The Interior Department is offering 38.6 million acres offshore Louisiana, Mississippi and Alabama in the Central Gulf of Mexico (GOM) Lease Sale 227 to be held in March. The sale, which could potentially result in almost 4 Tcf of natural gas production and nearly 1 billion bbl of oil production. The sale is the second in the Obama administration’s 2012-2017 Outer Continental Shelf (OCS) program and would be the first of five Central GOM lease sales to be held under the program (see NGI, July 2, 2012).
The Energy & Minerals Group (EMG) is investing an additional $450 million for its joint venture (JV) with MarkWest Energy Partners LP to build midstream infrastructure in the Utica Shale. EMG’s total contribution would increase to $950 million in MarkWest Utica EMG LLC (see NGI, Nov. 12, 2012; Dec. 19, 2011). The liquidity boost, said the partners, allows MarkWest financial flexibility in timing its capital contributions to the JV, but it doesn’t modify the partners’ interests. An amendment was added to the agreement allowing MarkWest to contribute up to $150 million to the JV on a short-term basis; EMG would provide its additional funding by the end of February.
Administrative Law Judge Richard Mather has turned down a request to block Tennessee Gas Pipeline Co.’s plans to expand a natural gas pipeline in Pennsylvania, because the environmental groups “failed to show that they were likely to succeed on the merits or that they would suffer irreparable harm.” The Delaware Riverkeeper Network and Responsible Drilling Alliance had appealed three permits issued to Tennessee by the Pennsylvania Department of Environmental Protection (DEP), arguing that DEP issued the permits despite technical deficiencies with Tennessee’s plans. The Pennsylvania Environmental Hearing Board had rejected all of the arguments and denied their appeal.
Williams Partners LP said Japan’s Marubeni Corp. is taking a 49% stake, estimated to be worth about $1 billion, in the Gulfstar FPS project, the first floating production system built entirely in the United States. The initial FPS would handle production at the Tubular Bells field in the deepwater Gulf of Mexico, which is being developed by Chevron Corp. and Hess Corp. (see NGI, May 30, 2011). Williams subsidiary Gulfstar One LLC is designing the FPS to process up to 200 MMcf/d of natural gas and 60,000 b/d of oil. Williams Partners would retain the majority stake; it has set aside about $500 million for the initial FPS.
A “cyber incident” at Department of Energy (DOE) headquarters in Washington, DC, in mid-January targeted the agency’s network “and resulted in the unauthorized disclosure of employee and contractor” information. In a letter to DOE employees Feb.1, the agency said an investigation conducted by the Office of Health, Safety and Security, law enforcement concluded that no classified data was compromised by the cyber attack. “We believe several hundred DOE employees’ and contractors’ PII [personally identifiable information] may have been affected,” according to the letter. “As individual affected employees are identified, they will be notified and offered assistance on steps they can take to protect themselves from potential identity theft.” A total of 14 computer servers and 20 workstations at DOE headquarters were penetrated during the attack, according to the Washington Free Beacon newspaper.
Howard Midstream Energy Partners LLC (HEP) plans to construct a cryogenic natural gas plant in the Eagle Ford Shale in Webb County, TX, capable of processing 200 MMcf/d. The $100 million plant and an import and export logistics railroad hub for oilfield-related services and products, including condensate and natural gas liquids (NGL), is to serve primarily producer and midstream customers. HEP’s Reveille cryogenic processing plant and associated pipelines would tie into the Cuervo Creek gathering pipeline system (see NGI, March 19, 2012). Start-up is anticipated in January.
The Ohio Supreme Court ruled that the Ohio Oil and Gas Commission does not have jurisdiction to hear an appeal on oil or gas well permits issued by the chief of the Division of Mineral Resources, a branch of the Ohio Department of Natural Resources (ODNR). “For oil and gas wells, however, a permit to drill a new well, drill an existing well deeper, reopen a well, convert a well to any use other than its original purpose, or plug back a well to a different source of supply, including association production operations, is not considered to be an order of the chief of the division,” the majority wrote. The case arose when Summitcrest Inc. filed with the commission, appealing a permit that was issued in March 2012 to Chesapeake Energy Corp. and allowed the energy company to use its lease to drill on Summitcrest property.
