Industry Affairs April 2011



April 14, 2011

This is the 70th report from the Industry Affairs Committee of OCAPL. The opinions expressed herein are those of the writers and not those of OCAPL, AAPL, former clients, or our current employers. The objective of this exercise is to alert OCAPLmembers to (a) the activities of organizations and governments that affect the way we do business, (b) public opinion that shapes legislation, and (c) judicial decisions relating to energy issues. Hopefully, this knowledge will provoke each of us to recognize the critical role we, as LANDMEN, play in sustaining America’s standard of living and thereby feel compelled to respond to the challenges before us. Your comments regarding this effort are always welcome. 

The Committee at Work: Current members in the OCAPL Industry Affairs committee include Phil Jones, Monica Smith, Brandt Vawter, Brett Hudson, John Raines, Ryan Coe, and Jack Rayburn. If you would like to participate in the committee’s effort, we would be pleased to hear from you.


World shale gas resources outside US assessed

Apr 11, 2011

Guntis Moritis
Production Editor

Initial estimated technically recoverable shale gas resources in the 32 countries assessed in an Apr. 5 report is 5,760 tcf compared with the 862 tcf in the US. The report was commissioned by the US Energy Information Administration from Advanced Resources International Inc. (ARI).

The report includes 48 shale gas basins in 32 countries, containing almost 70 shale gas formations.

EIA noted that world proved reserves of natural gas as of Jan. 1, 2010, are about 6,609 tcf and world technically recoverable gas resources are about 16,000 tcf, largely excluding shale gas. Thus, adding the identified shale gas resources to other gas resources increases total world technically recoverable gas resources by more than 40% to 22,600 tcf.

EIA said these shale resouces are uncertain given the relatively sparse data that currently exist and the approach ARI employed would likely result in a higher estimate once better information becomes available.

At the current time, efforts are under way to develop more detailed shale gas resource assessments by the countries themselves, with many of these assessments being assisted by several US federal agencies under the auspices of the Global Shale Gas Initiative (GSGI) which was launched in April 2010.

EIA explained that shale gas development was more likely to emerge for two country groupings.

The first group consists of countries such as France, Poland, Turkey, Ukraine, South Africa, Morocco, and Chile that are highly dependent on natural gas imports, have at least some gas production infrastructure, and their estimated shale gas resources are substantial relative to their current gas consumption. South Africa also could use shale gas as feedstock for its existing gas-to-liquids and coal-to-liquids plants.

The second group consists of countries with more than 200 tcf of shale gas resource such as Canada, Mexico, China, Australia, Libya, Algeria, Argentina, and Brazil.

The report did not include Russia and Central Asia, Middle East, Southeast Asia, and Central Africa primarily because of existing significant quantities of conventional natural gas reserves in place (Russia and the Middle East) or because of a general lack of information for even an initial assessment.


Obama Administration to Act on Gas Drilling Safety in Six Months

By Katarzyna Klimasinska - Apr 14, 2011 1

The U.S. Energy Department, urged by President Barack Obama to ensure that extracting natural gas from shale is safe, will act within six months to protect drinking water from hydraulic fracturing, an official said.

The department plans to analyze the process that injects a chemical solution into shale to free trapped gas, Christopher Smith, deputy assistant secretary for oil and natural gas, said today in an interview in Washington. The examination will seek to ease public concern that fracking taints water supplies.

“In six months, there will be some conclusions announced,” he said. “We will be announcing specific actions.” He didn’t elaborate on the process or possible steps being considered.

Obama is seeking to increase the safety of domestic natural gas production as part of a plan to boost output and reduce U.S. dependence on imported fossil fuels. He wants to cut purchases of foreign oil by a third by 2025, he said on March 30.


Coffman reintroduces legislation to restart domestic REE industry

U.S. Rep. Mike Coffman, R-Colorado, April 6 introduced H.R. 1388, the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2011 (RESTART Act). Coffman said this bill, similar to H.R. 4866 introduced by the legislator in 2010, seeks to avert a U.S. rare earth supply crisis by reestablishing a domestic rare earth industry.

“Currently, the world is nearly 100 percent reliant on Chinese exports for these critical materials and China’s trade policies of restricting rare earth exports pose a serious threat to both the economic and national security of the United States,” the Colorado republican said.

China supplies about 95 percent of the world’s rare earth metals, used in everything from wind turbines, electric car batteries, television sets, smart phones, and advanced weapons systems. Chinese officials have said they will cut exports of rare earth metals by 35 percent in the first half of 2011.

“The Chinese government-ordered reduction in rare earth metals exports demonstrates the urgent need for us to act to correct our rare earth supply chain vulnerability,” Coffman said.

Coffman, who sits on the House Armed Services Committee, became alarmed in early 2009 when he learned that many U.S. defense contractors rely heavily on Chinese exports of rare earth metals to make everything from night vision goggles, tanks, and fighter aircraft, to precision guided munitions. This reliance on China poses a key vulnerability according to Coffman.

Coffman’s comprehensive, bipartisan legislation will put in place mechanisms to assist U.S. companies with meeting their needs for rare earth metals and ensures our national security needs are met in the near term.

Key provisions of the legislation include:

  • Directing appropriate federal agencies to expedite the permitting process in order to increase the exploration and development of domestic rare earth elements, without waiving environmental laws, and establishing a multi-agency task force to carry out this process;
  • Setting up a Defense Logistics Agency (DLA) rare earth inventory -- where DLA enters into long-term supply contracts and then makes the supplies available for purchase to federal government contractors – to generate a domestic market and facilitate the domestic sourcing of rare earth alloys and magnets;
  • Making loans, backed by the federal government, available to start production should lending from the capital markets not be available;
  • Requiring the various cabinet Secretaries to appoint Executive Agents for rare earths;
  • Establishing a rare earth program at the U.S. Geological Survey.

“Our nation must act to protect our security interests with regard to rare earth elements," Coffman said. “China is neither an ally of the United States nor is it a reliable trade partner when it comes to these strategic metals.”

Coffman’s legislation has the support of the Coalition for a Prosperous America and the United States Magnet Materials Association and their members who are most affected by the disruption in the rare earth metals market.

"The manufacturing, agriculture and worker members of CPA are pleased to support Rep. Coffman's RESTART Act," said Coalition for a Prosperous America CEO Michael Stumo. "America needs a national strategy to address the unfair trade tactics of other countries which harm our economic growth and our workers. The RESTART Act will provide a strategy to help jump start American innovation and neutralize the Chinese government's attempts to freeze our country out of the many new technologies for which rare earth materials are needed."