Energy & Environmental Law Blog

OH: Disclaimer of Implied Covenants Upheld

Vorys — Wed, 19 Jun 2013 15:27:38 -0500

Based upon a lease's general disclaimer provision, the Court of Appeals for the Fifth Appellate District of Ohio recently affirmed the dismissal of a lessor's claim that a producer had violated the implied covenant to further develop the lessor's property. See Bilbaran Farm, Inc. v. Bakerwell, Inc., Case No. 12-CA-21 (June 12, 2013). Among other things, the court observed:

Bilbaran Farm argues the failure to further develop the property is unfair and inequitable. *** [T]his is waived by the express disclaimer against an implied covenant to develop the property. As stated in Bushman, '[t]he mere fact that the terms of an executed contract turn out to be unfavorable to one of the parties does not override the fundamental concept in Ohio law that parties enjoy 'freedom of contract' and are bound to the contractual relationship that they create.

For a copy of the case, see here.

OH: Unitization Proceedings

Vorys — Mon, 17 Jun 2013 09:38:34 -0500

The Ohio Division of Oil and Gas Resources Management ("Division") recently published guidelines for filing unitization applications under Revised Code 1509.28. Note: "If the information in the application is deemed complete, the Division will schedule a hearing to consider the need for the operation as a unit of an entire pool or part of a pool. The applicant, all unleased mineral owners, and all uncommitted working interest owners in the proposed unit will be notified of the hearing. The hearing will take place no sooner than 45 days after receipt of the application." (Emphasis is ours.)

For a PDF copy of the guidelines, see the link above.

OH: To U.S. EPA - Stop Your "Sue and Settle" Tactic

Vorys — Sat, 15 Jun 2013 14:14:40 -0500

According to the Akron Beacon Journal, Ohio joined 11 other states in warning U.S. EPA not to employ the tactic of "sue and settle" to regulate hydraulic fracturing: "The letter, signed by 12 energy-producing states, was sent to the EPA after several northeastern states threatened to sue the agency for not taking over regulatory responsibility of oil and gas production. The Clean Air Act provides states, not the federal government, with primary regulation responsibility. *** The letter states, 'It is abundantly clear that EPA should not succumb to the pressure intended by the Northeastern States. … Any discussions to regulate methane emissions from oil and gas facilities would obviously have a significant impact on the economy and citizens of those states. … EPA must, at a minimum, include Oklahoma and other states with similar interests in any negotiations.'”

The tactic is real ...

"We May Live on a Natural Gas Machine"

Vorys — Sat, 15 Jun 2013 14:10:56 -0500

That's the title to a post in the WSJ: "Coal, oil and gas are “fossil” fuels, right? They are derived from ancient life-forms and are nonrenewable, stored energy, extracted from prehistoric sunlight. In the case of coal and most oil, this is obviously true: You can find fossil tree trunks and leaves in coal seams and chemicals in oil that come from plankton. *** But there’s increasing doubt about whether all natural gas (which is 90% methane) comes from fermented fossil microbes. Some of it may be made by chemical processes deep within the earth. If so, the implications could be profound for the climate and energy debates."

EIA: An Assessment of Technically Recoverable Resources

Vorys — Wed, 12 Jun 2013 16:33:24 -0500

The Energy Information Administration has issued (and updated) an initial assessment of global shale oil and natural gas resources. Among its conclusions: "[It] is evident that shale resources that were until recently not included in technically recoverable resources constitute a substantial share of overall global technically recoverable oil and natural gas resources. The shale oil resources assessed in this report, combined with EIA's prior estimate of U.S. tight oil resources that are predominantly in shales, add approximately 11 percent to the 3,012 billion barrels of proved and unproved technically recoverable nonshale oil resources identified in recent assessments. The shale gas resources assessed in this report, combined with EIA's prior estimate of U.S. shale gas resources, add approximately 47 percent to the 15,583 trillion cubic feet of proved and unproven nonshale technically recoverable natural gas resources. Globally, 32 percent of the total estimated natural gas resources are in shale formations, while 10 percent of estimated oil resources are in shale or tight formations."

There's a lot of interesting information. For example: "[T]he production of shale oil requires that at least 15 percent to 25 percent of the pore fluids be in the form of natural gas so that there is sufficient gas-expansion to drive the oil to the well-bore. In the absence of natural gas to provide reservoir drive, shale oil production is problematic and potentially uneconomic at a low production rate. Consequently, producer drilling activity that currently targets oil production in the Eagle Ford shale is primarily focused on the condensate-rich portion of the formation rather than those portions that have a much greater proportion of oil and commensurately less natural gas."

As we say - read the whole thing.

EIA-914 Production Data

Vorys — Fri, 07 Jun 2013 06:25:35 -0500

We thought you might be interested in the latest gross production data from the Energy Information Administration (EIA). One of the graphs:

"Other States" has a nice trajectory ...

