Sabal Trail Transmission LLC, a joint venture of Spectra Energy and NextEra Energy Inc., has been named the winning bidder to build a 465-mile interstate natural gas pipeline project by Florida Power & Light (FPL) to provide transportation services for its power generations needs beginning in May 2017. FPL, the largest power company in the state, put out the request for proposals for a new pipeline in December. Sabal Trail would have an estimated price tag of $3 billion and originate in Tallapoosa County, AL, extend through Georgia and terminate at the Central Florida Hub near Orlando (see NGI, July 8). Through a capacity lease with Transcontinental Gas Pipe Line (Transco), natural gas supply would be accessed at Transco’s Station 85 in Choctaw County, AL. The pipeline, when completed, would have the capacity to transport more than 1 Bcf/d to serve local distribution companies, industrial users and natural gas-fired power generators. According to the Energy Information Administration, Florida generates 62% of its power from 1.1 Tcf of natural gas.
The House of Representatives on Thursday has passed legislation to limit the U.S. Environmental Protection Agency‘s (EPA) authority over state programs to manage and dispose of coal ash generated from coal plants. A second bill (HR 1582) considered this week may place significant restrictions on EPA oversight on the energy industry. The Senate has not taken up either issue. By 265-155, House lawmakers passed the Coal Residuals Reuse and Management Act of 2013 (HR 2218), to allow states to create and enforce their permit programs, while providing the EPA with limited authority. HR 1582 would give the Department of Energy (DOE) the power to veto any EPA rules that “will cause significant adverse effects on the economy.” President Obama has indicated that he would veto the bill. The measure would require EPA, before promulgating a final rule that regulates any aspect of the production, supply, distribution or use of energy, and that is estimated by the administrator or the director of the Office of Management and Budget to impose aggregate costs of more than $1 billion, to submit a report to Congress to include estimates of the total costs; increases in energy prices resulting from implementation or enforcement; and a detailed description of the impact that the rule may have on employment.
The Commodity Futures Trading Commission (CFTC) has ordered New Jersey futures traders Panther Energy Trading LLC of Red Bank and Michael J. Coscia of Rumson to pay a total of $2.8 million for engaging in the illegal practice of “spoofing.” They also were banned from trading for one year. The pair were accused of spoofing between Aug. 8, 2011 and Oct. 18, 2011 using a computer algorithm that was designed to illegally place and quickly cancel bids and offers in futures contracts, including natural gas and light sweet crude oil. Panther and Coscia are to pay a $1.4 million civil penalty and disgorge $1.4 in in trading profits. It is the first fine issued under Dodd-Frank’s prohibition against spoofing, which involves bidding or offering with the intent to cancel before execution. The CFTC found that Panther and Coscia engaged in the illegal activity in 18 futures contracts traded on four exchanges owned by CME Group. In a related matter, the UK Financial Conduct Authority fined Coscia $900,000 for market abuse activities on the ICE Futures Europe exchange. CME, by virtue of disciplinary actions taken by four of its exchanges, imposed a fine of $800,000 and ordered disgorgement of $1.3 million against Coscia and Panther, and it has issued a six-month trading ban for Coscia on its exchanges.
A wide variety of outcomes are possible when contemplating the likelihood that an oil or natural gas injection well could increase the chance of seismic activity, according to a draft report by a U.S. Environmental Protection Agency (EPA) workgroup. Three components are necessary for significant injection-induced seismicity: stressed faults, pressure buildup from disposal activities and a pathway for increased pressure to communicate with the fault. “An absence of historical seismic events in the vicinity of a disposal well does not provide assurance that induced seismicity will not occur…” The 341-page document, “Minimizing and Managing Potential Impacts of Induced-Seismicity from Class II Disposal Wells: Practical Approaches,” was authored by EPA’s Underground Injection Control National Technical Workgroup. The draft, completed in 2012, was recently released by EPA in response to a Freedom of Information Act request by EnergyWire.