BP plc‘s former chief of natural gas liquids trading has accused the company of wrongfully firing him to manipulate the U.S. market. In a 10-page civil complaint filed in January in the District Court of Harris County, TX, Drew Sickinger said his termination in January positions BP to engage in price manipulation by establishing a dominant and controlling position in the market. The alleged plot, for which Sickinger is seeking unspecified damages for breach of contract and fraud, was not revealed in the complaint (Drew Sickinger v. BP Energy Co., District Court of Harris County, TX, No. 2013-05995). The allegations “are untrue and without merit,” BP said.
Williams County, ND, District Court Judge David Nelson ruled in favor of the state in a dispute over who is entitled to subsurface mineral rights in the “shore zone” along two major navigable waterways. Private landowners and Brigham Oil had filed lawsuits regarding the minerals under an area on the Missouri and Yellowstone rivers, contending the minerals were owned by riparian landowners. Nelson said “as part of its title to the beds of navigable waterways, owns the minerals in the area, and this public title excludes ownership and any proprietary interest by riparian landowners.” The case is expected to be appealed.
The government of Quebec reportedly plans to introduce legislation to formally enact a moratorium on shale gas development in the province. Environment Minister Yves-Francois Blanchet said the National Assembly would ban exploration licenses and suspend the licenses already issued, including those to Questerre Energy Corp. and Talisman Energy Inc. Quebec launched a two-year study of shale gas development in March 2011 but allowed hydraulic fracturing to continue for exploration purposes only (see NGI, March 14, 2011). Results of the study should be completed by the end of 2013, at which point the government’s Bureau d’audiences publiques sur l’environnement would determine, with public input, whether development could be regulated.
Gulfport Energy Corp. reported 4Q2012 net production of 608,500 boe, an 8% decline year/year. Natural gas production nearly doubled to about 366.3 MMcf; oil output fell 12.5% and liquids output was down 46%. The company reported total proved reserves of 13.88 million boe for year-end 2012, which included 33.8 Bcf of natural gas and 8.25 million bbl of oil. About 59.8% of total proved reserves were classified as proved developed.
Maryland lawmakers have to approve a bill to allow utility companies to impose a customer surcharge of up to $2/month to pay for repair and replacement of aging natural gas pipe and distribution lines. The Maryland Strategic Infrastructure Development and Enhancement Program bill is one “we’ve supported,” said Baltimore Gas and Electric Co. spokesman Aaron Koos. The utility has 1,400 miles of aging cast iron mains that need to be replaced. The legislation allows the company to receive compensation for the work from customers on a “pay as you go” basis, he said.
State-owned GAIL India Ltd. has signed an agreement with EDF Trading to acquire and develop oil and gas assets in North America. EDF Trading North America is the fifth largest gas marketer by volume on the continent, trading 7.61 Bcf/d in 3Q2012, according to NGI‘s survey of the Top North American Gas Marketers.
Ohio Gov. John Kasich proposed biennial executive budget includes a two-tier severance tax structure that would, for the first time, differentiate between horizontal and vertical wells in the Utica Shale. Under the plan, natural gas from horizontal wells would be taxed at 1% of gross receipts, while liquids, oil and condensate from horizontal wells would be taxed at 4%. Two models in the proposed budget calculated that new severance taxes would bring in $43.5-45 million in additional revenue for FY 2014, and $149.7-155 million during FY 2015.
