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California’s New Hydraulic Fracturing Regulations: Implications and Next Steps

Source: Holland & Knight via Mondaq | 6 December 2013

California’s Senate Bill 4 (SB 4) is one of the first laws in the United States to regulate hydraulic fracturing. On 15 November 2013, the state’s Division of Oil, Gas, and Geothermal Resources (DOGGR) issued its first set of draft regulations implementing the controversial new law, in accordance with SB 4′s statutory requirements. DOGGR also issued a notice of preparation of an environmental impact report (EIR), kicking off a year-long process intended to result in final regulations by 1 January 2015.

Comments on the currently proposed draft regulations must be submitted by 14 January 2014. Comments on the scope of the EIR must be submitted by 16 January 2014.

Lack of Clear Regulatory Framework Hampers Indian Oil and Gas Industry’s Attempts To Attract Foreign Interest, Analyst Says

Source: GlobalData | 6 December 2013

India’s New Exploration Licensing Policy X (NELP X) license round, which will take place in January 2014, will struggle to attract major International Oil Company (IOC) participation, leaving the country underexplored and with an increasing dependency on foreign imports, says an analyst with research and consulting firm GlobalData.

According to Idris Shah, GlobalData’s analyst covering upstream oil  and gas, IOCs have grown weary of the lack of a clear regulatory framework for approvals and resolving delays, which makes conducting business and long-term planning difficult. Currently, typical bureaucratic issues are solved on a case-by-case basis, with little or no evidence of due process.

In late October 2013, symptomatic of regulatory fatigue, one of the largest foreign investors BHP relinquished all licenses except the one nonoperated position. Additionally, Statoil and Petrobras considered participating in blocks operated by India’s Oil and Natural Gas Corporation (ONGC) in 2010 but ultimately declined. Similarly, ConocoPhillips decided against exploring India’s deepwater areas with ONGC.

Recognizing the need to generate more foreign investment, the Indian government made several overtures last year. A more attractive pricing structure for domestic market obligations was introduced in June 2012, based on a weighted average of American, British, and Japanese benchmark gas prices from April 2014. This is expected to increase prices from USD 4.20 per thousand cubic feet (mcf) to between USD 6 and 8 per mcf.

Shah said, “To address the bureaucratic delays, India’s Directorate General of Hydrocarbons has proposed the creation of a single approval entity to help navigate the 70 or more approvals needed to begin exploration. There are also discussions of introducing a system whereby blocks are preapproved for exploration before the round begins.”

GlobalData expects the IOC participation void to be filled with domestic operators such as ONGC, Oil India Limited, and Indian Oil. However, Shah believes that a lack of domestic expertise will limit exploration and development of India’s deepwater areas, in which there are 25 blocks on offer in NELP X.

“The participation of foreign firms in the upcoming NELP X round will be a good barometer of the Indian policy shifts and whether more changes are needed to attract investment away from other areas of global exploration,” the analyst concludes.

Utech To Become Obama’s Top Climate, Energy Adviser

Source: Reuters | 12 November 2013

Dan Utech, a long-time Washington insider on environmental issues, will become President Barack Obama’s top adviser on energy and climate change, a White House official said, a role that will involve tough decisions on power plants and TransCanada’s Keystone XL pipeline.

The move had been widely expected after the Obama administration said earlier this month that Heather Zichal, who served five years in the position, would step down.

Utech will help Obama implement his climate action plan, which involves limiting carbon emissions from power plants and the pipeline project that would link Canada’s oil sands with refineries in Texas.

Obama set a June 2014 deadline for the Environmental Protection Agency to propose limits on existing power plants, one of the top US greenhouse gas sources. The rules need to be finalized a year after that.

Obama Taps Former Reid Aide To Run Interior Energy Agency

Source: The Hill | 12 November 2013

President Obama is tapping a former aide to Senate Majority Leader Harry Reid (D-Nev.) to direct the Interior Department branch that regulates oil and gas drilling, green power development, and conservation on huge swaths of federal land.

Neil Kornze, the nominee to formally head the Bureau of Land Management (BLM), is BLM’s principal deputy director and has been leading the bureau on an acting basis for 8 months.

