OCAPL Industry Affairs Report 12-11-2009

OCAPL

INDUSTRY AFFAIRS REPORT

December 11, 2009

This is the 55th 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 OCAPL members 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 and Matt Blomstedt. If you would like to participate in the committee’s effort, we would be pleased to hear from you.

Climate scientists' leaked correspondence illustrates bitter feud, by Keith Johnson, The Wall Street Journal; November 23, 2009.

The scientific community is buzzing over thousands of emails and documents -- posted on the Internet last week after being hacked from a prominent climate-change research center -- that some say raise ethical questions about a group of scientists who contend humans are responsible for global warming. 

The correspondence between dozens of climate-change researchers, including many in the U.S., illustrates bitter feelings among those who believe human activities cause global warming toward rivals who argue that the link between humans and climate change remains uncertain. 

Some emails also refer to efforts by scientists who believe man is causing global warming to exclude contrary views from important scientific publications. 

"This is horrible," said Pat Michaels, a climate scientist at the Cato Institute in Washington who is mentioned negatively in the emails. "This is what everyone feared. Over the years, it has become increasingly difficult for anyone who does not view global warming as an end-of-the-world issue to publish papers. This isn't questionable practice, this is unethical." 

In all, more than 1,000 emails and more than 2,000 other documents were stolen Thursday from the Climate Research Unit at East Anglia University in the U.K. The identity of the hackers isn't certain, but the files were posted on a Russian file-sharing server late Thursday, and university officials confirmed over the weekend that their computer had been attacked and said the documents appeared to be genuine. 

"The selective publication of some stolen emails and other papers taken out of context is mischievous and cannot be considered a genuine attempt to engage with this issue in a responsible way," the university said. 

Journal Community discusses “Any group with such a single-minded view (whether they are believers in global warming, global warming rejectionists, liberals, conservatives, whatever) bears close watching and a certain amount of skepticism.”

Most climate scientists today argue that the earth's temperature is rising, and nearly all of those agree that human activity is likely to be a prime or at least significant cause. But a vocal minority dispute one or both of those views. 

A partial review of the hacked material suggests there was an effort at East Anglia, which houses an important center of global climate research, to shut out dissenters and their points of view. 

In the emails, which date to 1996, researchers in the U.S. and the U.K. repeatedly take issue with climate research at odds with their own findings. In some cases, they discuss ways to rebut what they call "disinformation" using new articles in scientific journals or popular Web sites. 

The emails include discussions of apparent efforts to make sure that reports from the Intergovernmental Panel on Climate Change, a United Nations group that monitors climate science, include their own views and exclude others. In addition, emails show that climate scientists declined to make their data available to scientists whose views they disagreed with. 

The IPCC couldn't be reached for comment Sunday. 

In one email, Benjamin Santer from the Lawrence Livermore National Laboratory in Livermore, Calif., wrote to the director of the climate-study center that he was "tempted to beat" up Mr. Michaels. Mr. Santer couldn't be reached for comment Sunday. 

In another, Phil Jones, the director of the East Anglia climate center, suggested to climate scientist Michael Mann of Penn State University that skeptics' research was unwelcome: We "will keep them out somehow -- even if we have to redefine what the peer-review literature is!" Neither man could be reached for comment Sunday. 

The emails were published less than a month before the opening of a major climate-change summit in Copenhagen. 

Representatives of the American Association for the Advancement of Science, a large professional organization, expressed concern that the hacked emails would weaken global resolve to curb greenhouse-gas emissions. The association believes "that climate change is real, it is related to human activities, and the need to counteract its impacts is now urgent," said Ginger Pinholster, an association spokeswoman. She added that the association's journal, Science, evaluates papers solely on scientific merit. 

John Christy, a scientist at the University of Alabama at Huntsville attacked in the emails for asking that an IPCC report include dissenting viewpoints, said, "It's disconcerting to realize that legislative actions this nation is preparing to take, and which will cost trillions of dollars, are based upon a view of climate that has not been completely scientifically tested." 

Mojib Latif, a climate researcher at Germany's Leibniz Institute of Marine Sciences, said he found it hard to believe that climate scientists were trying to squelch dissent. Mr. Latif, who believes in man-made global warming but who has co-authored a paper ascribing current cooling to temporary natural trends, said, "I simply can't believe that there is a kind of mafia that is trying to inhibit critical papers from being published."

 

Pollution Fears Creating Reaction Against Natural Gas Boom, by Jad Mouawad and Clifford Krause, New York Times; December 8, 2009.

Victoria Switzer dreamed of a peaceful retirement in these Appalachian hills. Instead, she is coping with a big problem after a nearby natural gas well contaminated her family’s drinking water with high levels of methane.

