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Regulations

Environmental Regulations: How Much Do They Really Cost?

Source: Hydrocarbon Processing | 18 November 2014

It is not unusual for some hydrocarbon processors to make environmental compliance activities a lower priority than daily operational needs, such as plant maintenance, product flow, and product transport. After all, compliance does not directly generate profit. Although not all owners/operators intentionally ignore environmental compliance, this mode of operating has been seen in the industry throughout the years—until now.

In the past decade, a great shift has occurred in hydrocarbon processors’ operating environments. As America’s robust oil and gas market expands—combined with increased international competition and unending news coverage of “environmentally unsound” industry practices—the US Environmental Protection Agency (EPA) has increased compliance enforcement, enacting nearly 78 civil cases and settlements in 2013 alone.

Furthermore, the EPA is considering a diverse array of new rules and regulatory program obligations to achieve the US’ long-term environmental goals. Recent examples include the Obama administration’s September 2013 announcement that it will direct the EPA to use the Clean Air Act to cut carbon dioxide pollution at power plants under the Climate Action Plan.

In the wake of this evolving and dynamic regulatory environment, owners/operators can spend a considerable amount of time and resources attempting to understand and comply with new or revised rules and regulatory program obligations. Instead of investing in new equipment or totally refocusing their processes, hydrocarbon processors should instead grasp some understanding of the costs and benefits by asking themselves: “How much will these changes really cost, and what’s in it for me?”

Alaska Mining Battle May Have Implications for Oil and Gas

Source: OilVoice | 28 October 2014

Alaska producers are watching a legal battle between a mine developer and the US Environmental Protection Agency over the agency’s move to preempt mining across a 268-sq-mile area of southwest Alaska before the company has defined its project or applied for permits.

Kara Moriarty, director of the Alaska Oil and Gas Association, said her industry is worried about the preemption because it usurps the US Army Corps of Engineers’ role in wetlands permitting under the federal Clean Water Act. “It would set a dangerous precedent,” Moriarty said.

The EPA plans to use its authority under Section 404c of the Clean Water Act to ban a large-scale mine in the Bristol Bay region. The authority is used occasionally to protect parcels of sensitive habitat, typically while a permit is being processed by agencies such as the corps.

Ed Fogels, Alaska’s deputy natural resource commissioner, said the proposal is an unprecedented expansion of the 404c authority because it covers such a large area.

“It covers state and privately owned lands and federal lands, too,” Fogels said. The 404c power is typically used to protect smaller sections of habitat, he said.

Texas Railroad Commission Issues New Regulations on Disposal Wells

Source: Rigzone | 29 October 2014

New regulations covering disposal wells from hydraulic fracturing operations go into effect in Texas beginning in November. The new regulations by the Texas Railroad Commission, the state’s regulating entity for oil and gas, are centered on the possible linkage between seismic activity and disposal wells.

There are four main components of the new regulations:

  • Applicants for disposal wells must conduct a search on the US Geological Survey seismic database to determine if there is a history of earthquakes within a 100-sq-mile area around the site of the proposed disposal well.
  • The new regulations clarify that the commission will have the authority to suspend or terminate a disposal well permit if there is any indication from scientific data that seismic activity in the area could occur because of the disposal well.
  • Under the new regulations, disposal well operators will have to disclose annual reported volumes and pressures more frequently if the commission determines that there is a need for the information.
  • The applicant of the disposal well will be required to provide information to the commission to demonstrate that disposal fluids will be confined when the well is located in an area with conditions making the migration of fluids likely.

Oil, Gas Companies Lobby White House To Block Hydraulic Fracturing Rule

Source: Bloomberg BNA | 21 October 2014

Representatives of ExxonMobil., Halliburton, Chesapeake Energy, and other oil and gas producers met with White House officials and urged them to not to proceed with a final rule to regulate hydraulic fracturing on federal and Indian lands, online meeting records show.

The rule, which was proposed by the Interior Department’s Bureau of Land Management and is being vetted by the White House Office of Management and Budget (OMB), will have a significant impacts on the industry, and its effects have not been adequately analyzed, according to an American Petroleum Institute handout distributed at the meeting.

“The BLM rule adds an unnecessary and duplicative layer of regulation on top of the already strong and stringent state regulation of hydraulic fracturing,” the document said. “This added layer will increase costs, delay permitting, and will slow domestic energy production, all at the expense of the American taxpayer.”

