The New Mexico legislature has passed a bill calling for an investigation of natural gas outages that hit parts of the state in February. Gov. Susana Martinez last Wednesday signed the measure (HB 452), which was unanimously approved by the state Senate March 12. Labeled an emergency investigation under the New Mexico legislative process, the measure creates the Gas Emergency Investigation Task Force composed of designated representatives from state government. The measure spells out the task force parameters and actions, and calls for a report and recommendations to be compiled by Aug. 1. Following energy disruptions caused by a severe freeze in the Southwest which left 28,000 New Mexico Gas Co. customers without service, the New Mexico Public Regulation Commission, Federal Energy Regulatory Commission and U.S. Senate Energy and Natural Resources Committee launched investigations and held hearings (see NGI, Feb 28). The task force is to investigate “how and why” many of the state’s rural natural gas consumers were shutoff, the economic and social impacts from that, and determine recommendations for both state and federal regulators on how to avoid a similar occurrence in the future.

Petrobras America Inc., a subsidiary of the Brazil’s Petrobras, won final approval to begin oil and natural gas production off the coast of Louisiana using a floating production storage offloading (FPSO) facility. This is the first time that this technology will be used in the Gulf of Mexico (GOM), said the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM), which approved the permit and operating plan for the project. Houston-based Petrobras America plans to use the FPSO technology at its Cascade-Chinook oil and gas project in the Walker Ridge area of the GOM, approximately 165 miles offshore Louisiana in 8,200 feet of water. Production from the facilities is expected to begin in the near future, according to BOEM. Petrobras won approval from the predecessor Minerals Management Service to develop an FPSO for use in the Gulf in 2008 (see NGI, May 5, 2008). The FPSO has a production capacity of 80,000 b/d of oil and 16 MMcf/d of natural gas, the Interior Department agency said. The floating facility has the capability to process oil and gas, store the crude oil in tanks in the facility’s hull, and offload the crude to shuttle tanks for transportation to shore. Natural gas processed by the facilities would be transported to shore by pipeline.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) is seeking information and nominations regarding proposed oil and gas lease sales in the Gulf of Mexico (GOM) Western and Central Planning Areas for the 2012-2017 Outer Continental Shelf (OCS) Oil and Natural Gas Leasing Program. Comments will be used to develop lease terms and conditions and to assess potential conflicts between offshore oil and gas exploration and development operations and state coastal management programs, and to develop actions and alternatives in the National Environmental Policy Act review process. A map outlining available blocks and those excluded is available, as is the call for nominations and comments.

Louisiana’s Mineral and Energy Board collected more than $11.5 million in bonuses in its March lease sale in which buyers heavily favored tracts in South Louisiana as opposed to the northern part of the state. The board awarded 32 leases covering more than 15,000 acres, out of 155 nominated tracts covering more than 232,000 acres. Leases were sold in Acadia, Avoyelles, Bossier, Cameron, DeSoto, East Feliciana, Plaquemines, St. Helena, St. Landry, St. Martin, Terrebonne and Vermilion parishes. Of the 32 tracts awarded, two were in North Louisiana and 30 were in the southern parishes. Leading bidders were Theophilus Oil, Gas, & Land, which won seven leases for $4.6 million. Paramount Energy was the second largest spender, with $4.5 million on one lease. The latest sale brought the total collected for fiscal year 2010-2011 to more than $35.9 million. For the calendar year the total is more than $14.3 million.

The Pennsylvania Fish and Boat Commission (PFBC) has established two programs to make money from 43,000 acres of state land and water it manages. The Natural Gas Leasing Program allows the PFBC to sell the natural gas under its properties. The program is nondevelopmental, meaning it won’t allow production equipment, including wells, on PFBC property. That means drilling companies would have to use horizontal wells started outside PFBC property. And the Water Access Program creates a system for the PFBC to “consider requests to use its property to access, acquire or transport water resources.” The PFBC believes this program will minimize local impacts from drilling by reducing truck traffic near development and by “placing strict rules” on water withdrawals, according to commission Vice President Robert Bachman. The PFBC said it would only approve projects that have “little or no impact” on its properties.