The second version of the U.S. Department of Interior’s (DOI) proposed rule to regulate hydraulic fracturing (fracking) on public lands isn’t as bad as the first, but with a projected cost per well of $96,913, it still leaves much to be desired, industry groups said. “While there are improvements in the second version of the rule, it still remains fundamentally flawed from an engineering perspective, as well as bad regulatory policy,” said Kathleen Sgamma vice president of government and public affairs for Western Energy Alliance. According to the analysis, the rule as it currently stands would “impose a cost to society of $345 million annually,” the groups said, adding that DOI’s Bureau of Land Management (BLM) is required to conduct a full economic assessment of the rule, something it has not yet done.
A study published in Groundwater, a scientific journal published by the National Ground Water Association, said Marcellus Shale gas drilling did not cause methane contamination in private water wells in Dimock Township, PA. An analysis of methane samples collected from 1,701 water wells throughout Susquehanna County “indicates that shale gas extraction has not resulted in regional impacts on groundwater quality” in the county, the researchers said in their peer-reviewed 17-page report, “Evaluation of Methane Sources in Groundwater in Northeastern Pennsylvania.” Methane “is common in Susquehanna County water wells” and not related to shale gas extraction activities. The findings, which appeared in the May/June issue, appeared to exonerate Cabot Oil & Gas Corp. and added another chapter to the long-running drama in Dimock, a community that has been at the center of a debate over the safety of fracking since 2009 (see NGI, Dec. 20, 2010).
Pressure is mounting inside and outside Washington, DC, for the Department of Transportation (DOT) to order the retrofit or phase-out DOT-111 tank cars that are used to transport crude oil and ethanol by rail. Proponents of the effort note that a number of the tank cars involved in the fiery crash of tanker cars carrying Bakken crude in Quebec earlier this month were DOT-111 cars. Sen. Charles Schumer (D-NY) has called for heightened regulations, noting that the DOT-111 tanker cars have proven to be flawed, out-of-date and a factor in hazardous material spills during derailments. Sen. John D. Rockefeller IV, chairman of the Senate Commerce Committee, called on the Government Accountability Office (GAO) to examine the impact of growing shale oil and gas development on the nation’s rail and pipeline infrastructure. In a recent letter to GAO, Rockefeller wrote that the “boom in domestic shale oil and gas production has raised questions about the ability of existing infrastructure to safely transport these hazardous products, and the capacity of safety standards as production increases.”
Williams Partners LP‘s Transcontinental Gas Pipe Line (Transco) has filed at the Federal Energy Regulatory Commission to expand a compressor station and provide additional firm transportation capacity to Southeast markets by spring 2015. The Mobile Bay South III Expansion Project would provide 225,000 Dth/d of firm service on the Transco Mobile Bay Lateral from the Station 85 4A Pooling Point and other receipt points at Transco’s Station 85 in Choctaw County, AL, to interconnections with Florida Gas Transmission and Bay Gas Storage in Mobile County, AL. Transco has executed binding precedent agreements with Southern Company Services Inc. and PowerSouth Energy Cooperative for 100% of the transportation service.
Oil production in Texas continued climbing during May, while natural gas output continued its year-long downturn, according to the latest data available from the Railroad Commission of Texas (RRC). The RRC said Texas produced 52.22 million bbl of crude oil in May, up from 51.69 million bbl in April. Every month this year crude oil production has surpassed that during the corresponding year-ago period. During the first five months of this year, Texas crude oil production totaled nearly 259.71 million bbl. During all of 2012 crude oil output was 579.26 million bbl. However, the state in May produced 557.90 Bcf of natural gas, down from about 573.43 Bcf in April. Every month this year gas production has failed to reach levels of a year ago. Gas production in the state reached a high of 684.92 Bcf in December 2011.
Natural gas fired more than half of the new electric generation that came online in the first half of 2013, according to the Federal Energy Regulatory Commission’s Office of Energy Projects. In June, there were no gas-fired electric generation capacity additions. New capacity by all sources totaled 8,601 MW, compared with 10,259 MW in the first six months of 2012, with new gas capacity providing 56.4%, or 4,852 MW. By comparison, renewables accounted for slightly less than 25% of the new generation capacity with 2,144 MW. FERC said it has pending requests to approve five gas pipelines with a combined capacity of more than 3.35 Bcf/d, mostly in the Northwest and Northeast.
