The Federal Energy Regulatory Commission issued favorable environmental assessments (EA) for two Dominion Marcellus Shale-related projects in Pennsylvania and New York: the Tioga Area Expansion Project and the Sabinsville-to-Morrisville Project. Because they are in the same geographic region, FERC reviewed the projects in a single EA [CP12-19, CP12-20]. The Tioga Area Expansion, estimated to cost $67 million, calls for the construction of 15 miles of 24-inch diameter pipeline in Tioga County, PA, and minor modifications to several existing Dominion facilities to provide a total of up to 270,000 Dth/d of firm transportation. About 150,000 Dth/d of the capacity would be delivered to Leidy in north-central Pennsylvania at an existing interconnect with Transcontinental Pipe Line, while the remaining capacity would be delivered to a new interconnect with Texas Eastern Transmission at Dominion’s Crayne Compressor Station in Greene County, PA. The Sabinsville-to-Morrisville Project would allow Tennessee Gas Pipeline to move its receipt point from Dominion south from North Sheldon, NY, to Sabinsville, PA, in Tioga County. The project, which would cost an estimated $17 million, would provide up to 92,000 Dth/d to Tennessee.

Ohio wells produced about 73.3 Bcf of natural gas and 4.9 million bbl of oil in 2011, according to a report by the Ohio Department of Natural Resources‘ (ODNR) Division of Oil and Gas Resources Management. The 23-page Ohio Oil and Gas Summary, also known as the McCormac Report, said 690 drilling permits were issued in the state in 2011, a 6% increase from 2010. During that time the state also saw a 7.7% increase in the number of wells drilled. ODNR said 460 oil and natural gas wells were drilled in 2011; 433 were productive and 27 were dry holes. Crude oil production totaled 4.85 million bbl (averaging 13,296 b/d), while natural gas production was about 73.3 Bcf (averaging 200.8 MMcf/d), according to the ODNR. That amounted to a 1.43% increase in oil and a 6.18% decrease in natural gas from 2010.

Three subsidiaries of Oneok Partners LP have asked a U.S. District Court in Tulsa to rule on the jurisdictional limits of the Pipeline and Hazardous Materials Safety Administration (PHMSA) regarding its regulatory jurisdiction over Oneok’s Bushton, KS, natural gas liquids plant, associated storage and in-plant piping systems. They requested a temporary restraining order and preliminary injunction to delay a scheduled PHMSA inspection of the plant until a decision is made on jurisdiction. “Although PHMSA has jurisdiction over our pipeline systems into and out of the plant, the Bushton NGL fractionation plant is regulated by the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA),” said Oneok Partners COO Pierce H. Norton. “We believe PHMSA is outside its jurisdictional authority by inspecting and attempting to impose different regulations on the assets and operating procedures currently regulated by OSHA and the EPA. We believe that having different rules within the same plant could result in misinterpretation and confusion.

An application by Tres Palacios Gas Storage LLC, a unit of Inergy LP, to build an extension of its header system to a processing plant in south-central Texas has been approved by the Federal Energy Regulatory Commission. The Westport, CT-based company proposes to construct a 19.7-mile extension of its existing storage facility pipeline header system located in Matagorda and Wharton counties, TX, to accommodate the expansion plans of Copano Energy LLC and to provide its customers with access to processing capability. Copano plans to expand capacity of its processing plant in Colorado County, TX, by 400 MMcf/d by early 2013, according to the FERC order. The Tres Palacios storage facility, which interconnects with 10 interstate and intrastate pipelines, has total capacity of 57.26 Bcf, of which 38.40 Bcf is working gas, and it has a peak withdrawal rate of 2,500 MMcf/d, a maximum injection rate of 1,000 MMcf/d and is capable of cycling seven times a year. The Commission reaffirmed the company’s request to charge market-based rates for storage, hub and wheeling services.