Pennsylvania state Rep. Jesse White (D-Washington County) wants to form a cooperative so that local municipalities can share ideas and resources as they manage development of the Marcellus Shale. While the scope of the cooperative would be set by its members, White believes municipalities could use the structure to jointly hire a natural gas enforcement officer who would travel throughout a region enforcing codes, or to form an advisory board that would help draft ordinances and hold educational events on industry-related issues. Although White began promoting his idea more heavily following an explosion in late February at a Chesapeake Energy Corp. storage tank in the Washington County village of Avella, he said the Marcellus Municipal Cooperative is “neither pro-drilling nor anti-drilling.” The idea “is about finding more efficient and effective ways to carry out our core responsibilities as elected officials, not promoting any sort of political or social agenda,” White said.

A U.S. district judge has granted Northern Natural Gas Co. the right to condemn more than 9,000 acres in south-central Kansas to contain natural gas migrating from an underground storage facility. The Federal Energy Regulatory Commission in 2010 approved Northern’s request to expand its Cunningham storage buffer zone by 12,320 acres in the Kansas counties of Pratt, Kingman and Reno, and Northern then sued to take acreage in the three counties (see NGI, July 26, 2010). Still to be determined is how much current property owners will be compensated.

Former Quebec Premier Lucien Bouchard, who now serves as president of the Quebec Oil and Gas Association (QOGA), said the organization welcomed the provincial government’s response to a report on hydraulic fracturing (hydrofracking) in the Utica Shale play. The Quebec government announced March 8 that it would conduct a two-year strategic environmental assessment of shale gas, at the suggestion of a report by the Bureau d’audiences publiques sur l’environnement (BAPE). Hydrofracking would be allowed to continue in the province, but companies would need to go through an approval process to do so (see NGI, March 14).

CME Group, operator of the New York Mercantile Exchange, has fined hedge fund Goldfinch Capital Management LP for position limit violations in the natural gas futures market. CME fined Houston-based Goldfinch $50,000 and ordered it to disgorge the $17,287 in unjust profits that it received from violating position limits for the expiring December 2010 natural gas futures contracts. It also directed the company to cease and desist from other violations in the future. According to an offer of settlement filed on March 9, Goldfinch held a short position of 1,053 gas futures contracts on Nov. 23, 2010; this was 53 contracts over the exchange’s allowed position limit. It was Goldfinch’s third position limit violation within the past two years, according to CME, which declined to comment on the disciplinary action beyond the notice that was posted on its website. Goldfinch also refused to comment.

Vendors and subcontractors outside of Texas and Louisiana spent $1.8 billion in the past three years to support shallow water energy exploration, according to a study by the Shallow Water Energy Security Coalition (SWESC). Deutsche Bank helped the 14 member companies of the SWESC compile domestic vendor and subcontractor expenditures for 2008-2010. Expenditures then were distributed by state and congressional district of the vendors’ principal place of business. Texas and Louisiana vendor spending was excluded “to illustrate the nationwide economic impact of shallow water drilling,” the coalition said. Illinois, with more than $376 million in vendor and subcontractor spending, led all states, the study found. Vendors in the Chicago area, which spent a total of $242 million in the last three years, were the biggest spenders. The study, “Domestic Vendor Spending Outside the Gulf,” found that about $1.3 billion of the total three-year spending was concentrated in seven states. After Illinois, vendor spending was highest in Pennsylvania, at $245 million, followed by Wisconsin, $176.5 million; New York, $139.6 million; California, $138 million; Oklahoma, $125.8 million; and Alabama, $104.5 million.