OH: Youngstown CNG Station

Vorys — Thu, 06 Jun 2013 06:20:31 -0500

The Youngstown Vindicator is reporting on the construction of the area's first CNG filling station: "Compressed natural gas, which is stored onboard a vehicle in cylinders at a pressure of between 3,000 and 3,600 pounds per square inch, has about the same fuel economy as a conventional gasoline vehicle, but it sells for far less. According to the U.S. Department of Energy, the U.S. national average for CNG on Tuesday was $2.10 per gasoline gallon equivalent — $1.51 less than a gallon of regular-grade gasoline."

Interesting.

OAG Opinion: County Can Sell Water To Operators

Vorys — Thu, 06 Jun 2013 06:12:35 -0500

Recently, the Ohio Attorney General issued an opinion concluding that a board of county commissioners has the authority to sell water to oil and gas operators. See OAG Opinion 2013-019. The Attorney General went on to conclude, however, that a county does not have the authority to enter into multi-year contracts with private entities to act as a "broker" for the county’s water supplies.

PA: Methane's Everywhere

Vorys — Sat, 01 Jun 2013 06:56:35 -0500

The National Ground Water Association has a press release discussing a new article in Groundwater finding: "Testing of 1,701 water wells in northeastern Pennsylvania shows that methane is ubiquitous in groundwater, with higher concentrations observed in valleys vs. upland areas and in association with calcium/sodium/bicarbonate, and sodium chloride-rich waters." (Emphasis is ours.) The press release continues: "The article goes on to say that 'on a regional scale, methane concentrations are best correlated to topographic and hydrogeologic features, rather than shale-gas extraction.'"

HF: New Study Concludes Little Risk Posed

Vorys — Sat, 01 Jun 2013 06:46:52 -0500

Energy In Depth has a post on a new study done assessing the risks of hydraulic fracturing: "A new, comprehensive report from Gradient examines two potential exposure pathways for hydraulic fracturing fluids to impact human health: upward migration from the shale formation itself, and surface incidents such as spills or other releases. Even by taking a conservative approach (which by design overestimates risk) the report concludes that hydraulic fracturing fluids 'are not expected to pose an adverse risk to human health' and that, in the event of a spill, natural processes would dilute fluids to 'below levels of human health concerns.'"

For a copy of the study, see here.

BLM Issues Updated HF Draft Rule

Vorys — Tue, 21 May 2013 07:21:22 -0500

On May 16, 2013, the U.S. Department of the Interior, Bureau of Land Management (BLM) released an updated draft rule for hydraulic fracturing on public lands. The rule was originally proposed in May 2012, but was withdrawn and revised to address several concerns raised in public comments. Changes from the original proposed rule include required use of cement evaluation logs in place of the originally proposed cement bond logs, a modification to the procedure for asserting trade secrets that would allow operators to submit to BLM an affidavit asserting exemption from disclosure of certain information regarding fracturing fluid, and the addition of a provision allowing the BLM to approve variances.

The updated draft rule will be subject to a 30-day public comment period from the date the draft rule is published in the Federal Register.

ODNR Releases 2012 Production Data

Vorys — Sat, 18 May 2013 13:06:49 -0500

The Ohio Department of Natural Resources (ODNR) is releasing the 2012 production data right now (you can watch here). Of note: Oil production last year increased by 93%, to nearly 636,000 barrels. Gas production increased by 80%, to nearly 13 Bcf.

We will update this information as soon as it becomes available.

[Update: Production data can be found here.]

[Update: For more, see here and here.] (Bumped.)

New Hydraulic Fracturing Study Finds No Issues

Vorys — Sat, 18 May 2013 10:40:23 -0500

The Washington Post has a story on a recent study finding that hydraulic fracturing has not contaminated water wells in Arkansas: "Members of the U.S. Geological Survey were also part of the study, which examined 127 drinking water wells for evidence of pollution from methane gas or chemicals. *** The study published Wednesday looked at an area of heavy drilling in north-central Arkansas known as the Fayetteville Shale. More than 4,000 new wells have been drilled there since 2004. The researchers did multiple tests to looks for the presence of contamination from drilling, or from naturally occurring gas or ultra-salty liquids that seep up through pre-existing faults. *** Arkansas homeowners 'typically had good water quality, regardless of whether they were near shale gas development,” said Robert Jackson, a professor of environmental sciences at Duke."

For a copy of the study, see here.

