Vol. 6, No. 13

Topics discussed in this week’s Report include:

  • Trump administration issued presidential permit for Keystone XL pipeline.
  • PHMSA issued advisory bulletin on classification of threats to integrity of gas pipelines.
  • Federal court rejected lawsuit challenging Delaware River Basin Commission’s jurisdiction to regulate natural gas development within the Basin.
  • Environmental NGOs filed petition for review of FERC decision granting certificate to Atlantic Sunrise Pipeline in D.C. Circuit.
  • Colorado: Intermediate appellate court held that state Oil and Gas Conservation Act requires oil and gas development to proceed in a manner protective of the environment.
  • Study concluded that the majority of methane found in groundwater in the Barnett Shale does not come from hydraulic fracturing.
  • Changes occur in economics of hydraulic fracturing as domestic oil production rebounds.

Federal

Trump administration issues presidential permit for Keystone XL pipeline. President Donald Trump’s State Department issued a presidential permit to TransCanada Keystone Pipeline LP for the Keystone XL pipeline, reversing former President Barack Obama’s November 2015 decision to deny the permit. A presidential permit is needed for a pipeline to cross the border between the United States and Canada. The Trump administration based its decision in part on the Obama administration’s 2014 environmental impact statement. Environmental groups have announced their intention to sue the United States regarding the permitting decision reversal, possibly alleging that using the 2014 environmental impact statement to come to a different conclusion was improper. To move forward, the Keystone XL pipeline project still needs Nebraska to grant a permit.

PHMSA issues advisory bulletin on classification of threats to integrity of gas pipelines. The Pipeline and Hazardous Materials Safety Administration (PHMSA) recently published an advisory bulletin that provides guidance to owners and operators of gas pipelines on identifying threats to pipeline integrity and criteria for addressing those threats. The bulletin notes that existing PHMSA regulations require pipeline owners/operators to evaluate nine threat categories as part of an integrity management program, with different levels of assessment required depending on whether the threat is active or inactive. The bulletin then provides guidance for determining when these threats, such as external and internal corrosion, qualify as active or inactive threats that may require a response.

Federal court rejects lawsuit challenging Delaware River Basin Commission’s jurisdiction to regulate natural gas development within the Basin. The Middle District of Pennsylvania recently dismissed a case in which property owners challenged the Delaware River Basin Commission’s (Commission) ability to regulate natural gas production. The Commission is an interstate compact among Pennsylvania, Delaware, New York and New Jersey that has jurisdiction over various issues related to water resources within the Delaware River Basin. In 2010, the Commission imposed a de facto moratorium on unconventional natural gas drilling within the Delaware River Basin. In dismissing the lawsuit, the court determined that oil and gas development activities constituted “projects” under the interstate compact. As such, the court reasons, development proponents are required to submit applications to the Commission demonstrating that their projects do not have “a substantial effect on the water resources of the Basin” and requesting Commission approval before they can proceed.

Environmental NGOs file petition for review of FERC decision granting certificate to Atlantic Sunrise Pipeline in D.C. Circuit. A coalition of environmental nongovernmental organizations (NGOs), including the Sierra Club, filed a petition for review in the D.C. Circuit under the Natural Gas Act of a Federal Energy Regulatory Commission (FERC) order granting a certificate to the Atlantic Sunrise pipeline. Transcontinental Gas Pipe Line Company’s proposed Atlantic Sunrise pipeline would expand its existing network to bring natural gas from northern Pennsylvania to other parts of Pennsylvania, Maryland, North Carolina, Virginia, Georgia and Alabama, with connections to existing pipelines in Florida. The NGOs assert that they have the right to bring their petition now since they claim that FERC’s tolling order giving it more time to act on the NGOs’ request for rehearing is invalid. In addition to various procedural challenges, in a statement the NGOs say they will claim that FERC’s cost-benefit analysis exaggerated the pipeline’s benefits while discounting its costs, which the NGOs allege range from habitat destruction to air pollution impacts.

States

Colorado: Intermediate appellate court holds that state Oil and Gas Conservation Act requires oil and gas development to proceed in a manner protective of the environment. A panel of the Colorado Court of Appeals recently held by a 2-1 vote that the Colorado Oil and Gas Conservation Commission (Commission) has statutory authority to determine that new oil and gas projects do not harm the environment before issuing permits to the projects. Several residents had asked the Commission to adopt a rule that it would not issue any permit to drill an oil or gas well unless an independent third party could show that the well would not negatively affect human health and the environment or contribute to climate change. A lower court had upheld the Commission’s ruling that the proposed rule was not authorized under state law. The appellate court reversed, citing the fact that the Colorado Oil and Gas Conservation Act promotes oil and gas development in the state “in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and natural resources.” The court held that the Act’s language sets a condition precedent to issuing permits rather than describes a balancing test between oil and gas development and protection of other interests. The court did not address the merits of the petition, remanding it to the Commission to consider whether to issue the proposed rule.

Studies

Study concludes that the majority of methane found in groundwater in the Barnett Shale does not come from hydraulic fracturing. A study by researchers from the University of Texas and University of Michigan did not find any correlation between the density of hydraulic fracturing wells and the level of methane found in groundwater in the Barnett Shale. The researchers evaluated 509 water well samples from 12 counties, 85 percent of which showed low levels of dissolved methane. In concluding that hydraulic fracturing did not generally increase the frequency of groundwater contamination, the researchers noted that most of the methane in groundwater in the study areas came from shallow gas deposits. However, the researchers noted that individual production wells could contaminate groundwater if not constructed or maintained properly.

Business

Changes occur in economics of hydraulic fracturing as domestic oil production rebounds. The rebound in domestic oil production from the downward trend in production during the first three quarters of 2016 is affecting the hydraulic fracturing industry in several ways. First, sand prices are increasing at a rapid rate, with the price of sand at approximately $40 per ton, or more than double its price in the latter half of 2016. Sand is used during the hydraulic fracturing process to help open underground spaces in which oil and gas is trapped. Second, North Dakota reports that there are over 1,000 open job positions in the state’s oil and gas industry.