Natural gas has been the primary target of domestic drilling throughout the past decade, but the focus appears to be shifting to crude oil, according to a report on first quarter well completions issued by the American Petroleum Institute (API). The estimated number of oil wells drilled in the first quarter outnumbered natural gas wells by 5,718 to 3,860, API reported. The figures for oil well completions “show the focus is changing,” the producer group said. While oil and gas well activity was up from the same period in 2010, it was down from 2009, API said. It estimated that 10,431 oil and natural gas wells and dry holes were completed in the most recent first quarter, up 29% from 2010’s first quarter but almost 8% below completions in the first quarter of 2009. API also reported total estimated footage of 75.66 million feet was drilled in the first quarter, a 38% increase from the same period of 2010.

The Federal Energy Regulatory Commission (FERC) has approved Trunkline Gas Co. LLC‘s proposal to modify a portion of its existing South Texas System to allow the bidirectional transportation of liquids-rich natural gas from the Eagle Ford Shale play in South Texas. Trunkline, a subsidiary of Southern Union Co., proposes to isolate a 165-segment of its pipeline in South Texas, to be known as the Modified Transportation System, by closing off block valves at the Edna Compressor Station in Jackson County, TX, and installing valves at the existing Beeville Compressor Station in Bee County, TX, to allow for the bidirectional transportation of the gas. The proposed change in the operation of the southernmost segment of its pipeline will enable Trunkline to service DCP Midstream LLC‘s gathering of liquids-rich gas, primarily in the Eagle Ford Shale trend. Denver-based DCP Midstream, formerly Duke Energy Field Services, will be the anchor shipper on the modified portion of the Trunkline system in South Texas. FERC also approved Trunkline’s request to abandon by sale to DCP Midstream the Edna Loop, composed of approximately 13 miles of pipeline upstream of the Edna Compressor Station and approximately nine miles of pipeline downstream of the station. Moreover, it cleared the abandonment by sale or by transfer of several smaller pipe facilities to DCP.

The Government of Nova Scotia has begun a year-long review of environmental issues associated with hydraulic fracturing (fracking). The review, which will be conducted jointly by the province’s departments of Energy and Environment, is expected to be finished in early 2012. A team of senior technical and policy staff from the two departments will work to identify potential environmental issues, determine how they are managed in other jurisdictions and identify industry best practices. The team will look at the reviews of other jurisdictions across Canada and the United States and bring in outside experts in certain subject areas. At the conclusion of the review the team will make recommendations to improve regulations where necessary, the departments said. Public comments will be sought both during and after the review. Nearly half a million wells have been fracked in British Columbia, Alberta and Saskatchewan, according to the Government of Nova Scotia. In March Quebec announced that fracking could continue in that province for exploration purposes only, after the release of a much anticipated report that recommended a two-year strategic environmental assessment on shale gas (see NGI, March 14).

Eagle Rock Energy Partners LP will purchase Tulsa-based CC Energy II, a portfolio company of Natural Gas Partners VIII LP that is also called Crow Creek Energy, for $525 million, the Houston-based partnership said. The deal includes approximately $303 million in Eagle Rock equity, $15 million of cash and $207 million of assumed debt. Closing is expected to occur May 3. Crow Creek, which had net production of approximately 47 MMcfe/d in 1Q2011, has total proved reserves of 268 Bcfe (80% gas and 66% proved developed) in the Anadarko Basin, Arkoma Basin and Barnett Shale. Based on its anticipated drilling plans and the current natural gas price environment, Eagle Rock expects production from the acquired properties to total approximately 51 MMcfe/d this year and to increase through 2015.

The Pennsylvania Department of Environmental Protection (DEP) is ordering water treatment plants to immediately test for radioactivity and other contaminants from Marcellus Shale wastewater. The DEP said it decided to call for the expanded testing before receiving a similar request from Environmental Protection Agency (EPA) Region III Administrator Shawn Garvin in early March (see NGI, March 14). In a pair of letters in mid-March, DEP Acting Secretary Michael Krancer ordered tests at 14 public water suppliers located downstream from facilities that treat Marcellus wastewater and 25 treatment facilities that accept Marcellus wastewater.

Ahead of a deadline Friday (April 15) to comment on the Delaware River Basin Commission‘s (DRBC) draft water quality amendments, which may affect natural gas drilling in the region, those for and against the proposed changes attempted to make their voices heard by delivering thousands of responses to the commissioners. As of Thursday morning the commission had received more than 7,600 comments, a spokesman told NGI. Seven boxes of comments also were delivered to the DRBC late Thursday, apparently from 18 environmental groups, which were said to contain around 36,000 responses. The industry-led Marcellus Shale Coalition outlined its concerns in comments and said the proposed rules exceed the multi-state commission’s legal authority and duplicate state jurisdiction. Last year the commission voted to impose a moratorium on new well pad permits in the basin, which overlies the Marcellus Shale formation, and in December proposed amendments to regulate wastewater, water sources for natural gas development and well pad siting (see NGI, March 7; Dec. 13, 2010). If the rules are adopted as proposed, drilling would be allowed to continue, albeit under more oversight.

The Pennsylvania Department of Environmental Protection (DEP) said 156 inspections were conducted at Marcellus Shale well sites in the state during the first three months of 2011. Inspectors issued 314 notices of violation (NOV) during that time frame, amassing $3,500 in penalties, all of which have been paid in full. Susquehanna County had the highest number of NOVs with 83. Rounding out the top five there were 67 NOVs in Lycoming County, 35 in Tioga County, 21 in Bradford County, and Clinton and Wyoming counties tied for fifth with 19 each. There was a nearly even split on the types of violations reported, with environmental issues on 169 NOVs (about 54%) and administrative matters comprising the remaining 145 NOVs (about 46%). Just over half of the violations (51%) were issued to three companies. Cabot Oil & Gas Corp. had 51 NOVs, while Chief Oil & Gas LLC had 41 and Anadarko E&P Co. LP had 38. The DEP appears on pace to issue about as many NOVs in 2011 as in 2010, when 642 inspections were conducted and inspectors issued 1,246 NOVs. Penalties totaled about $5.85 million, of which about $4.75 million has been collected.