Ohio EPA Issues Compliance Advisory Notice for Emergency Electrical Generators

Vorys — Wed, 15 May 2013 16:00:19 -0500

On May 15, 2013, Ohio EPA issued a Compliance Advisory Notice (Notice) regarding the operation of emergency electrical generators, permitted under Ohio EPA’s permit-by-rule (PBR), for peak shaving or other non-emergency demand response situations. The Notice was issued in light of the Director’s April 30, 2013 Final Findings and Orders clarifying how Ohio EPA would implement U.S. EPA’s revised National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines (RICE NESHAP). Pursuant to the Director’s Final Findings and Orders, Ohio EPA will not consider peak shaving operations to be a violation of the Emergency Generator PBR, from April 30, 2013 through May 3, 2014, if the owners or operators comply with the RICE NESHAP's operating restrictions and reporting requirements.

EIA Short-Term Energy Outlook - May 2013

Vorys — Mon, 13 May 2013 16:13:25 -0500

The Energy Information Administration (EIA) has issued its Short-Term Energy Outlook for May 2013. Among the highlights: "Natural gas working inventories ended April 2013 at an estimated 1.82 trillion cubic feet (Tcf), about 0.80 Tcf below the level at the same time a year ago and 0.13 Tcf below the five-year average (2008-12). EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.80 per MMBtu in 2013 and $4.00 per MMBtu in 2014, about 27 cents per MMBtu and 40 cents per MMBtu higher than forecast in last month's STEO, respectively."

Read the whole thing.

OH: Youngstown Rejects Development Ban

Vorys — Sun, 12 May 2013 16:05:31 -0500

The Youngstown Vindicator is reporting that a charter amendment designed to ban hydraulic fracturing within the city has been rejected by voters: "Opponents of a citizen-organized anti-fracking charter amendment said the voters made the right choice in rejecting the ballot issue. *** While opponents said the amendment wouldn’t have been enforceable if approved, they’re glad they don’t have to concern themselves with that issue."

Expect development opponents to continue their efforts ...

New Study Supports Benefits of Energy Production

Vorys — Sun, 12 May 2013 15:53:18 -0500

The Akron Beacon Journal quotes a recent press release noting yet another study confirming the economic benefits of domestic energy development: "Today, the Small Business & Entrepreneurship Council (SBE Council) published a new report titled 'The Benefits of Natural Gas Production and Exports for U.S. Small Businesses.' The report highlights the significant growth in the number of employer firms and jobs in the energy sector between 2005-2010. The job growth is most striking among small businesses. During this same period, total U.S. employment and firms experienced a decline. The findings of the report underscore the need for policies that encourage and enable this positive development for the U.S. economy."

For a copy of the report, see here.

PA: Hydraulic Fracturing Did Not Cause Town's Methane Problems

Vorys — Sat, 11 May 2013 15:43:38 -0500

Businessweek is reporting on recent findings by the Pennsylvania Department of Environmental Protection regarding alleged methane contamination: "Methane in the water wells of a Pennsylvania town visited by Yoko Ono in her campaign against hydraulic fracturing wasn’t caused by nearby drilling for natural gas, the state environmental regulator said. *** In the northeastern town of Franklin Forks, samples from three private water wells are comparable in their chemical makeup to the natural spring at a nearby park where methane had been detected long before fracking began in the area, according to the Pennsylvania Department of Environmental Protection." (Emphasis is ours.)

Read the whole thing ...

EPA: Methane Leaks Less Than Previously Thought

Vorys — Sat, 11 May 2013 15:29:50 -0500

The Examiner has a notable report on an EPA study revising downward the methane leaked during natural gas production operations: "'The scope of the EPA's revision was vast. In a mid-April report on greenhouse emissions, the agency now says that tighter pollution controls instituted by the industry resulted in an average annual decrease of 41.6 million metric tons of methane emissions from 1990 through 2010, or more than 850 million metric tons overall. That's about a 20 percent reduction from previous estimates. The agency converts the methane emissions into their equivalent in carbon dioxide, following standard scientific practice. *** The EPA revisions came even though natural gas production has grown by nearly 40 percent since 1990.'" (Emphasis is ours.)

For more, see here (EPA: "National Greenhouse Gas Emissions Data").

Ohio EPA Proposes Revisions to Best Available Technology Program

Vorys — Tue, 07 May 2013 09:29:11 -0500

On May 1, 2013, Ohio EPA published notice of proposed revisions to its Best Available Technology (BAT) program. Under Ohio’s air pollution control law, owners or operators applying for air pollution permits for new or modified sources are required to provide their recommendations for BAT to minimize air emissions from the source. Ohio EPA’s proposed revisions would impact two of the four case-by-case options for BAT determinations – the Work Practices option and the Source Design Characteristics or Design Efficiency of Applicable Air Contaminant Control Devices option – and would be implemented through modifications to OAC 3745-31-05 and Ohio EPA’s BAT Requirements for Permit Applications Filed On or After August 3, 2009 guidance document.

Comments are due by May 31, 2013.