Liquid Fuels

The Department of Interior notified dozens of state treasurers on Monday that refunds totaling $110 million would be coming back to their coffers after a reversal of the Administration's decision to withhold royalty payments required by the Mineral Leasing Act (MLA). Last spring, a decision was made by Interior and the Office of Management and Budget to treat MLA payments owed to 34 impacted states as a “federal expenditure” subject to the parameters of the Sequester and the 2011 Budget Control Act. That decision received significant bipartisan opposition from many in Congress and the Western Governors Association.

The Department of Energy's National Energy Technology Laboratory (NETL) announced the preliminary findings of a major study and analysis that traced the chemical agents used in the practice of hydraulic fracturing of oil and and natural gas wells and found no evidence that the wells it monitored had contaminated drinking water supplies in the Marcellus Shale region. The announcement was hailed by representatives from the oil and gas industry and met with some words of caution by academic researchers and environmental groups who noted that its findings are not yet finalized.

Maine's U.S. Representatives, Chellie Pingree and Mike Michaud, have asked for a federal investigation on the state's rail infrastructure transporting oil and gas in the aftermath of the tragic derailment in Lac-Megantic, Quebec where 60 people are presumed dead or missing. The accident occurred only 22 miles from Maine's border and the cargo of 50,000 barrels of Bakken crude oil was bound for refineries in New Brunswick. The request comes after Governor Paul LePage issued an executive order directing the state DOT to review the sufficiency of its existing freight rail regulations.

Today's Wall Street Journal featured a front page story highlighting that US crude oil production grew by 14% last year. The finding came from an annual compilation of industry trend lines that is published by BP  called the Statistical Review of World Energy, which noted that the increase was the largest in the world and the largest in US history. Rising domestic crude oil production, according to the report, was largely tied to increased use of hydraulic fracturing that has led to rapid growth in shale production in North Dakota and Texas.

The current abundance of domestic natural gas at historically inexpensive prices is presenting policymakers, regulators, and advocacy organizations with a new challenge – should this resource be exported to other high-priced markets or should it be protected and used as a strategic asset for energy-intensive industries?  An overview is presented of the economic, regulatory, foreign policy, foreign trade, and political implications surrounding this growing energy policy debate.

A new proposal, HB 2615, endorsed by both industry and environmental groups has received bipartisan support in the Illinois State House which may lay the groundwork for a regulatory path forward on the often controversial issue of hydraulic fracturing. According to news reports, the filed bill - titled the "Hydraulic Fracturing Regulatory Act" - would require oil and natural gas operators to test water in all phases of drilling, require chemical disclosure of fracking solutions, address air pollution concerns, and hold companies liable for water contamination found after drilling operations.

On Tuesday, the Energy Information Administration (EIA) announced that crude oil production in the U.S. reached a 15-year high with nearly 6.5 million barrels per day in September. The boom was attributed to the use of hydraulic fracturing and horizontal drilling techniques which yielded a 16 percent increase, or an extra 900,000 barrels per day, from September 2011 levels.

Stateline Midwest ~ September 2012

The long-simmering fuel vs. food debate has reached a boiling point, as the result of drought conditions that have raised corn prices and precipitated requests for the EPA to adjust the federal Renewable Fuels Standard.

On Monday, Secretary of Interior Ken Salazar announced a management plan that would remove roughly half of the acreage available for oil and natural gas drilling in the 23 million-acre National Petroleum Reserve in Alaska. Under the proposal, drilling activities and potential pipeline construction development could occur in the remaining 12 million acres of the reserve that may connect exploration projects waiting federal approval in the Chukchi Sea.

Alaska State Representative Charisse Millett and the Chair of the Alaska Oil and Gas Conservation Committee, Cathy Foerster, testified at a hearing before the U.S. Senate Committee on Energy and Natural Resources criticizing the very slow pace of plugging 136 abandoned wells overseen by the Bureau of Land Management (BLM) in the National Petroleum Reserve. The Committee's Ranking Member, Senator Lisa Murkowski stated, “This is the type of crime the federal government would fine a private company millions of dollars for, but since these wells were drilled and are owned by a federal agency they are allowed to willfully ignore the law...Only the federal government could get away with this.”

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