The meeting, which was requested by the API and held 6 October, also included representatives from Hess, Devon Energy, Occidental Petroleum, and Marathon Oil, as well as officials from the White House Council on Environmental Quality, Interior Department, and the Office of Management and Budget, according to meeting records.

The rule (RIN 1004-AE26) has been in the works since 2012 after increased use of hydraulic fracturing stoked fears of water pollution from oil and gas development. The regulation will focus on wellbore integrity, fracturing fluid chemical disclosure, and issues related to flowback water, which is the water that comes out of a well along with oil or natural gas.

The rule has been under review at OMB since late August.

Environmental Groups Ramp-Up Crude-By-Rail Fight In Courtroom

Source: BakerHostetler via Mondaq | 21 October 2014

Bakken crude producers and midstream transportation companies already experience transportation woes related to inadequate pipeline infrastructure, railroad capacity, tank car supply, rail accidents, and new regulations. But they also increasingly face a new problem: lawsuits. In September alone, the Sierra Club, one of the largest environmental organizations in the United States, filed two lawsuits challenging different aspects of crude-by-rail transportation. First, on the national level, the Sierra Club seeks to stop the transportation of crude oil in allegedly outdated and unsafe tank cars. And second, at the state level, the Sierra Club accuses a local agency of illegally permitting a rail-to-truck facility.

The first lawsuit challenges the continued use of older DOT-111 tank cars, the tank car commonly used to transport Bakken crude oil.

The second lawsuit targets a permit to transfer crude oil from trains to trucks issued to Inter-State Oil Company, a fuel and lubricants distributor located outside of Sacramento, California.

Environmental Groups Crank Up Heat on Methane Mandates

Source: Fuel Fix | 22 September 2014

Environmental groups pressured the Obama administration on 18 September to clamp down on methane leaking from the oil and gas sector by imposing new regulations targeting wells, valves, and other infrastructure.

Those mandates are urgently needed to keep that potent heat-trapping gas out of the atmosphere and are an “essential” ingredient in any plan to combat climate change, said the coalition of 16 environmental organizations in a letter to President Barack Obama. And they called on the Environmental Protection Agency to use its Clean Air Act authority to issue methane pollution standards for all new and existing oil and gas sources of the material.

“The environmental community is united in their view that the oil and gas industry must reduce their methane emissions and that federal regulation is essential to making this happen,” said Mark Brownstein, associate vice president of the Environmental Defense Fund’s US Climate and Energy Program, in a conference call with reporters. “This industry is simply too big, too diverse, and focused solely on profits and quarterly earnings to think that regulation is unneeded.”

The Obama administration is already working on several fronts to rein in methane, which is believed to be 28 to 34 times more potent than carbon dioxide when measured over a century. But so far, it has not formally decided to impose new regulations targeting the substance.

Feds Advance Hydraulic Fracturing Rule

Source: Fuel Fix | 2 September 2014

A hydraulic fracturing operation in the Permian Basin. Credit: Apache.

The Obama administration is on track to impose new mandates governing hydraulic fracturing on public land by the end of the year—a move that will test the White House’s ability to appease worried environmentalists while still sustaining the drilling boom bolstering the US economy.

The timeline is tied to the Office of Information and Regulatory Affairs, which launched a final interagency review of the measure on 26 August. The office, which disclosed the review on 29 August, generally has 90 days to vet proposed regulations, though it can finish early and extensions are allowed.

It appears unlikely the final rule would be published before the Nov. 4 midterm elections—a benefit to several Senate Democrats in tight reelection contests who have weathered attacks from opponents seeking to tie them to the administration’s energy and environmental policies.

Illinois Natural Resources Department Issues Long-Awaited Plan To Regulate Drilling

Source: Fox Business | 2 September 2014

The Illinois Department of Natural Resources released a long-awaited plan to regulate high-volume oil and gas drilling on 29 August that supporters hope could bring an economic boost to southern Illinois but environmentalists fear may be too lenient.

The lengthy report follows months of delays and complaints over the process to draft rules governing hydraulic fracturing in Illinois. Industry officials say southern Illinois has rich deposits of natural gas, but a final draft of the rules—initially touted as a national model of both sides working together—has taken months for the agency to produce.

A 150-page report was given to the 12-member Joint Committee on Administrative Rules, which has 45 days to act. If no action is taken, the rules can take effect.

Environmental groups, industry experts, and lawmakers also got their first look at the report on 29 August. They expected to spend several hours, possibly days, combing through the details.

“These are highly technical rules that will require a really close look at the details,” Josh Mogerman, spokesman for the Natural Resources Defense Council, said. “Our experts are going to be spending their holiday weekend going through these rules with a fine tooth comb.”