Alliance Pipeline agreed to pay a civil penalty of $500,000 for violating Federal Energy Regulatory Commission regulations regarding a capacity auction in 2010, specifically giving shippers a misleading impression about the amount of unsubscribed capacity on its system. Alliance, jointly owned by Enbridge Inc. and Fort Chicago Pipeline II U.S. LP (now Veresen Inc.), feared that its customers would see unsubscribed capacity on its system as an indication of the capacity’s reduction in value and a reason not to renew their contracts, FERC said in a recent order [IN13-3]. Alliance’s CEO “sought to have its parent companies purchase the unsubscribed capacity, even though it believed that doing so would likely increase the parents’ financial losses, to avoid negative perceptions of Alliance that would result from non-placement of that capacity.” In an e-mail dated March 11, 2010, the CEO estimated that purchasing turned-back capacity would have cost the parent companies around $1.1 million, but he said it “seems like a reasonable price to pay to avoid the…owner issues of stranded capacity,” the order said. “Had the owners…implemented this plan, it could have created a misleading impression with existing shippers on Alliance about the value of Alliance’s overall capacity. The threat was ultimately alleviated because, by the time of the auction in late May 2010, the owners concluded that they would reduce, rather than increase, their losses by having an affiliate engage in the transaction” to buy the the capacity.

The Interior Department disbursed or paid out $12.15 billion in revenue generated from energy production on public lands and offshore areas in fiscal year 2012 — an increase of $1 billion over the previous year. More than $2.1 billion of the energy revenue was disbursed to 36 states as their cumulative share of revenues collected from oil, gas and mineral production on federal lands within their borders and from U.S. offshore oil and gas tracts adjacent to their shores. Tribal governments received more than $700 million, and $6.6 billion went directly to the U.S. Treasury to fund programs for the entire nation, making Interior’s mineral disbursements one of the nation’s largest sources of nontax revenue. The disbursements fund several special-use accounts, including $897 million to the Land & Water Conservation Fund; $1.6 billion to the Reclamation fund; and $150 million to the Historic Preservation Fund. Sens. Lisa Murkowski (R-AK) and Mary Landrieu (D-LA), who represent large producing states, plan to make revenue-sharing — capturing a greater share of revenue from energy production for the states — a major issue in Congress next year.

Chevron Corp. is directing about $7.5 billion for U.S. upstream projects in 2013, with most of the focus on deepwater Gulf of Mexico (GOM) projects, the producer said. The San Ramon, CA-based oil major plans to spend $36.7 billion for capital projects next year, with $33 billion set aside for the upstream. Nearly all (90%) of the spending program in 2013 is budgeted for oil and gas exploration and production projects, while about 7% will go to the downstream businesses. “Major” U.S. capital investments next year are planned in the GOM deepwater, where Chevron is developing the prospective Jack/St. Malo, Big Foot and Tubular Bells projects. The Jack/St. Malo is about 55% complete, while Big Foot is close to two-thirds complete, and both are “on budget.” First production for those two development is expected in 2014. In Canada major investments are planned for the Hebron offshore oil development.

EQT Corp. in 2013 plans capital expenditures of $1.5 billion with more than 170 wells and an investment of $320 million in midstream projects. Most of the money, $915 million, is for new wells, including $820 million to drill 153 wells in the Marcellus Shale, $40 million for eight wells in the Utica Shale, and $55 million for 11 wells into the Upper Devonian formation using six horizontal rigs and two top-hole rigs. The company projected 335-340 Bcfe of produced gas sales in 2013, a 31% increase from 2012’s estimate of 257 Bcfe, and between 3.3 and 3.4 million bbl of natural gas liquids.

Anadarko Petroleum Corp. said four core U.S. onshore operating plays — the Wattenberg Field in Colorado, the Greater Natural Buttes in Utah, and the Marcellus and Eagle Ford shales — eclipsed production records in November, with each one exceeding a gross processed production milestone of 100,000 boe/d. The Wattenberg Field’s sales volumes are on track to increase in the final three months of this year by more than 10% from the third quarter. The growth rate was highlighted by the performance of the horizontal program, which recently established a gross production record of more than 45,000 boe/d.

