bush.  A number of things she talks about, like drilling in the Arctic or increased U.S. natural gas production, would be problematic in a contested Democratic primary.  It will be interesting to see if she changes her tone at all during the campaign.

2.  Bloomberg Reloads in Attack on Coal Plants

Former New York City Mayor and very rich man Michael Bloomberg donated $30 million to the Sierra Club’s beyond coal campaign last week, which comes on top of a $50 million donation a few years ago:

Bloomberg’s donations have allowed the Sierra Club’s Beyond Coal effort to expand dramatically since 2011, when it was operating in only 15 states. The money has also helped Beyond Coal build a real-time database that tracks the progress of coal retirements.

Brune said the new money announced Wednesday will allow the campaign to hire more lawyers and activists to fight against power plants across the country.

Here is a video the group released a few days ago:

Politico reports that the group will acknowledge the role of natural gas:

Bloomberg’s donations have allowed the Sierra Club’s Beyond Coal effort to expand dramatically since 2011, when it was operating in only 15 states. The money has also helped Beyond Coal build a real-time database that tracks the progress of coal retirements.

Brune said the new money announced Wednesday will allow the campaign to hire more lawyers and activists to fight against power plants across the country.

Brune acknowledged that the Sierra Club can’t take full responsibility for all the closures — the industry is suffering from low natural-gas prices and federal policies like an EPA mercury rule that takes effect next week. But he said the group believes its litigation against coal plants has helped ensure their demise.

3.  New Statistics Show Lots of Gas in U.S.

The U.S. has more natural gas available than ever before, according to a press release from last week:

The American Gas Association (AGA), in coordination with the Potential Gas Committee (PGC), today released the PGC’s year-end 2014 biennial report: Potential Supply of Natural Gas in the United States. The new assessment finds that the United States possesses a technically recoverable natural gas resource potential of 2,515 trillion cubic feet (Tcf). This is the highest resource evaluation in the PGC’s 50 year history- a 5.5 percent increase of 131 Tcf from the previous record-high assessment from year-end 2012.

Meanwhile, the U.S. was the top producer of oil and gas last year:

US production volumes of petroleum and natural gas remained tops in the world in 2014, exceeding that of both Russia and Saudi Arabia, according to estimates from the US Energy Information Administration.

EIA specifies that its petroleum production figures encompass crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids such as biofuels.

4.  Royal Dutch Shell Moves to Buy BG Group

The world’s largest oil company is about to get bigger, and world natural gas trade is a major reason for the deal, according to the Washington Post:

In an interview last year, Ben van Beurden, the new CEO of oil giant Royal Dutch Shell, gave his outlook on what it would take to deal with the global problem of carbon emissions.

“I think the real challenge is not so much how do we accelerate renewables but more about how do we decarbonize the system we have,” said van Beurden. “How do we take coal out and replace it with gas?”

Shell made a major step in that direction Wednesday, announcing the acquisition of BG Group, a corporate descendant of British Gas and a leader in global liquefied natural gas or LNG sales — a market that is expected to grow considerably in the next decade.

The deal, valued at around $70 billion, represents the biggest purchase of an exploration and production company in history….

In light of China’s pledge to peak its greenhouse gas emissions by around 2030, importing more natural gas also takes on greatly increased importance.

That’s where BG Group comes in. In its 2014 annual report, the company noted that two-thirds of its LNG sales were in the Asia Pacific region. The company also projected a dramatic growth in demand for LNG imports in India and China by 2025.

5.  EDF Wins Mistrust and Admiration from Enviros

Inside Climate News ran an in-depth article last week that detailed the conflict between the Environmental Defense Fund and other groups that take a more negative view on natural gas:

Those concerns stem from an ambitious project EDF embarked on in 2011, as an oil and gas boom swept the U.S. While environmentalists have increasingly called for an outright ban on hydraulic fracturing, or fracking, amid concerns that it pollutes the air and water, stifles growth of renewable energy, and might accelerate rather than slow climate change, EDF decided to probe the industry’s climate impacts. And it did so by collaborating with natural gas companies, which agreed to partially fund the research and give EDF access to gas sites for taking crucial measurements.