Two polls show New Yorkers remain evenly split on the issue of hydraulic fracturing (fracking). A Siena College Research Institute poll found 40% of respondents support the Department of Environmental Conservation allowing fracking to move forward in parts of upstate New York, while 40% are opposed and 20% undecided. The Siena poll also found that 54% of fracking opponents would be “very upset” if the practice was approved, but only 20% of fracking supporters would be “very upset” if it was banned. A Quinnipiac University poll showed overall support for fracking by a 43-42% margin.
The Ninth Appellate District Court in Ohio ruled 3-0 that laws regulating the oil and natural gas industry preempt local ordinances, reversing a lower ruling that favored the City of Munroe Falls over Beck Energy Corp. The city had ordered Beck to cease drilling operations in 2011, arguing that the state only had the authority to permit wells and to decide their location and spacing. The court said the city had no authority to require a public hearing before issuing a drilling permit and said city zoning ordinances interfered with permitting.
The Delaware River Basin Commission (DRBC) has reversed course and plans to conduct a docket review of Tennessee Gas Pipeline Co. LLC‘s (TGP) 300 Line Extension Project (see NGI, Nov. 7, 2011), and Columbia Gas Transmission LLC‘s Line 1278 Replacement Project — because they both traverse the Delaware State Forest, a public recreation area that lies within the DRBC’s comprehensive planning area. The environmental group is lobbying the DRBC to also review TGP’s Northeast Upgrade Project (see NGI, June 4, 2012).
Xcel Energy experienced flat demand and results in 2012 and the prospect for this year and beyond is more of the same, according to CEO Ben Fowke. Projected growth in utilities overall for the next five years is barely 1%. Residential demand for gas and power was flat in all of its areas, while commercial/industrial demand experienced some growth, particularly in Wisconsin. Gas sales in 4Q2012 dropped nearly $40 million from the same period a year earlier, and for the year sales declined by nearly $300 million ($1.5 billion versus $1.8 billion in 2011).
Hydraulic fracturing (fracking) could be performed safely in New Brunswick if appropriate regulations are established, according to Dalhousie University professor Grant Wach, president of the Atlantic Geoscience Society. He told the Canadian Broadcasting Corp. that “fracking is done at such a depth that there shouldn’t be any problems geologically with leakage, because the cracks really don’t propagate that far.” New Brunswick is expected to release a blueprint for oil and natural gas regulations this spring (see NGI, Dec. 3, 2012).
The Mexican government said the Jan. 31 explosion at the headquarters of state-owned Petroleos Mexicanos (Pemex) that killed 37 was caused by a methane gas leak (see NGI, Feb. 4). Mexico Attorney General Jesus Murillo Karam said the explosion was caused by an accumulation of gas in the basement of a seven-story structure that served as an annex and was adjacent to Pemex’s 52-story executive tower. Investigators from Mexico, the United States, Britain and Spain found no traces of explosives at the site and ruled out terrorism, but criminal charges could still be filed. Authorities are reportedly trying to determine the source of the methane gas.
Members of the Eagle Ford Shale Legislative Caucus, which recently briefed Texas state lawmakers on the economic impact of the Eagle Ford Shale, said development was having a “tremendous impact” on the state’s economy and spurring investments across the region. James LeBas, fiscal consultant with the Texas Oil and Gas Association, said, “Mineral reserves under the surface are subject to local property tax; active production itself is subject to a state severance tax, and most purchases of oil and gas equipment are subject to both state and local sales taxes.”
Evansville, IN-based utility holding company Vectren Corp. secured a year’s supply of natural gas for its standard choice offer (SCO) load at a price indexed to the Henry Hub, plus $1.05/Mcf. The retail price adjustment (RPA) of $1.05/Mcf, added to the monthly Henry Hub futures settlement price on Nymex was unchanged from last year. The contract will run from April 1, 2013 to March 31, 2014. Out of seven bidders in the Jan. 16 auction the winning suppliers were Hess Corp., DTE Energy Supply and Direct Energy Services. Bidders competed to offer the lowest RPA.
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