Through no design of hers, Ms. Switzer has joined a rising chorus of voices skeptical of the nation’s latest energy push. “It’s been ‘drill, baby, drill’ out here,” Ms. Switzer said bitterly. “There is no stopping this train.”

Across vast regions of the country, gas companies are using a technology called hydraulic fracturing to produce natural gas from previously untapped beds of shale. The push has been so successful that the country’s potential gas reserves jumped by 35 percent in two years. The new supplies have driven down natural gas prices for consumers and might help the global environment by allowing more production of electricity from natural gas, which emits fewer global warming emissions than coal.

What the drilling push will do to local environments is another matter.

The drilling boom is raising concern in many parts of the country, and the reaction is creating political obstacles for the gas industry. Hazards like methane contamination of drinking water wells, long known in regions where gas production was common, are spreading to populous areas that have little history of coping with such risks, but happen to sit atop shale beds.

And a more worrisome possibility has come to light. A string of incidents in places like Wyoming and Pennsylvania in recent years has pointed to a possible link between hydraulic fracturing and pollution of groundwater supplies. In the worst case, such pollution could damage crucial supplies of water used for drinking and agriculture.

So far, the evidence of groundwater pollution is thin. Environmental groups contend that is because governments have been slow to react to the drilling boom and are not looking hard for contamination. Gas companies acknowledge the validity of some concerns, but they claim that their technology is fundamentally safe.

The debate is becoming more urgent as gas companies move closer to more populated areas, especially in the Northeast, where millions of people are likely to find themselves living near drilling operations in coming years.

“To be able to scale up our drilling, clearly we have to be in sync with people’s concerns about water,” said Aubrey K. McClendon, chief executive of the Chesapeake Energy Corporation, a leading gas company. “It’s our biggest challenge.”

Hydraulic fracturing consists of injecting huge volumes of water at high pressure to break shale rocks and allow natural gas to flow out more easily. The water is mixed with sand, chemicals and gels to lubricate the process and help keep the rocks open.

After refining the technique in Western states in recent years, gas companies are moving to tap the nation’s largest shale structure, the Marcellus shale, which stretches from Virginia to New York.

“It’s a very reliable, safe, American source of energy,” said John Richels, president of the Devon Energy Corporation.

Environmental activists, however, say there is at least scattered evidence that fracturing operations can pose risks to groundwater sources, particularly when mistakes are made in drilling operations. They have also questioned how some companies deal with the wastewater produced by their operations, warning that liquids laced with chemicals and salt from drilling can overload public sewage treatment plants or pollute surface waters.

Deborah Goldberg, a lawyer for the nonprofit environmental group Earthjustice who is fighting to toughen Pennsylvania’s discharge rules, said the state “is facing enormous pressure from gas drillers, who are generating contaminated water faster than the state’s treatment plants can handle it.”

According to the New York State Department of Environmental Conservation, which is going through a public review of its new rules on hydraulic fracturing, gas companies use at least 260 types of chemicals, many of them toxic, like benzene. These chemicals tend to remain in the ground once the fracturing has been completed, raising fears about long-term contamination.

The most immediate hazard from the national drilling bonanza, it is clear, involves contamination of residential drinking water wells by natural gas. In Bainbridge, Ohio, an improperly drilled well contaminated groundwater in 2007, including the water source for the township’s police station, according to a complaint filed this year. After building to high pressures, gas migrated through underground faults, and blew up one house.

Here in Dimock, about 30 miles north of Scranton, Pa., 13 water wells, including that of Ms. Switzer, were contaminated by natural gas. One of the wells blew up.

Under prodding, environmental regulators are stepping up the search for groundwater contamination. In Pavilion, Wyo., for instance, the Environmental Protection Agency has begun an investigation into contamination of several drinking water wells.

Luke Chavez, an E.P.A. investigator, said that traces of methane and 2-butoxyethanol phosphate, a foaming agent, had been found in several wells near an area where the EnCana Corporation, a Canadian gas company, had used hydraulic fracturing in recent years.

He said the compounds could have come from cleaning products or oil and gas production, but “it tells us something is happening here that shouldn’t be here.”

An EnCana spokesman, Doug Hock, said the company was “committed to working with E.P.A. to resolve this issue.” But he added, “At this point, no specific connection has been made between the tentatively identified compounds and oil and gas activities.”

In a 2004 study, the E.P.A. decided that hydraulic fracturing was essentially harmless. Critics said the analysis was politically motivated, but it was cited the following year when the Republican-led Congress removed hydraulic fracturing from any regulation under the Safe Drinking Water Act.

The current Democratic Congress recently enacted a law requiring the E.P.A. to review the study. Lawmakers from Colorado and New York have also introduced legislation to end the water act exemption and require gas companies to disclose all chemicals used in fracturing operations.

The agency has begun an analysis of whether hydraulic fracturing requires tighter federal regulation.