The Pipeline Safety Division (PSD) of the Indiana Utility Regulatory Commission has notified three of the state’s major natural gas utilities — Citizens Gas, Northern Indiana Public Service Co. (Nipsco) and Vectren — that it is seeking a total $180,000 in proposed penalties for multiple pipeline safety violations. Vectren faces a total of $75,000 in total penalties for failing to follow written procedures ($40,000) and for failing to keep accurate records ($35,000). Nipso’s proposed penalties are for failing to provide written procedures ($55,000) and for also failing to keep accurate records ($20,000). Citizens Gas would be fined $30,000 for failing to follow written procedures. “The violations are failures by each operator to follow procedures and keep accurate maps and records of their underground facilities,” PSD said. “Further, these failures resulted in either mislocating or not locating pipelines in accordance with Indiana’s ‘Call Before You Dig’ laws. Properly responding to and locating pipelines is absolutely critical to avoiding property damage and personal injury, potentially resulting from natural gas explosions.” In addition to monetary penalties, each operator also faces additional compliance actions.
Researchers at Ohio State University (OSU) want to set up a functioning oil and gas well at the school’s Eastern Agricultural Station in Noble County, OH, to study the environmental effects of hydraulic fracturing. Jeff Daniels, who directs OSU’s Subsurface Energy Resource Center (SERC), said the school wants to gather baseline information on various aspects of shale development by drilling .one horizontal well targeting the Utica Shale, plus an associated vertical monitoring well to gather microseismic data. The university has been negotiating with several companies to serve as drilling operator, and has applied for an $8 million grant through the U.S. Department of Energy to help finance the project.
Natural gas utilities are well positioned to make significant investments in customer-sited combined heat-power (CHP) as a strategic business opportunity, according to a white paper by the American Council for an Energy Efficient Economy (ACEEE). Expanding the CHP market would be good business for the gas utilities, authors Anna Chittum and Kate Farley argue. They contend that it is the “most efficient way” of generating electricity currently. The paper said CHP-based power capacity should be much higher than the current 8% of U.S. electricity supplies that it accounts for and argues that the gas utilities’ ability to make long-term investments and to access low-cost capital on investments that may take years for full payback are perfect for the CHP space.
A U.S. unit of Japan’s Mitsui & Co. Ltd. is taking a 30% stake in Kinder Morgan Inc.‘s Sierrita Gas Pipeline, an Arizona project to export U.S. natural gas to Mexico. MIT Pipeline Investment Americas Inc. would participate in the pipeline with Kinder Morgan and Mexico’s Petroleos Mexicanos (Pemex). Pemex affiliate MGI Enterprises US LLC is to participate in and acquire a 35% ownership stake in Sierrita. Mitsui and Pemex agreed in April to collaborate in the energy business, including natural gas, and the investment in Sierrita marks the first joint venture project to be undertaken under their memorandum of understanding. Sierrita would interconnect with the U.S. pipeline system and extend south from Tucson to Sasabe in Arizona, a new interconnection point near the border between the United States and Mexico. The project would have a design capacity of 200 MMcf/d and is estimated to cost $200 million. Pemex affiliate MGI Supply Ltd. has executed a 25-year transportation service agreement with Sierrita for the full design capacity of the project.
The Idaho Public Utilities Commission has accepted the integrated resource plan of MDU Resources Inc.‘s Intermountain Gas Co., which finds natural gas resources adequate to serve the southern part of the state over the next five years. Intermountain told the PUC that key pipeline infrastructure upgrades in the past two years helped assure the region’s future gas needs would be taken care of. Intermountain also has used portable liquefied natural gas equipment in the Rexburg, ID, area to meet growing demand there. Traditional gas sources for the utility come from Alberta and northeastern British Columbia in Canada and the Rockies production basins in Wyoming, Colorado and Utah.
The U.S. Geological Survey (USGS) said shale and other formations may be a safe place to dispose of nuclear waste, specifically spent nuclear fuel (SNF) now stored at nuclear power plants around the world. In a report, USGS hydrologist Christopher Neuzil said shales and mudrocks, clays and similar formations could provide a storage solution because of their low permeability. According to the U.S. Government Accountability Office, about 70,000 metric tons of SNF are now in pool or dry cask storage at 75 U.S. sites. The U.S. Department of Energy had planned to build a repository for SNF and high-level nuclear waste at Yucca Mountain, NV, but those plans were scrapped by the Obama administration in 2010.
