Liquid Fuels

Last week, the Illinois State Senate voted 54-0 to pass new legislation regulating hydraulic fracturing by requiring chemical disclosure of the fluids used to break open the underground formations and new testing requirements for the cement and steel used during the "casing" process. Proponents of the bill lauded its passage as a way to beef up the state's oversight of expected drilling activity that may occur near the New Albany Shale formation and coal fields of southern Illinois.

Today's Wall Street Journal features a prominent story chronicling the number of local municipalities challenging state laws prohibiting them from regulating oil and gas drilling.The trend underscores an inherent tension between states seeking to provide regulatory certainty (not to mention a steady stream of tax revenue) with localities that believe they should have more control over zoning and development in or near their town borders.

Consumers may be in for more bad news on the dreary march to $4 a gallon gasoline as the largest refinery on the East Coast is expected to close this Summer - eliminating nearly 25 percent of the region's gasoline refining capacity. The closure of the Sunoco refinery is due in large part to high oil prices and decreasing domestic fuel demand, leading to substantial economic losses. Unfortunately, the trend may continue in the region as experts predict two other refineries are expected to close because of unsustainable financial impacts. If so, nearly half of the refining capacity on the East Coast will be gone with some economists predicting a 15 cents per gallon spike in New England because more imported gasoline will be needed to meet demand. 

North Dakota has now officially become the third largest oil producer in the country, due in large part to the increasing use of hydraulic fracturing. The state moved past California, according to data from the North Dakota Industrial Commission, and is now behind Texas and Alaska in overall production numbers. 

On March 8, the New Hampshire House of Representatives overwhelmingly disapproved of participation in a regional a low-carbon fuel standard (LCFS) by a vote of 243-96. Opponents of creating a LCFS likened the proposal to a "liquid RGGI program," which refers to the cap and trade program created by northeastern and mid-Atlantic states under the Regional Greenhouse Gas Initiative.  

Every day, a network of more than 2 million miles of pipelines quietly supplies the United States with critical energy products to heat and cool our homes, drive our cars to work or fly across the country for a family vacation.  Although pipeline accidents are rare, their consequences can be very harmful and sometimes fatal. States are tasked with supplying the overwhelming number of inspectors to keep this huge and expansive network operating safely to protect the public and the environment.

States have a significant role to play in regulating the safety of the nation's enormous pipeline network. Policymakers at the state level should be aware that additional federal scrutiny of damage prevention programs is likely to increase from congressional directives and increasing safety expectations from the general public. 

Yesterday, the State Department signed an agreement to resolve a long-standing dispute on oil and natural gas leases that straddled the maritime boundaries between the US and Mexico. The result is the creation of a legal framework for US companies to work in tandem with Pemex (Petroleos Mexicanos), the Mexican state-owned oil company, to develop offshore energy projects on roughly 1.5 million acres of the Outer Continental Shelf.

Last week, the House of Representatives approved the energy portion of a surface transportation package, the “Protecting Investment in Oil Shale the Next Generation of Environmental, Energy, and Resource Security (PIONEERS) Act” (H.R. 3408) by a vote of 237-187. The amended bill included several provisions to significantly expand offshore oil and natural gas development off the Pacific, Mid-Atlantic, and Gulf Coasts as well as Alaska as a way to fund transportation projects due to a shortage in federal-gas tax receipts for the Highway Trust Fund. In addition, HR 3408 would open up the Alaska National Wildlife Refuge (ANWR) to exploration, incentivizes the development of oil shale reserves and it includes language to expedite the approval process of the Keystone XL project. Prospects for final passage are uncertain at best as the bill faces stiff opposition in the Senate and a veto threat from the Administration.

While President Barack Obama’s third State of the Union address Tuesday focused primarily on familiar themes of economic recovery, the president tipped his hat to some new policies that could have a major impact on states, specifically education reform, infrastructure and hydraulic fracturing.

Obama announced a goal to increase the minimum student dropout age to 18 or until they graduate.

”When students don’t walk away from their education, more of them walk the stage to get their diploma,” Obama said. “When students...