July 2015, Vol. 242, No. 7

In The News

In The News: EPA Says Fracking Not Widespread Problem in Drinking Water

The federal Environmental Protection Agency on June 4 released a much-anticipated study of whether hydraulic fracturing contaminates drinking water supplies, concluding that while there have been some cases of contamination, the issue is not widespread.

The draft study is in response to a congressional request five years ago that the agency study concerns about drinking water supplies. Hydraulic fracturing uses a high-pressure stream of water, sand and chemicals to tap into oil and gas reserves in rock formations, and has been used more frequently in recent years in many parts of the nation.

The agency found some “specific instances” in which the integrity of fracked wells or the handling of wastewater ended up affecting drinking water. But Thomas Burke, deputy assistant administrator of EPA’s Office of Research and Development, told reporters the number of instances was “relatively low when compared to the number of fracked wells.”

PA Task Force Looks to Ease Gas Glut via Pipelines

Pennsylvania Gov. Tom Wolf has formed a task force to help gas companies navigate the hurdles of building thousands of miles of pipelines to carry shale gas to markets and alleviate a glut that has contributed to depressed prices. The task force, which will be led by Department of Environmental Protection acting Secretary John Quigley, will recommend best practices for planning and routing pipelines through Pennsylvania.

The goal is to promote collaboration among the stakeholders – drillers, regulators, environmentalists and the public – and find ways to minimize environmental impact while addressing the industry’s infrastructure needs. The task force will have about 32 members. Industry and government officials along with environmental and conservation groups will be eligible for membership.

The task force will also help pipeline companies navigate the permitting process and save money and time on their projects, Quigley said. “At a minimum, we want to come out over the next eight or so months with a set of best practices (for) the entire life cycle of pipeline development.”

More pipelines are desperately needed to transport record levels of shale gas produced in the state. The lack of infrastructure has led to an oversupply of gas in Pennsylvania, which has driven down prices and curbed industry profits. There are 25,000 miles of gathering lines and up to 5,000 miles of transmission lines that could be built in Pennsylvania over the next decade, according to the state.

New Water-Quality Rule Could Affect Pipelines

Pennsylvania’s energy companies are expected to be among businesses that will be affected by a new federal rule extending the protection of the Clean Water Act to small tributaries and other waterways that feed major rivers supplying drinking water to millions of people.

Operators of natural gas rigs or builders of pipelines will likely have to comply with the Clean Water Rule, announced by the EPA and the U.S. Army Corps of Engineers on May 27, which imposes tougher standards on companies that want to operate near the streams that flow into rivers.

Businesses of all kinds will have to apply for a permit to operate near the waterways, and the EPA will determine case-by-case whether their activities will comply with the 1972 law, which is the basis for the new rule.

It’s unclear whether the gas industry will be affected by the rule’s requirements to the same extent as other industries because of existing exemptions, said Adam Garber, field director for PennEnvironment, who predicted the measure will eventually affect gas companies.

“The reality is that there will be places where the drillers are developing whether it’s gas drilling platforms or pipelines, where the Clean Water Act may play a role in protecting those streams,” he said.

Pioneer Sells Shale Operations for $2.15 Billion to Enterprise

Pioneer Natural Resources and its partners at Reliance Holding have agreed to sell its Eagle Ford Shale Midstream business to an affiliate of rival Enterprise Products Partners for $2.15 billion. This includes 460 miles of gas-gathering pipelines and facilities that can process as much as 780 MMcf of natural gas.

Pioneer Chairman and CEO Scot Sheffield said the sale will support future operations in the oil-rich Permian shale acreage where it operates 10 rigs in the Spraberry/Wolfcamp basin.

“Starting in July, we will add an average of two horizontal rigs per month in the northern Spraberry/Wolfcamp through the remainder of the 2015 as long as the oil price outlook remains positive,” he said in a written statement.

A report from Bentek, the forecasting unit of energy news agency Platts, found oil production in the Permian basin increased 50% and natural gas production increased 30% in the last three years. While other reserve basins are seeing a decline in rig activity, Bentek said the Permian shale has shown resiliency in the era of low oil prices.

Chevron Paying Fine for 2012 Explosion

Chevron Appalachia LLC has agreed to pay a nearly $940,000 fine levied by the Pennsylvania state Department of Environmental Protection over a natural gas well explosion and fire that killed a contractor. In April, Chevron agreed to pay $5 million to settle a wrongful death lawsuit filed by the family of the worker, Ian McKee, 27, of Morgantown, WV.

DEP spokesman John Poister said the agency doesn’t track fines like the $939,522 penalty though it’s “one of the largest we’ve ever had.” Investigators determined that an inexperienced worker at Chevron’s site in Dunkard Township of Greene County loosened a bolt without proper supervision, likely causing the well to leak and catch fire.

Canada Regulator Can’t Afford Proper Staff, Group Warns

Canada’s pipeline regulator can’t afford to keep veteran engineers, and government pay guidelines are to blame, a major industry group told lawmakers.

Because of salaries that are too low to compete with the private sector, the National Energy Board (NEB) instead hires junior engineers only to lose them once they have more experience, the head of the Canadian Energy Pipeline Association said before members of Parliament last month.