….

InsideClimate News interviewed 40 scientists, activists, academics and industry representatives—more than half of whom aren’t involved with the EDF research. This group included 15 methane researchers. None of them said they thought the industry was manipulating EDF’s research results or pressuring scientists to change their data.

However, eight of the 15 (including several who participated in the studies) expressed concerns over the transparency and quality of the work.

Interview with John Robitaille of the Petroleum Association of Wyoming (Starts at 28:14)

In 2012, the Department of Interior issued a proposed rule for hydraulic fracturing on federal land.  Interior Secretary Sally Jewell, a former drilling engineer, has been somewhat supportive of the industry but has said that the department needs to update its regulations to protect land in states with lax regulations.  State regulations control most aspects of drilling on federal land, so the role of new federal regulations are unclear.  A state like Wyoming, which has more federal land production oil and gas than any other state, may face a duplicative layer of regulation.  That has been a concern of Wyoming Senator John Barrasso (R), but one the Secretary has sought to play down.

With final rules finally released last month, I had a chance to talk with John about the impact they would have on Wyoming.  John is a University of Wyoming graduate who has spent the bulk of his career with the Petroleum Association of Wyoming and other similar industry groups.  He is responsible for the group’s work on environmental regulations.  Oil and gas employs more than 25,000 people in the state, a major chunk for a population of less than 600,000 people.

Nationally, the oil and gas industry has reacted with a bit of a shrug.  The American Petroleum Institute said that a “duplicative layer of new federal regulation is unnecessary, and we urge the BLM to work carefully with the states to minimize costs and delay.”  That is probably because only about 7.5% of the wells in the United States are on federal land.  In Wyoming, however, John pointed out that 50% of the surface and 2/3rds of the state’s minerals are owned by the federal government.  That means this rule will have a far greater impact on Wyoming and other western states.

At this point, the laws in Wyoming appear to be more stringent than most of what is in the new Interior rule.  John said the state did feel a need for additional regulations a few years ago, but the state has acted and put strong rules in place.  Though the Secretary has suggested the federal government will defer to more stringent state regulations, it is not clear how that will happen.  It appears that each state will need to request and receive a variance if it wants to avoid the new federal rules.

I asked John about the new requirements and how they compare to existing Wyoming laws, and he said most of the new federal rules are pretty much the same.  That includes submissions of drilling plans, casing and cementing programs, mechanical integrity tests prior to fracking, and monitoring annulus pressure.  John said the only possible change is that a mechanical integrity test is not required for all wells currently, they are required only at the option of the relevant well supervisor.

The new federal rule will also require disclosures of what chemicals are being used, but John views current Wyoming rules as more stringent than the federal law.  Wyoming requires disclosure of proposed mixtures and maximum injection treating pressures, for example, and those are not in the new federal rule.  Wyoming drillers may have to provide their disclosures to additional places.

The major problem is duplication.  Producers in Wyoming are already taking most of the actions that the federal government is seeking to require.  The main problem for Wyoming is that companies in the state could be stuck with delays and additional costs for filing a second set of paperwork with the federal government.  The Petroleum Association of Wyoming considers this a state issue, and hopes that the federal government will continue to respect the state regulation that is working well.  At this point, the next step is for the state government and the federal government to work out a memorandum of understanding on what regulations will govern.

One thing that the new rule will likely end is the storage of produced water in lined pits.  That is water that comes up from the well with the oil and gas, and it is often stored in an open pit.  In Wyoming, pit storage is currently an option and some companies store their water that way.  The new federal law will require all water to be stored in “rigid enclosed, covered, or netted and screened above-ground tanks.”  John said that many companies are already using tanks only, so the new requirement would not be a major change.

John said this federal rule is probably one of the biggest regulatory challenges for the industry right now.  He also pointed out the ozone regulations from the Environmental Protection Agency as another major challenge.  At this point, the association has provided its input on the federal fracking rule and the association has to kind of wait to see the balance that is struck between the state and federal government.