El Paso Pipeline Partners LP is buying an additional 25% stake in southeastern interstate pipeline system Southern Natural Gas Co. (SNG) from El Paso Corp., the parent of both companies, for a total of $667 million. The master limited partnership would own an 85% interest in SNG once the transaction closes. SNG’s throughput volumes in 4Q2010 were 2,542 billion Btu/d, compared with 2,329 billion Btu/d in the year-ago quarter. SNG’s 2010 volumes totaled 2,505 billion Btu/d versus 2009 volumes of 2,322 billion Btu/d.

Europe’s unconventional commercial natural gas reserves likely rival those in North America and could begin making contributions to supply in 10 to 15 years, according to IHS Cambridge Energy Research Associates (IHS CERA).”Breaking with Convention: Prospects for European Unconventional Gas” estimates that Europe’s total unconventional gas in place — shale and coalbed methane — could be 173 trillion cubic meters (Tcm), or 6,115 Tcf. The study is the first of a series by IHS CERA about the prospects for unconventional gas development worldwide. Using data from key unconventional gas plays in Europe and IHS proprietary databases, the authors explored the extent to which the potential of unconventional gas may be realized and what it means for European gas markets. Unconventional gas production in Europe “is likely to make significant contributions to supply in the next 10 to 15 years,” the study said. IHS CERA estimated that production levels ranging from a minimum of 60 billion cubic meters (Bcm) — less than half of current shale gas production in North America — to 200 Bcm around 2025.

A U.S. subsidiary of Norway’s Statoil ASA has finalized an agreement with MarkWest Liberty Midstream & Resources LLP to increase the availability of natural gas midstream services in the Marcellus Shale of northern West Virginia. MarkWest Liberty, a joint venture of MarkWest Energy Partners LP and The Energy & Minerals Group, now provides midstream services to Statoil Natural Gas LLC at its Majorsville, WV, complex, which includes a 135 MMcf/d cryogenic processing plant. By mid-2012 MarkWest Liberty expects to be operating 745 MMcf/d of cryogenic capacity to serve Marcellus Shale producers.

Oklahoma City-based Chesapeake Operating Inc. and Little Rock, AR-based Clarita Operating LLC agreed to halt drilling waste injection activities at two disposal wells while a potential link between injection activities and earthquakes in the Fayetteville Shale region is examined. The Arkansas Oil and Gas Commission (AOGC) held an emergency meeting to consider a staff request that injections at the two wells be halted, and commissioners unanimously approved an emergency order to immediately stop all injection operations at the two disposal wells in Faulkner County. The companies volunteered to stop injections until the matter can be discussed at the AOGC’s regular meeting, which is scheduled for March 29.

Houston-based independent power producer Dynegy Inc. warned in a 10-K Securities and Exchange Commission (SEC) filing that it may file for bankruptcy if it doesn’t renegotiate new terms with its creditors. In the meantime, four new directors have joined the Dynegy board. Dynegy said in the SEC filing that it is trying to rework its largest, $1.8 billion credit facility, which it expects to be a smaller amount for a higher cost of borrowing. Thus, the company faces the prospect of potentially having to take on more debt or sell more equity. The latest developments come after two buyout offers by its major shareholders — Carl Icahn and Seneca Capital — were rejected by a majority of Dynegy shareholders (see NGI, Feb.14).

Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee, has established a new Office of Oversight and Investigations to keep close tabs on the Interior Department and other agencies over which the panel has jurisdiction. The office will be staffed with attorneys, investigators and experts on issues related to the committee’s jurisdiction. The committee already has recruited Morgan Kim based on her experience as a nonpartisan investigator and prosecutor for the Department of Justice’s Inspector General Office, the U.S. Attorney’s Office and the House Ethics Committee. She left her most recent position as deputy chief counsel and director of investigations and enforcement at the House Ethics Committee on March 4 to begin work with the committee’s new Oversight and Investigations Office. Committee Chief of Staff Todd Young said that Kim worked with Hastings when he was chairman and ranking member of the House ethics panel. “I don’t believe so,” said Crystal Feldman, a spokeswoman for the House Energy and Commerce Committee, when asked if the new office of the House Natural Resources Committee would conflict with the duties of the House Energy and Commerce’s Subcommittee on Oversight and Investigations.This office “is just for our committee and will address only those areas where we have jurisdiction,” such as public lands, mineral resources on public lands and forest reserves, she said.

A bill in a Texas House committee if passed would repeal a natural gas drilling tax break that benefits the vast majority of wells in the state’s shale gas plays. The bill’s sponsor says the incentive has outlived its usefulness, but an industry advocate claims its repeal would be a gas production- and job-killer. Rep. Lon Burnam‘s bill (HB 2001) would repeal a tax break for high-cost gas wells that was created in 1989. The Fort Worth, TX, Democrat conceded that the measure has been successful, and that’s why it’s no longer needed. After reaching a peak of 26 Bcf/d during the early 1970s, Texas natural gas production slumped to less than 16 Bcf/d by 2000, according to data from the Railroad Commission of Texas. However, since the first horizontal Barnett Shale well was drilled in 2002, production from the state has slowly crept back up, reaching just more than 20 Bcf/d in 2009. To qualify for the tax break, producers must submit data on permeability and well depth to the Railroad Commission of Texas, which is in charge of certifying that criteria have been met.