U.S. hydraulic fracturing (fracking) capacity utilization has fallen by almost one-third since January, and all of the major domestic plays are in a “negative frack pricing environment,” according to PacWest Consulting Partners. In the latest PumpingIQ report, analysts found that the gap between aggregate U.S. fracking supply and demand should hit a trough in 1Q2013. U.S fracking capacity plunged on average 79% in 3Q2012 and is expected to hit a low of 73% in 1Q2013. The market environment for new oil and natural gas development “has changed considerably over the past six months, prompting a significant downward revision in U.S. land rig count forecasts for 2012 and 2013. Due to consistent rig count reductions expected through 2012, PacWest forecasts that hydraulic fracturing capacity utilization will continue to fall throughout the year, ending the year at 74%.” Total U.S. capacity at the end of June was 14.9 million hydraulic horsepower (hhp), which translates into 499 fracking fleets. “At the end of 2012, PacWest forecasts that there will be 15.3 million hhp of capacity in the US, an increase of 18% from the end of 2011.”

Interior Secretary Ken Salazar has issued a final secretarial order to end the conflict between the potash industry and the oil and natural gas industry over leasing opportunities on public lands within the 500,000-acre designated potash area (DPA) in Southeast New Mexico. The order promotes the use of emerging technologies, such as horizontal drilling, to minimize surface disruption to potash, which is located above oil and gas wells (see NGI, July 16). This strategy clears the way for increased production in the Permian Basin, and provides more certainty for the development of potash, which is a mined salt that contains potassium and is used in fertilizers in U.S. agriculture. The DPA contains deposits of both potash and oil and gas on more than 400,000 acres of land, most of which is managed by Interior’s Bureau of Land Management. The DPA currently produces 75% of the potash mined in the United States and is also home to nearly 800 federal oil and gas leases. More information on the secretarial order is available on the BLM’s website:

The costs to build, as well as operate, upstream oil and natural gas facilities continued to increase this year and are forecast to jump more in 2013, according to IHS Inc. indexes, which track upstream building and operating costs. The Upstream Capital Cost Index rose 1% from 1Q2012 to 3Q2012 to an index score of 230, which matches a high set in 3Q2008. Over the same period, the Upstream Operating Cost Index rose 0.5% to a new high of 190. The indexes are proprietary measures of cost changes, similar in concept to the Consumer Price Index, and are used as a benchmark for comparing costs around the world. Values are indexed to the year 2000, meaning that $1 billion in 2000 capital costs have risen to $2.3 billion in current dollars. Likewise, the annual operating costs of an oilfield would be $190 million today versus $100 million 12 years ago.

Canadian ferry operator Societe des traversiers du Quebec (STQ) has ordered what is expected to be the first ferry in North America to be powered by liquefied natural gas (LNG) from Wartsila. The ship, scheduled for delivery in late 2014, is being built by Fincantieri Cantieri Navali Italiani in Italy and will be used on routes crossing the St. Lawrence River.

The natural gas liquids (NGL) Lone Star West Texas Gateway NGL Pipeline has entered service from the Permian and Delaware basins in West Texas to Mont Belvieu, TX, said partners Energy Transfer Partners LP (ETP) and Regency Energy Partners LP. The 570-mile, 16-inch diameter pipeline runs from Winkler County in West Texas to ETP’s Jackson County processing plant in Jackson County with initial capacity of 209,000 b/d. The 130-mile Justice NGL Pipeline, extending from the Jackson County processing facility to Mont Belvieu, is also in service. Lone Star has secured NGL capacity on Justice.

The Columbus & Ohio River Rail Road Co. (CUOH), a subsidiary of Genesee & Wyoming Inc., signed a long-term agreement to transport natural gas liquids (NGL) and serve a fractionation facility being built by Utica East Ohio Midstream LLC (UEO) in Harrison County, OH. CUOH is building a storage track to serve the Harrison Hub in Scio, OH, scheduled to come online in May. CUOH expects to ship 10,000 carloads of NGLs annually. The Harrison Hub is to have an initial NGL storage capacity of 870,000 bbl, fractionation capacity of 90,000 b/d, and the rail-loading facility.

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