Waterless Fracking in New York? – August 16, 2015

Today I talk about five things in the news for the week of August 10, 2015:

  1. Efforts to Block the Clean Power Plan Hitting Stride
  2. Minimal Energy Talk at Iowa State Fair
  3. Obama Allows Crude Exports to Mexico
  4. Enviros New Push to Ban Natural Gas Exports
  5. Obama Is Headed North to Alaska

And my interview is with Adam Schultz, an attorney with Couch White in Albany, New York, who is seeking approval for waterless fracking operations.

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

1.  Efforts to Block the Clean Power Plan Hitting Stride

The final Clean Power Plan is out and taking hits from all directions.  Last week, a group of 15 states, led by West Virginia Attorney General Patrick Morrisey, filed suit to stop the Clean Power Plan.  In his press release, he noted he was jumping the gun a little bit:

Typically, a stay of a federal rule would not be sought until the lawsuit challenging it is filed, which would usually occur once the rule is published in the Federal Register. In most cases, the obligations imposed by a new rule are tied to the date of publication.

However, in this case, the Attorneys General argue, the EPA has made the unusual choice to make the states’ obligations effective immediately. Regardless of the date of formal publication, the states already have firm deadlines to submit initial and final compliance plans under the rule…it could be months before the 1,560-page rule is published…

“If we were to wait on the EPA to get this rule published, it could be well into 2016 before the States complete arguments and receive a ruling on a request to stay this rule,” Attorney General Morrisey said. “By that time, many states will already be in the middle of drafting their compliance plans ahead of the September 2016 deadline. We want to ensure that no more taxpayer money or resources are wastefully spent in an attempt to comply with this unlawful rule that we believe will ultimately be thrown out in court.

These same states, along with a group of coal companies, had already sued to stop the proposed rule.  They lost on procedural grounds, as the court refused to stop a rule that had not been finalized.  Motions for rehearing are pending on that case, so it is not completely over, and the judges on the panel seemed skeptical of the Clean Power Plan.  So, the states also filed a motion to consolidate their lawsuits into one that would stay with the same panel of judges.

Gina McCarthy, appearing at a Resources for the Future event last week, said she fully expects the Clean Power Plan to survive any legal challenges.  The real issue in her mind is the next Administration.  She said, however, that it would be hard for a new President to stop the actions states are already taking to comply.

She also said the final plan will get all the states on the same page so they are not shirking their responsibilities.

2.  Minimal Energy Talk at Iowa State Fair

This weekend is the Iowa State Fair, and nearly every Presidential candidate is there working crowds and making speeches.  But from what I saw, only one candidate really talked about energy.  Jeb Bush is quite comfortable using energy to discuss his jobs plans.  He sees energy production as important to both directly creating jobs and to boosting American manufacturing.

Donald Trump, in a Meet the Press interview, also ventured into energy policy saying that the U.S. foreign policy will be aided by the fracking revolution.

3.  Obama Allows Crude Exports to Mexico

The Houston Chronicle explains that the Administration has begun allowing crude swaps with Mexico:

The discrete, case-by-case approvals do not signal an imminent dismantling of the ban, either at the White House or on Capitol Hill.

But they are a major victory for oil companies that have struggled to keep rigs drilling and workers employed since crude prices started falling last year. They also are a win for lawmakers from both parties who have lobbied the administration to approve oil sales to the Mexican oil company Petroleos Mexicanos, known as Pemex.

The deals approved by the Commerce Department’s Bureau of Industry and Security allow swaps of some light U.S. oil for similar quantities of heavier, lower-quality Mexican crude that is a better fit for many Gulf Coast refineries. Officials didn’t say how much is covered by the approved transactions, and it’s not clear how much capacity Mexico has to refine the American crude.

The move has been praised by leaders from oil country:

U.S. Sen. Lisa Murkowski, R-Alaska, today applauded news that the U.S. Commerce Department has approved limited exchanges of crude oil between the United States and Mexico.

“I welcome this decision, which requires no change in the law and which the Commerce Department has the full authority to implement,” Murkowski said. “While today’s decision is a positive step toward the liberalization of our energy trade policies and comes after the urging of both Senate and House members, I remain committed to the full repeal of the ban on selling oil to our friends and allies overseas and I believe we should do so as quickly as possible.”