“E.P.A. is reviewing available information to determine whether hydraulic fracturing fluids have contaminated drinking water and has dedicated resources to properly studying this issue,” the agency said in a statement.

The political situation has put the gas companies on the defensive. “It’s not going to stop us, but we do have to solve the problem in a prudent manner,” said Rodney L. Waller, a senior vice president at the Range Resources Corporation, a major gas producer in the Marcellus shale.

Partly in response to opposition it has encountered in New York, Chesapeake recently indicated that it would not drill in the New York City watershed, a region that supplies drinking water to nearly 10 million people. Schlumberger, a service company that performs fracturing operations on behalf of gas companies, said it was working on “green” fracturing fluids, including safer substitutes for hazardous chemicals.

In the Barnett shale gas field in Texas, Devon Energy and Chesapeake are trying various treatment techniques for disposing of contaminated drilling water. Gas executives hope that wider use of such techniques will damp public opposition in some regions. Several companies are starting a joint water treatment effort in Pennsylvania in the next few weeks.

Still, around Dimock, the gas boom is viewed with mixed feelings. Many public officials support drilling. Governor Edward G. Rendell has called the surge “a great boon” to Pennsylvania. Many people have leased their land here and are collecting royalty checks from gas production.

The hills around Dimock have been bulldozed to clear the ground for dozens of drilling pads the size of football fields. Eighteen-wheelers thunder down narrow country roads, kicking up dust and fumes. Recently, a helicopter buzzed overhead while dangling heavy cables used for seismic tests.

In September, the Cabot Oil and Gas Corporation, a Houston energy company, was required to suspend its fracturing operations for three weeks after causing three spills in the course of nine days. Cabot, which was fined $56,650 by the state, said the spills consisted mainly of water, with only 0.5 percent chemicals. This month, Cabot was fined an additional $120,000 by Pennsylvania for the contamination of homeowners’ wells. It must now submit strict drilling plans to the state.

A company spokesman, Kenneth S. Komoroski, said it was too early to blame hydraulic fracturing — the technology at the heart of the boom — for pollution of water wells. He said Cabot was still investigating the causes of last January’s contamination incidents.

“None of the issues in Dimock have anything to do with hydraulic fracturing,” he said.

The fines were little consolation to Ms. Switzer, the woman who can no longer draw drinking water from her well.

After moving here in 2005, she sold drilling rights on her property for a mere $180 after, as she recalled it, a gas company representative convinced her only one well might be drilled. In fact, no well was drilled, but three were on surrounding properties. Her well was contaminated at the beginning of the year after gas leaked from a well drilled by Cabot.

Her family now uses bottled water supplied by Cabot every week. She fears that if she tried to sell her home, which sits in the middle of a drilling zone, no one would buy it.

“Can you imagine the ad? ‘Beautiful new home. Bring your own water,’ ” Ms. Switzer said. “We’re like a dead zone here.”

 

Obama Administration: No documented cases of hydraulic fracturing contamination, State News Service; December 8, 2009. 

The following information was released by the U.S. Senate Committee on Environment and Public Works:

During today's Senate Committee on Environment and Public Works hearing on "Federal Drinking Water Programs," Senator Inhofe asked officials from the Environmental Protection Agency (EPA) and the United States Geological Survey (USGS) if they were aware of any documented cases of hydraulic fracturing contamination. None of the three witnesses could provide a single example. Testifying before the EPW Committee today was Peter Silva, Assistant Administrator for Water, Environmental Protection Agency, Cynthia Giles, Assistant Administrator for Enforcement and Compliance Assurance, Environmental Protection Agency, and Matthew Larsen, Associate Director for Water, U.S. Geological Survey.

"The Obama Administration has it right: there are no documented cases of ground water contamination from hydraulic fracturing," Senator Inhofe said. "Hydraulic fracturing is a safe production technique that is thoroughly regulated by the states. We have a 60 year history to prove it.

"With the unemployment rate at 10 percent, we need to put people back to work. Imposing more bureaucracy and regulation will destroy jobs and stifle opportunities for those looking to find a job. The oil and gas industry employs 6 million people in the U.S. I want to see that number go up, not down."

Full Transcript of Exchange

Senator Inhofe: I'm anxious to get to this second panel, Madame Chairman. I can't remain silent after Senator Lautenberg's statement about hydraulic fracturing. I have something to say about that, but first, I want to ask all three of you and response: Do any one of you know of one case of ground water contamination that has resulted from hydraulic fracturing? Start with you, Mr. Silva.

Peter Silva: Not that I'm aware of, no.

Senator Inhofe: Ms. Giles?

Cynthia Giles: I understand there's some anecdotal evidence, but I don't know that it's been firmly established.