Consol Energy said its plans to drill 70 wells in the Marcellus Shale by the end of the year were slightly ahead of schedule, thanks to the 13 horizontal wells it drilled during 1Q2011. Consol has drilled four additional wells so far in April, bringing its total Marcellus lateral footage to more than 60,000 feet, compared to a total lateral footage of 78,000 for all of 2010. The company attributed the increase to drilling efficiency, with drilling days from kick-off point to total depth averaging fewer than 10 days. Consol also said its gas division had set a record for quarterly gas production at 35.9 Bcf during 1Q2011. The company said it was committed to reaching its production goal of 150 to 160 Bcf for the entire year. Consol plans to announce additional operational and financial results for 1Q2011 during a conference call on April 28.

Chesapeake Energy subsidiary Chesapeake Appalachia LLC has been temporarily barred from removing soil from a waste disposal pit in Wetzel County, WV, by a restraining order issued by U.S. District Judge Frederick Stamp for the Northern District of West Virginia. The order was sought by Larry and Jana Rine, who last year filed a lawsuit claiming Chesapeake unlawfully dumped drilling waste in the pit, which is located on the Rines’ property near New Martinsville at the base of the state’s northern panhandle. The couple have alleged that Chesapeake, which is performing repairs on a slip near the pit, is also removing evidence — contaminated soil — from the site. Chesapeake has denied “any and all allegations of wrongful or illegal conduct” and said its activities were covered by a permit issued by the West Virginia Department of Environmental Protection. The restraining order allows Chesapeake to continue repairs to the slip. A hearing is scheduled for Thursday (April 21).

Regulators must take a harder line when it comes to natural gas drilling’s effects on Texas’ environment, and the Railroad Commission of Texas (RRC), “long the oil and gas industry’s lapdog, must become a watchdog,” as activity in the Eagle Ford Shale increases, according to a report by Earthworks’ Texas Oil & Gas Accountability Project (OGAP). In its report, OGAP called on the RRC to adopt rules requiring “full public disclosure of oil and gas drilling and fracking [hydraulic fracturing] fluids,” and to implement rules requiring closed-loop drilling systems and water-based drilling fluids. OGAP also recommended that the Texas Commission on Environmental Quality strictly enforce emission limits from oil and gas exploration and production (E&P) equipment, the Texas Water Development Board evaluate the impact of fracking on groundwater, and the U.S. Environmental Protection Agency identify sources of drilling chemicals in groundwater and regulate air pollution from oil and gas E&P. The report, issued jointly by Earthworks and nine other environmental and community groups, criticized the regulatory agencies for what OGAP called “inadequate laws and regulations” in response to potential “air pollution, water contamination and other problems that accompany natural gas production.”

A goal of having 33% of California’s electricity come from renewable resources by 2020 (SB2X) has been formally codified into law by Gov. Jerry Brown. The governor said he sees 33% as a “floor, not a ceiling,” and that a 40% goal is probably doable in a reasonable time frame. He also said there are some problems with SB 2X’s language that will cause implementation problems, so he is urging the state legislature to immediately begin work on added clean-up legislation. California Public Utilities Commission President Michael Peevey pledged to work with the state legislature on “refinements” to smooth the path to achieving the 33% goal.

Pacific Gas and Electric Co. (PG&E) cited public and industry concerns stemming from the crisis at Japan’s Fukushima Daiichi Nuclear Power Plant in announcing that it will suspend its relicensing effort for the Diablo Canyon Nuclear Power Plant along the central California coast, pending the completion of updated seismic tests. Critics of the plant have been urging this action for months, even before the Japanese disaster. Separately, Southern California Edison Co. (SCE) asked state regulators to approve retail rates to support seismic studies related to the San Onofre Nuclear Generating Station (SONGS), of which it is the majority owner/operator. SCE said it will file for an additional $64 million in rates to the California Public Utilities Commission. The seismic studies are intended to expand the utility’s understanding of the seismic/tsunami conditions that could affect the SONGS site along the Southern California coast.

Royal Dutch Shell plc has agreed to become a natural gas supplier and equity partner in Chevron Corp.‘s Wheatstone, one of two mega projects now under way in Australia. Shell Development (Australia) Pty Ltd.‘s agreement gives it an 8% participating interest in the Wheatstone and Iago natural gas fields offshore northwest Australia. The agreement also gives Shell a 6.4% participating stake in Wheatstone. With the Shell sale, Chevron would own close to 74% of Wheatstone. Apache Corp. has a 13% interest, while Kuwait’s Kufpec has a 7% stake.

Golar LNG Ltd. has contracted to build four 160,000-cubic meter liquefied natural gas (LNG) carriers with Korea’s Samsung Heavy Industries Co Ltd. Three vessels are to be delivered in 2013 and one in early 2014 at a combined cost of about $800 million. Golar has an option to acquire another four vessels for delivery in 2013 and onward, the company said. The company said it might consider a mixture of several employment opportunities for the vessels, including spot trading, employment within Golar Commodities for its own cargo trading activities, joint venture structures with LNG suppliers and possible long-term charters to third parties. Commitment within the floating storage and regasification unit segment for several of the ships seems realistic as well, the company said. Golar said it sees further opportunities in the new-build markets and is pursuing several other projects.

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