NGO Notifies DOT of Intent to Sue Over Pipeline Safety Regulations. The National Wildlife Federation issued a 60-day notice of intent to sue the U.S. Department of Transportation (DOT) for allegedly failing to comply with a mandatory duty to issue regulations requiring pipeline owners and operators to establish safety plans for worst-case oil releases into certain water bodies. The group claims that DOT failed to issue the necessary rules requiring plans for offshore facilities located landward of the coastline under the Oil Pollution Act.
Senate Committee Approves Bill to End Crude Oil Export Ban. By a 12-10 vote, the Senate Energy and Natural Resources Committee approved an energy bill that includes an end to the United States’ prohibition on exporting crude oil. Bill supporters argue the ban is outdated and allowing exports is sound economic policy. Sponsors are now looking to get the full Senate to vote on the bill before leaving for the August recess. Environmental groups oppose exports as encouraging the use of fossil fuels, while committee dissenters raised questions about the impact on domestic gasoline prices.
California: NGOs Sue to Block California Hydraulic Fracturing Regulations. The Center for Biological Diversity (CBD) filed suit in state court to block the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources (DOGGR) from issuing hydraulic fracturing permits. According to the group, DOGGR completed its environmental impact report (EIR) before the California Council on Science and Technology (CCST) completed its own study of hydraulic fracturing and allegedly failed to heed the CCST’s warning that there was no method to adequately track potential environmental impacts on groundwater. DOGGR’s EIR disagreed with the CCST’s findings, concluding that potential impacts from hydraulic fracturing would be limited with adequate oversight. The suit claims that the subsequent DOGGR permitting regulations violate the California Environmental Quality Act, as well as Senate Bill 4, the 2013 California law authorizing hydraulic fracturing regulations, and seeks an injunction prohibiting the issuance of any permits until DOGGR issues a supplemental EIR. Governor Jerry Brown recently created a panel to review the CCST study.
Iowa: Landowners Challenge Pipeline Eminent Domain. Three Iowa landowners filed suit in Cherokee County District Court to stop the Iowa Utilities Board from granting eminent domain rights for the construction of a 570,000 barrel per day crude oil pipeline running from the Bakken Shale play to Illinois. Dakota Access LLC sought the right to condemn land through eminent domain for properties where it could not come to an agreement with landowners. The plaintiffs claim that state law does not authorize the Iowa Utilities Board to issue eminent domain rights for pipeline construction. The company stated that exercising eminent domain is an option of last resort.
North Dakota: Fort Berthold Tribe Eyes Drilling Rule Reforms. Leaders from North Dakota’s Fort Berthold tribe announced that it will carefully consider new rules for oil and gas development on reservation lands. The West Segment Regulatory Commission, the tribe’s regulatory body, recently proposed, and then suspended, new rules to govern drilling and development activities. Representatives from industry and state regulatory bodies are skeptical of reforms and have expressed concern that new rules would stifle development at a reservation that produces 300,000 barrels of oil per day. The western segment is the largest producer, but residents have registered complaints, including the alleged effects from flaring and venting of natural gas. An attorney for the commission stated that the goal would be to alleviate those concerns through supplemental regulations while continuing to keep drilling costs low.
Oklahoma: Injection Wells Agree to Shut Down Pending Investigation After Earthquakes North of Oklahoma City. After three earthquakes shook the Oklahoma City area, the Oklahoma Corporation Commission (OCC) requested two oil and gas wastewater injection wells near Crescent, Oklahoma to shut down. According to the U.S. Geological Survey, a magnitude 4 earthquake was followed by a magnitude 4.5 earthquake just 23 minutes later and a magnitude 4.1 earthquake later that evening. All of them were centered near Crescent, 36 miles north of Oklahoma City. Crescent was recently named to the OCC’s “Area of Interest” list due to the presence of a 50-mile fault line. The well owners agreed to OCC’s request and a third injection well near Crescent will reduce its injection capacity while the OCC investigates. Depending on the investigation’s outcome, the OCC could prohibit further injections, reduce volumes or require injections at shallower depths.
AFBF Report: More Oil Pipelines Would Help Grain Shipments. An American Farm Bureau Federation (AFBF) report urged the construction of more crude oil pipelines, keeping railways available for corn and soy shipments. Farmers have contended that crude oil shipments displace resources formerly reserved for grains. Although crude oil remains a small fraction of total railroad freight, AFBF contends it receives higher priority. According to the report, in North Dakota, farmers lack access to waterways, making competition for rail shipments more difficult given the significant amount of crude oil being shipped from the Bakken Shale play. AFBF attributes lost profits for North Dakota corn farmers to railroad congestion and urged faster approval of pipelines, especially for the Bakken. In Surface Transportation Board meetings, railroads have disputed allegations that crude oil shipments are given priority and point to plans for investing billions of dollars in new track to provide improved access for all shippers.
SABIC Eyeing U.S. Shale Gas Investments. Saudi Basic Industries Corp. (SABIC) announced that it intends to invest in shale gas assets through joint ventures with U.S. companies. As the world’s second largest chemical manufacturer, low-cost gas offers SABIC cost savings for its U.S. plastics business, as well as the potential to export excess feedstock to its foreign plants. The company has already converted crackers at its UK olefin plant to process shale gas. The company’s CEO stated that shale gas assets in the northeast and south are being investigated, but that SABIC is not currently interested in acquiring any U.S. gas companies.
Oil Production up in Permian Despite Losses and Layoffs. Several oil and gas companies reported quarterly losses, while the leading wellfield service companies announced a new round of layoffs. West Texas Intermediate prices also continue to lag at around $50, prompting capital budget cuts and falling futures prices. Nonetheless, oil production and rig counts continue to creep higher in Texas’ Permian Basin. The recent completion of new pipelines to Gulf Coast refineries eliminated a long-standing bottleneck, adding 750,000 barrels per day of capacity, eliminating the need for producers to offer discounts to buyers, and reducing crude inventories. As a result, Texas is poised to break production records dating back to 1972. Many companies are telling their investors that they expect oil production to increase with expected capital budget cuts, price reductions from vendors and efficiency gains to off-set low crude prices.
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The Environmental Practice of Sidley Austin LLP
The Energy Practice of Sidley Austin LLP