Senator Inhofe: So the answer is no, you don't know of it.

Cynthia Giles nods.

Senator Inhofe: Alright, Mr. Larsen?

Matthew Larsen: I'll have to respond in writing, I don't, I'm not aware of all of our studies on that topic.

Senator Inhofe: Well, but you've already answered. You're not aware. That's the question I asked you. Here's the problem we have. Senator Lautenberg referred to this as something that's new. This isn't new. It's been around over fifty years. And, we do approximately thirty-five thousand wells a year - nearly a million wells, without one documented case of groundwater contamination. I'm concerned about this, because I know for a fact that if you took away the ability, as all other countries do, of hydraulic fracturing, we're going to become much more dependent upon other countries for our ability to produce oil. Now, I want to repeat that one more time that there has never been a documented

case in almost a million uses of that technology. The EPA did an extensive study of this back, prior to, it lasted a long period of time, they concluded in 2004 that it does not warrant any further study. And, I want to submit for the record a document that tells the history of hydraulic fracturing. And, I will reserve time in case I need it, I hope I don't.

Background

Hydraulic fracturing is a key production method that has aided in U.S. production of oil and gas from more than one million wells and it continues to aid in the production from over 35,000 wells per year. This 60 year old technique has been responsible for the production of 7 billion barrels of oil and 600 trillion cubic feet (Tcf) of natural gas. The National Petroleum Council reports that 60% to 80% of all wells in the next ten years will require fracturing to remain productive and profitable.

In 1995, as EPA Administrator, Carol Browner wrote in response to litigation that federal regulation is not necessary for hydraulic fracturing. She said that the practice was closely regulated by the states and that, "EPA is not legally required to regulate hydraulic fracturing." Most importantly, she further wrote that there was "no evidence that hydraulic fracturing resulted in any drinking water contamination" in the litigation involved.

Released in a 2004 report, EPA conducted a review of all 11 major coal basins across the country and of 200 peer-reviewed publications. It reviewed 105 comments in the Federal Register. It requested information from 500 local and county agencies in states where CBM production occurred. It interviewed 50 local and state government agencies, industry representatives, and 40 citizens groups which alleged drinking water contamination from hydraulic fracturing. After completing its 4 year study, EPA concluded that "the injection of hydraulic fracturing fluids into CBM wells poses little or no threat to underground sources of drinking water and does not justify additional study at this time." EPA had planned to study contamination in a two phase study. Following these findings EPA, did not even initiate the second phase of study.

The American Petroleum Institute recently determined that through duplicative federal regulations, the number of new oil and natural gas wells drilled would drop by 20% in the next five years. Should hydraulic fracturing be eliminated, new oil and gas wells would drop by 79%, resulting in 45% less domestic natural gas production and 17% less domestic oil production.

 

DOE's latest CCS funding includes EOR project in West Texas, By Nick Snow, The Oil and Gas Journal; December 9, 2009.

The US Department of Energy will provide $350 million to support a project designed to capture carbon from a proposed electric power plant near Midland-Odessa, Tex., and transport it to the Permian basin where it will be used in enhanced oil recovery, US Energy Secretary Steven Chu announced.

The Texas Clean Energy Project, which will be led by Summit Texas Clean Energy LLC of Bainbridge Island, Wash., was one of three efforts receiving $979 million of federal support under the third round of DOE’s Clean Coal Initiative. The other two will involve carbon capture from existing coal-fired power plants and storage in deep saline formations in West Virginia and Alabama.

“By harnessing the power of science and technology, we can reduce carbon emissions and create new clean energy jobs,” Chu said Dec. 4 as he announced the funding. “This investment is part of our commitment to advancing carbon capture and storage technologies to the point that widespread, affordable deployment can begin in 8-10 years.”

The award came nearly 2 years after the Midland-Odessa area lost its bid to become the site of Future Gen, the country’s first fully integrated commercial power plant and CCS system, to Matoon, Ill.

STCE plans to integrate Siemens’s gasification and power generating technology with carbon capture technologies to effective capture 90% of the carbon dioxide (2.7 million tonnes/year) at the planned 400-Mw plant near Midland-Odessa, DOE’s Fossil Energy office said.

The captured carbon dioxide will be treated and compressed, then transported by pipeline to Permian basin oil fields in West Texas for use in EOR operations, it said. The University of Texas’s Bureau of Economic Geology will design and assure compliance with a state-of-the-art sequestration monitoring, verification, and accounting program, DOE said. The project is expected to take 8 years.

A second project, led by Southern Co. Services Inc., will receive $295 million of federal funding over 11 years to retrofit CO2 capture equipment on an existing Alabama Power Co. plant north of Mobile for ultimate sequestration in deep saline formations. SCS also plans to explore potentially using this captured CO2 in EOR applications, DOE said.