Liquid Fuels

A report released last week by the Energy Information Administration (EIA) found that U.S. distillate fuel exports hit a record high in April, with 981,000 barrels per day being shipped overseas. That same government report estimated that foreign distillate imports fell to their lowest level since 1985.

Hydraulic fracturing and horizontal drilling have created new domestic energy frontiers and made the United States a net energy exporter for the first time in more than 60 years. Although the process has been used for decades to stimulate production from declining wells, new technological advancements have rapidly accelerated the development of unconventional reserves of fossil fuels that were either unknown or considered uneconomic just a few years ago. Despite the excitement over the potential economic benefits are underlying public safety and environmental concerns.

 HB 1487 went into effect today, which prevents the state of New Hampshire from joining a national, regional, or state low carbon fuel standard (LCFS) without first receiving legislative approval. Although the legislation does not prevent agency staff from participating in discussions about LCFS related topics, it could have a significant impact on the development of a regional agreement that critics have often referred to as a "liquid cap and trade program."

According to media reports including the New York Times and others, New York Governor Andrew Cuomo is considering a plan to allow limited permitting for hydraulic fracturing in communities in the Marcellus Shale region bordering Pennsylvania that have expressed support for the process. The move would signal at least a partial end to the nearly three year administrative review that has been conducted by the state Department of Environmental Conservation to determine the path forward on the controversial practice that has been derided by environmental activists because of water and air pollution concerns.

Today's Wall Street Journal featured a prominent story detailing the closure and lay-offs at ethanol plants around the Midwest as fuel demand weakens, and federal production mandates have largely been met after 15 straight years of growth.

According to a recent article in the Houston Chronicle, the EPA believes that at least 140 million fraudulent credits have been circulated in biodiesel markets established by federal renewable energy mandates. The level of fraud (almost 9%) is concerning to many industry observers because the entire credit market only generated 1.6 billion credits last year. The agency brought allegations this month against two Texas-based companies, charging them with fabricating 60 million invalid credits that fuel producers like refineries buy when alternative fuels are not available. 

According to the state Industrial Commission, North Dakota recently passed Alaska to become the second largest oil producer in the country. In March, North Dakota's oil wells produced 17.8 million barrels or 575,490 barrels per day - providing roughly 9% of overall US production. The advancements in horizontal drilling and hydraulic fracturing have catapulted the state from a minor producer to a major player in the oil boom across the country, with production more than doubling since 2009.

A number of factors make the world of refining complicated and complex. The article supplies basic information on how refineries operate, where they are located, and the general economic, regulatory, and policy challenges facing the industry.
 

Delta Airlines announced yesterday that it reached agreement with ConocoPhillips to purchase its troubled Trainer refinery for $150 million, preventing the removal of 185,000 barrels per day of refining capacity from leaving fuel markets in the Northeast. The facility had been idled since last year because of difficult financial head winds facing East Coast refiners because of declining domestic fuel demand and they are more heavily reliant on expensive foreign crude oil than its competitors in the South and Midwest. Delta will become the first US airline to own a refinery, which it believes will help them hedge against rising jet fuel prices.

 

As the use of hydraulic fracturing—or fracking—has grown, and as the practice has become more controversial, states have taken action in three primary ways.

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