Occidental Petroleum Corp. plans to construct a propane export facility in Ingleside, TX, that is expected to begin in January 2015. The project is contingent upon obtaining required contractual arrangements. “Occidental is also considering opportunities to export additional products from the facility, including butanes, natural gasoline and condensate,” the company said. The company did not provide any details on the potential size of the facilities, cost or volumes to be exported.
ENGlobal Corp. has been awarded a $5 million contract to provide services for a 200 MMcf/d cryogenic processing plant being built in Carroll County, OH, that is owned by Utica East Ohio Midstream LLC, a joint venture (JV) of M3 Ohio Gathering LLC, EV Energy Partners LP and Access Midstream Partners LP. ENGlobal said it plans to begin working on the project immediately, with completion expected in 2Q2014. The JV plans to invest about $900 million over the next five years developing the largest integrated midstream service complex in eastern Ohio.
Gulfport Energy Corp. smashed natural gas, oil and liquids production records in 2Q2013 with total output at 815,300 boe, led by the Utica Shale. A year earlier the operator produced a total of 663,300 boe. In an operations update, the Oklahoma City-based driller said it produced 8,959 boe/d between April and June, at the high end its original guidance of 8,500-9,000 boe/d. Gulfport produced 1.41 Bcf of natural gas, 535,182 bbl of oil and 1.86 billion gallons of natural gas liquids year/year in 2Q2013. In 2013 to date, the operator has produced 1.39 million boe, versus year-ago total output of 1.31 million boe. The full quarterly report is scheduled to be issued on Aug. 7.
Post Oak Energy Capital and funds managed by Goldman Sachs Asset Management have made a $100 million capital commitment to newly formed producer PetroEdge Energy III LLC, based in Houston and focused on the Eagle Ford Shale. PetroEdge acquired an acreage position in Brazos and Burleson counties, TX, and would be initially focused developing the lower Eagle Ford (Maness), an oil-prone shale play, the company said, adding that it will continue to acquire and lease additional land in the area while preparing to drill its first horizontal well on the acreage. PetroEdge management will also be investing in the venture.
Kodiak Oil & Gas Corp., which focuses on the Bakken Shale in North Dakota’s Williston Basin, grew oil and gas sales volumes by 83% in 2Q2013 year/year; crude oil accounted for 87% of sales. Average daily sales volume was 23,200 boe/d from 12,700 boe/d and 8% higher sequentially. Current net production is about 34,000 boe/d, consisting of 28,500 boe/d from legacy sources and 5,500 boe/d from recently acquired properties. Average daily production for full-year 2013 is expected to be 30,000-34,000 boe/d, an increase from prior guidance of 29,000-31,000 boe/d. Kodiak raised its fully-year capital budget to a range of $950 million to $1 billion with the expectation of completing 100 net wells for the full year.
Ohio’s Muskingum Watershed Conservancy District (MWCD) has agreed to sell 1.5 million gallons per day (gpd) from Seneca Lake, at a rate of $6.00/1,000 gallons, to Antero Resources for oil and gas drilling in the Utica Shale. According to reports, the deal could provide up to 138 million gallons. Last April, the district agreed to supply Antero with up to 2 million gpd from Seneca Lake — also at a rate of $6 per 1,000 gallons — through mid-July (see NGI, April 29). That deal provided up to 184 million gallons.
India’s Reliance Industries Ltd. has made multiple bets on U.S. shale gas and they’re paying off, the company said in its fiscal 1Q2014 results, which included an 84% hike in U.S. shale-derived revenue from a year ago. Reliance’s share of gross production stood at 37.7 Bcfe in fiscal 1Q2014, reflecting 71% growth year/year and 4% more than in the previous quarter. Reliance has upstream joint ventures (JV) in the United States with Chevron Corp., Pioneer Natural Resources and Carrizo Oil & Gas, and a midstream JV with Pioneer. The aggregate investment by Reliance at the end of fiscal 1Q2014 in the ventures was about $6 billion. Average combined daily production (gross at JV level) for all three JVs stood at 914 MMcf/d (with 51,600 bbl of condensate) in the latest quarter. The company could spend another $5 billion on U.S. shale activities between now and 2016.
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