“We believe the NEB needs more flexibility to be able to nimbly hire and contract the kind of sophisticated, advanced expertise that it will require to keep pace with global, world-class regulation and risk management,” Brenda Kenny, CEPA’s president and CEO, said at a Senate committee hearing on a pipeline safety bill.

Craig Loewen, a spokesman for the NEB, an arm’s-length government agency that oversees pipeline construction and operation, acknowledged it can’t match private sector salaries in some cases but remains confident it has the expertise needed to fulfill its mandate.

The pipeline safety discussion follows an increasing number of proposed conduits or expansions to ship production from Alberta’s oil sands.

Jim Donihee, the chief operating officer of the pipeline group and a former executive with the NEB, told lawmakers the regulator typically hires engineers but loses them after seven to 10 years. He said he saw the problem first-hand while at the agency. The NEB discussed with Canada’s Treasury Board department ways to retain its staff, Donihee said, suggesting the pipeline industry would be willing to offer its own staff to help.

CEPA represents natural gas and oil pipeline companies across Canada, while the NEB is 90% funded by levies on the industry.

185,000 Canadian Jobs in Danger, Oil and Gas Study Says

Shrinking budgets in the oil and gas industry could cost as many as 185,000 direct and indirect job losses in Canada this year, says a study by an industry group.

The report, by the labor market division of Enform, indicates potential losses would represent a 25% of the number of jobs the sector supports, resulting from major budget cuts in the oilpatch. The industry is expected to spend $94 billion this year, down from $125 billion last year, the study said.

While Alberta would be the hardest hit by any cuts, the pain will extend across Canada, said Carol Howes, director of Enform’s labor market division.

“Certainly the impact is fairly significant in terms of various provinces and various industries feeling the oil price downturn,” she said.

The expected cutbacks are similar in scale to those during the 2009 downturn, although the industry recovered fairly quickly as the global economy rebounded. She said the current downturn is more directly tied to the drop in the oil price.

The study said engineering construction firms are the most vulnerable, with roughly 75,000 jobs on the line, while exploration and development drilling could account for the second-highest number of job losses – as many as 26,000. Howes said oil and gas companies are increasingly looking at creative ways to avoid cutting staff, including job sharing, shorter work weeks and reduced pay.

“Companies are trying to balance that long-term objective of maintaining workforces and the short-term reduction in oil prices,” she said.

The study is based on past spending patterns and what oil and gas companies are committed to spend in 2015. Howes said the findings are similar to others but it looks at all of Canada and at more job categories. The job figures include anyone employed by oil and gas companies and anyone who sells directly to the industry.

The Conference Board of Canada determined a recession is unavoidable in Alberta this year. The province’s economy is expected to shrink by 0.7% in 2015 though oil prices seem to have stabilized at around US$60 a barrel, the Ottawa-based economic think tank said. Next year, it’s calling for modest growth of 1.1%

“Alberta’s economic performance will be underwhelming this year and next, especially compared with recent years,” said Marie-Christine Bernard with the Conference Board.

Enable Midstream Announces Leadership Changes

Enable Midstream Partners, LP announced June 2 that Lynn Bourdon resigned from the company, also stepping down from his positions as president and CEO of Enable GP. The board of directors of Enable Midstream’s general partner, Enable GP, LLC, named Scott Prochazka as chairman of Enable GP’s board and appointed board member Pete Delaney as interim president and CEO, effective immediately.

Delaney, 61, is chairman of OGE Energy Corp. He has served as CEO of OGE Energy since 2007 and as CEO of OGE Energy’s natural gas midstream business that was contributed to Enable Midstream. In connection with his appointment as interim president and CEO of Enable GP, he ceased serving as CEO of OGE Energy.

US Takes Lead of International Gas Union

The United States, through the American Gas Association (AGA), accepted the presidency of the International Gas Union (IGU) at the 26th World Gas Conference last month in Paris. The U.S. will lead the organization, made up of the gas industries of 91 nations, for a three-year term, which will conclude with the 27th World Gas Conference in June 2018 in Washington, D.C.

The 140 members of IGU are associations and corporations of the gas industry representing 95% of the global gas market. The organization provides opportunities for over 1,000 members of the gas community to share best practices and engage in discussions relating to all segments of the natural gas value chain.

Under its theme, “Fueling the Future,” the U.S. team noted three strategic objectives:

• Access: Programs to aid the industry’s ability to access energy resources and promote timely build-out of the infrastructure required to produce, transport and deliver gas to existing and new markets.

• Markets: Expanding global markets for natural gas is good for the industry and good for consumers. Working to create new areas of demand for gas and to reduce barriers to commercial trade.

• Social license: The industry has a long history of safe and responsible gas production, transport and delivery. Leveraging the collective efforts of the IGU membership will provide the opportunity to build on this history.

Sunoco celebrated the grand re-opening of its Sunoco APlus on June 8 at the Pittsburgh International Airport. The location offers compressed natural gas (CNG) dispensers, a liquid propane fueling station and electric charging station, and is the first nationally for Sunoco to offer all three options for its customers. Jeff Shields, director of Communications for Sunoco, spoke at the event of Sunoco’s commitment to alternative fuels and the use of Pennsylvania-based natural resources in the Commonwealth.

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