JayHawk Energy Inc. has begun evaluating for drilling its recently acquired acreage in the Bakken Shale. The Post Falls, ID-based company also said it was looking to add more acreage to its Bakken holdings and plans to accelerate its efforts through purchases and joint ventures through 2011. JayHawk has procured more than 1,066 gross acres — about 135 net acres — in Divide County, ND. Spacing of wells is currently 1,280 acres, so JayHawk said it will pool its acreage with other interest holders in order to drill a well, possibly by 4Q2011.

Xcel Energy Inc. said it plans to shut down two coal-fired boilers producing 253 MW at its Black Dog power plant in Minnesota and replace them with a 700 MW combined-cycle facility that uses natural gas. The company has asked Minnesota regulators to approve a certificate of need for the $600 million project at the plant, located in Burnsville, MN. The combined-cycle facility would be built on what is now the plant’s coal yard. The facility will include two combustion turbines, two heat recovery steam generators and a steam turbine generator, and will be connected to the power grid via 345-kilovolt lines at the site. Xcel said it needs the approval of several state agencies for the project, including the Minnesota Pollution Control Agency and Minnesota Public Utilities Commission. If approved, construction could begin in 2012 and be online in 2016.

EXCO Resources Inc. has withdrawn its proposal to lease nearly 300 acres of borough-owned land for Marcellus Shale gas drilling operations in Ford City, PA, about 40 miles northeast of Pittsburgh in Armstrong County, the borough council said Tuesday. Under terms of the five-year lease proposal, the borough would have received about $861,000 for the drilling rights to three parcels of land currently used for industrial purposes, and a little more than 10% royalties for any gas produced. While several Ford City residents had expressed concerns about potential environmental and health impacts from drilling and hydraulic fracturing operations, some borough council members had indicated that they were prepared to approve the lease proposal.

Residents in and around Sacramento, CA say they will not accept a final environmental report listing as remote the chance of a leak or accident at a proposed underground storage facility. The 379-acre project is being considered by a California Public Utilities Commission administrative law judge who is expected to recommend a decision for the five-member regulatory panel this spring. Backers also need to obtain a special-use permit from the city, which so far has not taken a position on the proposed facility, most of which lies underneath 700 homes. Many of the homeowners long ago accepted $500 “signing bonuses” and the promise of annual payments from the storage operator in exchange for giving up their rights to oppose the project. Others have remained opposed within a local property owners association.

Texas state Rep. Tank Parker (R-Flower Mound) has introduced bills that would make urban areas with significant oil and gas drilling a priority for inspections by the Railroad Commission of Texas (RRC) and double the potential monetary penalty for violations. HB 2125 would require that the RRC “give priority to oil or gas wells that are located in a county…with a population of 650,000 or more and in which there are more than 2,000 producing oil or gas wells.” Under HB 2126 operators with safety or pollution regulation violations would be subject to fines of up to $20,000 per day for each violation occurring in “an urban natural gas producing county.” The current penalty is up to $10,000 per day. Under the bill, penalty amounts above $10,000 “may be appropriated only to the commission to be used for activities and equipment related to the inspection of gas wells in urban natural gas producing counties.”

An initiative to tax the horizontal segments of natural gas wells has been stopped in its tracks by Louisiana House and Senate committees after lawmakers refused to go along with the idea promoted by the Louisiana Tax Commission. It was a measure that the Louisiana Oil & Gas Association (LOGA) had lobbied hard against. “They were wrong,” said LOGA President Don Briggs. “They were putting a value on something that doesn’t exist. In Louisiana the ad valorem value on downhole equipment is for downhole, tangible equipment. “[It can be recovered after the well’s drilled] based on fair market value. There’s no pipe in the hole that’s recoverable on the lateral. The tax commission members…felt that it had value because of the minerals in the ground. The problem with that in Louisiana law [is] they cannot tax minerals other than the severance tax, which we have, and so that makes it wrong and illegal [to tax the laterals].”

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