Washington Gas is backing legislation in Maryland that would allow for expedited cost recovery for pipeline replacement programs outside traditional base rate cases. The utility cites pipeline safety as the reason for its support, but a building trade association opposes the associated costs. The Maryland Strategic Infrastructure Development and Enhancement Program (STRIDE), which is pending before both the state House (HB 856) and Senate (SB 332), would allow gas companies to collect a surcharge from customers to pay for infrastructure costs on a real-time basis, but the surcharge must be approved by utility regulators. In a poll paid for by the utility, 63% of respondents said they would favor a monthly surcharge of no more than $2 to make pipeline repairs and replacements, Washington Gas said. The Apartment and Office Building Association (AOBA) opposes the legislation and notes that commercial customers would be charged $5. The legislation is also opposed by the Maryland Public Service Commission and the Maryland Office of People’s Counsel, AOBA said.

Wyoming Gov. Matt Mead signed into law energy measures dealing with a state energy improvement program, microbes use in natural gas drilling, natural gas vehicles (NGV), wind project property owners’ rights, and a nuclear energy production study. Senate Bill SFO116 regulates the use of microbes as an innovative means of creating methane gas from coal seams. Another bill (HB 179) established an energy improvement program, offering financing, procedures and effective dates for local governments to offer energy efficiency and renewable energy improvements through a city, county or multi-county joint powers agreement. HB 235 authorizes the state transportation department to construct and operate natural gas vehicle (NGV) fueling stations that would be open to the general public, while setting regulations for the retrofit of NGVs.

Shale’s market eruption and regulatory responses to recent safety breaches have combined to put some strain on the U.S. natural gas pipeline industry’s usually staid credit ratings, according to a report by Standard & Poor’s Ratings Services (S&P). “Changing natural gas supply dynamics” driven by the rapid run-up in shale gas production is adding to that risk, the report stated. Most of the nation’s large interstate pipelines are connected to conventional supply sources — the Gulf of Mexico coast, Midcontinent region and Western Canada. However, shale gas is moving to change all of that, said S&P. “Because shale production is generally more economical than conventional gas supply sources, the dependency and corresponding transportation rates on other transportation routes and their intrinsic worth is beginning to suffer,” S&P said. “In short, some pipelines could become ‘stranded’ assets.” The report also acknowledged that recent gas pipeline accidents have “caused nationwide concern” about operational failures. As a result, S&P said it is expecting greater federal and state oversight of the pipelines.

The Allegheny County (PA) Council heard from more than 100 speakers during a recent hearing in Pittsburgh regarding Marcellus Shale natural gas drilling within the county. The council held a hearing on the same topic last July, but with a long list of invited guests — including the state’s Department of Environmental Protection (DEP) and Department of Conservation and Natural Resources, along with industry representatives Consol Energy, Allegheny Energy, Atlas Energy Resources, Peoples Natural Gas and Range Resources — members of the public said more time was needed for comments. The council is considering new restrictions on drilling in the county, including stretching the minimum distance between wells and homes to 2,000 feet from the current state-mandated 200-foot minimum.

With the National Weather Service (NWS) calling for above-normal rainfall in the spring and summer in the Pacific Northwest, hydroelectric production should get a boost, bringing the promise of continued shrinking prices and use of coal and natural gas in the region. In addition, during May and June the federal power marketer/transporter Bonneville Power Administration (BPA) will target large thermal generators to back out additional coal-fired and natural gas generation. A combination of high water levels and high volumes of power supplies from an increasing number of wind projects gave BPA a temporary oversupply of generation in the federal Columbia River Power System. As a result, BPA proposes to try to avoid the oversupply by paying thermal-fired generation in the region to be on standby — but not running — in May and June. BPA’s goal is to achieve what it called “greater thermal flexibility” than was in place last June.

Recovery Energy Inc. has closed on a $12.3 million cash-and-stock deal to acquire oil and gas leases on 8,060 net acres from Houston-based Wapiti Oil & Gas LLC. The leasehold is located primarily northwest of the prolific Silo field in Laramie County, WY. The Wapiti sale follows Denver-based Recovery’s acquisition in February of approximately 1,700 acres in Weld County, CO and about 6,600 net acres in Goshen County, WY from various private individuals for $1.9 million in cash and stock. The combined acquisitions bring Recovery’s holdings in the Denver-Julesburg Basin to 148,000 gross acres (134,000 net acres).

The Supreme Court of Arkansas has upheld a lower court ruling dismissing a lawsuit against the Arkansas Game and Fish Commission (AGFC) for leasing thousands of state-protected wildlife acres in the Fayetteville Shale for gas exploration. James Dockery had argued that the AGFC did not have the authority to conclude a $32 million lease agreement with Chesapeake Energy Corp. in 2008. Under the lease, the Oklahoma City-based company was given drilling rights to more than 7,500 acres in the Petit Jean River Wildlife Management Area and about 4,000 acres in the Gulf Mountain Wildlife Management Area (see NGI, August 4, 2008). Dockery also sought to have the lease revenue deposited in the state’s general fund rather than have the money going directly to funding for the wildlife agency (Case No. 10-651, Dockery v. Morgan et al).

The Ohio General Assembly is considering a bill that would open leasing rights for all property owned by the state government — including state parks — to oil and gas companies. HB 133, introduced by State Rep. John Adams (R-Sidney), would also create a five-member Oil and Gas Leasing Board. The panel would create a leasing procedure and ensure that the appropriate state agencies — collectively facing an $8 billion deficit — receive their share of revenue. “There needs to be an open, transparent evaluation of the bidding and leasing process to assure the Ohio public that the public interest is being taken care of,” Tom Stewart, executive vice president of the Ohio Oil and Gas Association, told NGI. “I believe this bill is more about the state of Ohio doing something to help itself rather than the industry trying to help itself to state land.” Environmental groups are against the bill.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.