4.  Enviros New Push to Ban Natural Gas Exports

The Center for Biological Diversity has filed a new petition to ban exports, as the group explains:

The Energy Policy and Conservation Act of 1975 (“EPCA”) was passed by Congress in response to the oil embargo crisis with the Arab fossil fuel-producing nations in the early 1970s. An explicit goal of this law, still relevant today, is conserving domestic energy supplies through specific congressionally-mandated programs. One important program central to achieving this goal was, and continues to be, the mandated prohibition of crude oil and natural gas exports originating from the United States. The President was given the duty and power to enact this prohibition, along with any restrictions on other fossil fuels as he saw necessary, which he delegated to the Secretary of Commerce. While the statute did allow for the creation of narrow exemptions to be in the national interest, the prohibition was and still is meant to instate a policy where the permitting of crude oil and natural gas exports is the exception, and not the norm.

DOC responded to its newly appointed duty by quickly implementing a prohibition of crude oil exports, which is still in effect with modifications to this day. Although DOC claimed it was working on such a policy for natural gas in parallel and that it would be released quickly, nearly forty years have passed without a prohibition on natural gas exports being implemented as required by Congress. To justify this failure to act, DOC has claimed that: 1) the Department of Energy (“DOE”) possesses authority and responsibility to approve natural gas export license applications; and 2) no one has ever sought a natural gas export license from DOC.

5.  Obama is Headed North To Alaska

The President announced he is taking a trip up North to highlight his work on climate change, and the White House is making some serious efforts to promote the trip.

Interview with Attorney Adam Schultz on Waterless Fracking (17:16)

Adam is an attorney practicing in Albany, New York with the firm Couch White.  His legal practice focuses on helping companies move projects through local, state, and federal permitting processes to a successful completion.  He has been in the news lately because he is helping a client in New York get a permit for fracking, using gelled propane instead of water.

In 1992, New York State released a Generic Environmental Impact Statement (GEIS) on oil and gas operations.  This study provided the basis for evaluating oil and gas wells proposed in New York in the subsequent years.  In 2008, as the shale boom picked up, New York decided to do a more extensive health study on high-volume hydraulic fracturing.  That led to a supplemental GEIS, which became a highly charged political document, and was finally released in June 2015.

After the health study’s release in December 2014, State Department of Health Commissioner Dr. Howard Zucker found “significant questions and risks to public health which as of yet are unanswered” and Gov. Andrew Cuomo banned “high-volume hydraulic fracturing.”  The Governor’s ban was specific to “the stimulation of a well using 300,000 or more gallons of water as the base fluid for hydraulic fracturing for all stages in a well completion, regardless of whether the well is vertical or directional, including horizontal.”  From Adam’s perspective, the State studied and banned a very specific activity over concerns relating to water.

Adam has applied to have his client drill a well to be completed with propane fracturing.  He noted this method has been used on over 800 well sites in North America, including more than 2,600 fractured well zones.  The system is an entirely closed loop.  At the surface, propane is mixed with a gelling agent and sand in what is essentially a big blender.  Then the gel is sent down the well, the pressure fractures the shale rock around the well, and the sand props open the cracks in the rock.  After the fracturing, much of the propane returns up the pipe along with natural gas produced by the well.

At a high level, fracking with propane and water are similar, but propane has some advantages.  The obvious advantage is that propane fracking uses zero water, which eliminates most environmental complaints.  Adam explained that propane is also a more efficient carrier of sand, because the sand remains suspended in propane but sinks in water.  This means propane causes more efficient fracturing and leads to more productive wells.  Water used in fracking also brings up low levels of naturally occurring radioactive materials (NORM), and propane does not.  Propane fracturing has historically been done in locations where water sourcing is a problem, and it has been considered more expensive than fracturing with water.  Adam said that the low price of propane and improved efficiency of the process has led some studies to show propane fracturing costs on par with water.  Adam also said the geology in the Marcellus is well-suited for this process.

Adam addressed some of the questions that have been raised about his client’s application.  He said the State of New York will have to decide if the 1992 General Environmental Impact Statement is sufficient, or if additional study will need to be done.  Adam says he has seen comments that he is “skirting” the New York ban, but he says the proposal is completely consistent with New York policy.  He also said his client is well aware of the economic risks of the project.  But the proposal is just to drill one well at this point, it is completely privately funded, and they would not have started the project if they did not believe they could be successful.