Kornze has been a senior official at BLM since 2011, and from 2003–11 worked in a variety of roles for Reid, including senior policy adviser.

Interior Secretary Sally Jewell praised the White House move to make Kornze the official head of the BLM, a task that will keep Kornze front and center in political battles over conservation and drilling.

“Neil has helped implement forward-looking reforms at the BLM to promote energy development in areas of minimal conflict, drive landscape-level planning efforts, and dramatically expand the agency’s use of technology to speed up the process for energy permitting,” Jewell said in a statement.

Canada: Protective Direction 31—Requirements for Crude Oil Shipped by Rail in Response to Lac-Mégantic

Source: Strikeman Elliott via Mondaq | 8 November 2013

On 17 October 2013, Transport Canada issued Protective Direction No. 31 pursuant to Section 32 of the Transportation of Dangerous Goods Act, 1992. The direction is in response to the Lac-Mégantic disaster on 6 July 2013, in which a train transporting crude oil derailed, resulting in a fire that caused several of the railcars to explode. The downtown core of Lac-Mégantic, a historic town in Quebec, was largely destroyed, and at least 42 lives were tragically lost.

Testing conducted after the disaster revealed that the crude oil in the derailed railcars had been incorrectly classified in shipping documents.

The direction requires any person engaged in importing or offering crude oil for transport to immediately test the classification of that crude oil, if that testing has not been conducted since 7 July 2013. The test results must be provided to Transport Canada on request.

Offering crude oil for transport means to select or allow the selection of a carrier to transport the crude oil, to prepare or allow the preparation of the crude oil so that a carrier can take possession of it for transport, or to allow a carrier to take possession of the crude oil for transport.

Until the testing is complete, crude oil transported by rail must be shipped as Class 3 Flammable Liquid Packing Group I. This is the classification required for the most flammable of liquids. Testing will determine whether a classification for less flammable liquids may be used.

Following testing, the person offering the crude oil for transport must immediately provide a Safety Data Sheet for the tested product to Transport Canada through the Canadian Transport Emergency Centre.

ANSI Launches Online Portal for Standards Incorporated by Reference

The American National Standards Institute (ANSI) has announced the official launch of the ANSI IBR Portal, an online tool for free, read-only access to voluntary consensus standards that have been incorporated by reference (IBR) into federal laws and regulations. In recent years, issues related to IBR have commanded increased attention, particularly in connection to requirements that standards that have been incorporated into federal laws and regulations be “reasonably available” to the US citizens and residents affected by these rules. This requirement had led some to call for the invalidation of copyrights for IBR standards. Others have posted copyrighted standards online without the permission of the organizations that developed them, triggering legal action from standards developing organizations (SDOs).


Investigation Points to Faulty Decisions in Fatal Black Elk Explosion, Fire

Source: Rigzone | 5 November 2013

The explosion and fire that killed three workers last year on a Black Elk Energy Offshore Operations-operated production platform resulted from the failure of Black Elk and contractors to follow Bureau of Safety and Environmental Enforcement (BSEE) safety regulations.

BSEE released on 4 November the panel investigation report on the 16 November 2012 incident. Ellroy Corporal, Jerome Malagapo, and Avelino Tajonera were killed in the incident, which also resulted in serious injuries to others and the discharge of pollutants into the U.S. Gulf of Mexico.

BSEE Director Brian Salerno said in a Nov. 4 press statement that the failures that resulted in the workers’ deaths “reflect a disregard for the safety of workers on the platform and are the antithesis of the type of safety culture that should guide decision-making in all offshore oil and gas operations.”

Who Is Watching Oil Pipeline Safety in the United States?

Source: OilPrice.com | 1 November 2013

North Dakota’s governor said he was frustrated with the way in which federal regulators were monitoring pipeline safety. An oil spill in the west of the state went unnoticed until a farmer discovered it in his field last month. Regulators, the governor said, don’t monitor rural areas the same way they do elsewhere. On Capitol Hill, meanwhile, supporters of a controversial pipeline bill say more infrastructure is needed and fast in order to keep up with the oil boom under way in the central United States. That measure, however, does little to allay the safety concerns about the spider web of oil and natural gas pipelines already in place across the country.