The new rules would require companies awarded drilling permits to submit lists, some of them redacted, of the chemicals used in hydraulic fracturing. The redacted list would be made available to the public by department and be submitted to the public health department. The industry says releasing the full list would expose trade secrets.

In issuing drilling permits, the department would be required to determine within 1 day whether an applicant had fully completed the necessary forms. The department would then have 60 days to approve or reject an application.

Read the full story here.

Coast Guard Issues Interim Rule for Offshore Supply Vessels

Source: US Coast Guard | 25 August 2014

The US Coast Guard issued an interim rule regarding regulations to mitigate the risk created by the removal of the statutory size limit previously placed on offshore supply vessels. The regulations were effective immediately upon publication in the Federal Register on 18 August.

The Coast Guard Authorization Act of 2010 removed the statutory size limit previously placed on offshore supply vessels and required the Coast Guard to issue regulations to mitigate the risk created as a result, noting the need to ensure safe carriage of oil, hazardous substances, and individuals other than crew on offshore supply vessels of at least 6,000 gross tonnage as measured under the Convention Measurement System.

Administration Studies Arctic Requirements

Source: FuelFix | 19 August 2014

The Obama administration is closer than ever to imposing the first minimum standards for oil and gas activity in US Arctic waters, as Shell pursues permits that could allow it to resume drilling in the region next year.

The Interior Department sent a draft of those Arctic regulations to the Office of Management and Budget (OMB) on 15 August, marking the launch of an interagency review process that typically spans months. The rule’s arrival at OMB was disclosed online by 17 August.

Conservationists say the standards are urgently needed to ensure oil and gas companies working in the remote and unforgiving Arctic use ice-worthy vessels and have enough emergency equipment stashed nearby. A government advisory panel offered similar recommendations in 2013.

Shell’s Washington Oil-by-Rail Plan Gets Streamlined Permitting

Source: Reuters | 19 August 2014

Royal Dutch Shell’s proposal to move by rail up to 60,000 B/D of North American crude to its Washington state refinery will not have to undergo a lengthy environmental review, local planners said.

The plan still awaits multiple permit approvals before construction can start, but the Skagit County Planning and Development Services division’s decision that a full-fledged environmental review is not required eliminates what could have been a lengthy delay of up to a year.

Shell’s project could now start up by early 2015, but the company has not disclosed when.

“Construction timing will depend on when all of the permits are approved. We are still too early in the overall permit process to forecast when we will start construction,” Shell spokeswoman Destin Singleton said.

Shell is the last of the state’s refiners to seek approvals to move cheaper US and Canadian oil by train to their plants to replace more expensive imports. Tesoro Corp was the first, starting shipments of up to 50,000 B/D to its 120,000 B/D Anacortes refinery in September 2012. Shell’s 145,000 B/D refinery sits right next to the Tesoro plant.

Report Says At Least 33 Companies in US Are Fracturing Illegally

Source: Shale Energy Insider | 15 August 2014

The illegal injection of diesel fuel during hydraulic fracturing has continued over the last 4 years, despite repeated denials by the drilling industry, according to a report by the Environmental Integrity Project (EIP).

In its investigation, EIP also found evidence that drilling companies have been changing and eliminating their disclosures of past diesel use from the industry self-disclosure database of chemicals used in hydraulic fracturing.

Injecting diesel fuel into the ground to fracture shale and extract gas or oil is a potential threat to drinking water supplies and public health because diesel contains toxic chemicals, such as benzene, that cause cancer or other serious health problems, even at low doses.

EIP’s report, “Fracking Beyond the Law,” uses self-reported data from drilling companies and federal records to document at least 33 companies fracking at least 351 wells across 12 states with fluids containing diesel from 2010 through early August 2014. Diesel fuels were used to fracture wells in Texas, Colorado, North Dakota, Arkansas, Oklahoma, Wyoming, New Mexico, Utah, Kansas, Pennsylvania, West Virginia, and Montana without required Safe Drinking Water Act permits.

“EPA and the states have an obligation to protect the public from the potential health hazards of fracking by enforcing the Safe Drinking Water Act,” said report author Mary Greene, Managing Attorney for EIP and a former EPA enforcement attorney. “We urge EPA and the states to exercise their legal authority by immediately investigating the compliance status of these 351 wells and taking all necessary steps to make sure they are properly permitted. Companies that inject diesel without permits should be fined for ignoring the law.”