“[The federal] Pipeline and Hazardous Materials Safety Administration requires the use of enhanced pipeline monitoring and control technology in locations considered ‘high-consequence areas’ such as cities and near drinking water supplies,” North Dakota Gov. Jack Dalrymple said. “Rural areas don’t necessarily get the same level of oversight from PHMSA and that is concerning.”

Column: Emerging Regulatory and Policy Issues Facing Canada’s Oil and Gas Industry

Source: Oil Council | 30 October 2013

Canada’s oil and gas industry has experienced a relatively stable and predictable operating environment. In part, this has been because of a common government recognition that technical issues regarding safety and responsible resource development are matters often best left to experienced experts overseen by objective independent regulators. This model has worked. Safe and responsible development has proceeded and, in large measure, without significant media interest or public concern.

These dynamics now seem to be in a state of flux. Public sentiment over resource development is at an all-time high and in conflict. Whereas before, conversations between regulators and industry experts were thought to be a reasonable basis for ensuring public safety and responsible resource development, these dynamics now seem to be changing and have required regulators to allow greater opportunities for public sentiments of all colors to be expressed and considered.

The politics of interjurisdictional and international resource development are also taking a new lease on life. Whispers of new and co-ordinated energy policies are emerging. Regulatory efficiencies that once seemed to have been taken for granted have been replaced with the need for greater process. Blurred lines between pure regulatory issues and government policy opposition have appeared. For the industry, this comes at a particularly delicate time. The ability to attract new and necessary investment is key. The need for and ability to demonstrate to new markets that Canada has been, and can continue to be, a reliable and secure jurisdiction for resource development is of paramount concern.

Report: Offshore Regulator Needs Outside Expertise on Technology

Source: Fuel Fix | 29 October 2013

The expertise of the offshore oil and gas industry outmatches the federal agency that oversees it, making it essential that the government reach outside its ranks for insight on the best technology to safeguard the work, according to a report issued 28 October.

But the government’s plans for a new independent Ocean Energy Safety Institute to help keep pace with the offshore oil industry needs changes to meet the challenge, said the National Academy of Sciences.

“If properly organized, staffed, and supported, (the institute) could go a long way toward solving problems associated with a government agency competing with industry for top talent and expertise,” the report said. But “the scale and structure of the institute … will need to be significantly expanded to address fully the challenges posed offshore.”


Australia Amends Petroleum and Gas Safety and Health Fee

Source: HopgoodGanim via Mondaq | 16 October 2013

Recent amendments to Australia’s Petroleum and Gas Production and Safety Regulation (2004) have made important changes to the Petroleum and Gas Safety and Health Fee. This fee covers the costs of the activities carried out by the Department of Natural Resources and Mines for the purposes of safety and health relating to operating plant.

Under the new amendments:

  • Reporting requirements of “liable persons” are reduced from quarterly to annually.
  • Fee capping provisions are introduced, to ensure users are not paying more than necessary to fund petroleum and gas safety and health regulatory activities.
  • Operators of facilities producing or processing biogas or gas derived from waste disposal or sewerage treatment are exempt from paying the fee where Innovation Australia has made a positive advance finding that these are core research and development (R&D) or supporting R&D activities.

People liable to pay the fee include holders of exploration and production tenements (but only those that are actually producing petroleum) and operators of certain operating plant and petroleum facilities.


BSEE To Mandate New BOP Rules

Source: OE | 10 October 2013

The Bureau of Safety and Environmental Enforcement (BSEE) will be issuing new requirements for the blowout preventers (BOP) by the end of the year, according to agency director Brian M. Salerno.

It is expected that BSEE will be extremely specific in it rules by laying out performance and operational standards for the BOPs, even employing technology that could diagnose potential threats or unexplained rises in oil and gas. Salerno said that BSEE is consulting with BOP manufacturers and their customers while drafting requirements, with a public forum held in May 2012 that initiated their consultation.