EIA: Permian Basin Oil Production and Resource Assessments Continue to Increase

According to the U.S. Energy Information Administration, “Crude oil production in the Permian Basin is expected to increase to an estimated 2.4 million barrels per day (b/d) in May, based on estimates from EIA’s Drilling Productivity Report. Between January 2016 and March 2017, oil production in the Permian Basin increased in all but three months, even as domestic crude oil prices fell. As production in other regions fell throughout most of 2015 and 2016, the Permian provided a growing share of U.S. crude oil production. With rising oil prices over the past year, the Permian continues to be attractive to drillers, as reflected in rising rig counts. As of April 21, 2017, the number of rigs in the Permian Basin reached 340, or 40% of the 857 total oil- and natural gas-directed rigs operating in the United States. The Permian rig count reached as high as 568 in late 2014 before falling to a low of 134 in spring 2016.”

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Federal Court Defers to Oklahoma Oil and Gas Oversight, Rejects Sierra Club Bid for Federal Regulation

This post was originally posted on WLF Legal Pulse.

In 2016, the Sierra Club filed suit in Oklahoma alleging that use of state-permitted deep wastewater injection wells was causing increased seismic activity—both in frequency and severity.  Sierra Club v. Chesapeake Operating, LLC, et al., Case No. CIV-16-134-F, United States District Court for the Western District of Oklahoma.

In an April 4, 2017 Order the court dismissed the case, declining to exercise jurisdiction because doing so would interfere with the state regulators’ efforts to address the alleged increased seismic activity from wastewater injection.

For decades, wastewater injection wells have been used to safely dispose of water that is a common byproduct of oil and gas extraction.  The disposal wells are drilled and completed to protect drinking water.  The geological formations into which the wastewater is injected are thousands of feet below fresh water formations to prevent contamination of drinking water.  Without such disposal wells, oil and gas production in Oklahoma would become prohibitively expensive.

In 1981, pursuant to authority under the federal Safe Drinking Water Act, EPA granted primary jurisdiction to regulate wastewater disposal wells in Oklahoma to the Oklahoma Corporation Commission (OCC), the state agency with regulatory authority over oil and gas activity in Oklahoma.

The Sierra Club specifically alleged that the injection of wastewater produced during oil and gas extraction had caused a 300-fold increase in earthquakes from 2009 to 2015, and a 50-fold increase in the number of 3.5 scale earthquakes.  It further alleged that Oklahoma now has the highest risk of earthquakes in the nation, and that the earthquakes caused by wastewater injection created an imminent and substantial danger to the environment, infrastructure, public health, and safety.

Alleging violations of the federal Resource Conservation and Recovery Act (RCRA), the Sierra Club asked the court to remedy the alleged earthquake risk by ordering the defendants to (i) immediately and substantially reduce the volume of wastewater injections, (ii) pay for reinforcement of vulnerable structures, and (iii) establish an earthquake monitoring and prediction center to study and determine the volumes of wastewater that can be safely injected without inducing seismic activity.

The court acknowledged that RCRA allows a private party to bring suit against any person or entity that handles, stores, treats, or disposes of wastewater in a manner presenting an imminent and substantial endangerment to public health or the environment.  Nonetheless, the court concluded that dismissal was appropriate under the related doctrines of Abstention and Primary Jurisdiction.

The Abstention Doctrine allows a federal court to decline to hear a case that would disrupt state efforts to establish a uniform policy dealing with a matter of great public concern, especially when the state is actively addressing the concerns.  The Primary Jurisdiction Doctrine is intended to promote the proper separation between courts and specialized regulatory agencies, protecting the function of agencies that possess particularized expertise and are charged with ensuring uniformity of regulatory outcomes.

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Hearings This Week

 

Senate Environment and Public Works Committee hearing on “A Review of the Technical, Scientific, and Legal Basis of the WOTUS (Waters of the United States) Rule.”
Wednesday, April 26, 10 a.m.
406 Dirksen Bldg.

 

House Transportation and Infrastructure — Subcommittee on Railroads, Pipelines and Hazardous Materials hearing on “Building a 21st Century Infrastructure for America: The State of Railroad, Pipeline, and Hazardous Materials Safety Regulations and Opportunities for Reform.”
Wednesday, April 26, 10 a.m.
2167 Rayburn Bldg. Witnesses
Linda Darr, president of the American Short Line and Regional Railroad Association

Roger Nober, executive vice president of law and corporate affairs at BNSF Railway

Paul Rankin, president of the Reusable Industrial Packaging Association

Robin Rorick, group director of midstream and industry operations at the American Petroleum Institute

Donald Santa Jr., president and CEO of the Interstate Natural Gas Association of America

John Tolman, vice president and national legislative representative for the Brotherhood of Locomotive Engineers and Trainmen

 

House Energy and Commerce Committee hearing on the Nuclear Waste Policy Amendments Act of 2017.
Wednesday, April 26, 10 a.m.
2123 Rayburn Bldg.

Burdens and Regulations Under Review at EPA

The internal memorandum from Administrator Pruitt to his senior staff at the U.S. Environmental Protection Agency (“EPA”) was recently released to the press.  The memo provides the road map for implementing Executive Order 13777, which directs agencies to take steps to repeal, replace, or modify unduly burdensome regulations.  To identify the regulations EPA will prioritize in the coming months and years, Administrator Pruitt created a Regulatory Review Task Force consisting of four top EPA appointees.  The Task Force is directed to develop the recommendations by seeking out input from regulated entities and the trade associations representing the regulated community.   The memo further directs the Task Force to conduct “some general outreach” and to host public stakeholder meetings and to screen and compile the responses by May 15, 2017.

Subsequent to Administrator Pruitt’s memorandum, EPA announced on its website that the Agency would convene a “Stakeholder Meeting” in Washington, D.C. on April 25, 2017, during which regulated entities and their representatives could testify on environmental regulatory burdens and EPA rules that should be repealed, replaced, or modified. Interested stakeholders should confirm their attendance with EPA by April 17, 2017.

In addition to, or in lieu of, testifying at the April 25th Stakeholder Meeting, regulated entities can also submit written comments on the regulatory burdens facing their industry/company and make recommendations for modification or repeal.   EPA opened a docket on regulations.gov and will accept comments until May 15, 2017.

While we cannot speculate on the likelihood that EPA will adopt any or all of the recommendations it receives, we note that this Administration has been aggressively touting its deregulatory approach and is taking concrete steps to better understand environmental regulatory burdens. For those who bemoaned the prior administration’s “regulatory onslaught” – this is your chance to ask for a change.  Stakeholders should use this process to reach out to EPA, provide their recommendations in a clear and succinct manner, and make themselves available for the public hearings and potentially other meetings.  Kelley Drye’s Environmental and Government relations practice groups are well equipped to help.

This is an Administration that operates far differently than previous administrations, and the regulated community need to be prepared for a different type of dialogue with EPA and other federal agencies.  Stakeholders who clearly articulate their regulatory concerns and proposed remedies to EPA will stand a better chance of seeing those concerns addressed.  Those entities that do not clearly identify their issues with EPA are not likely to see those issues addressed.

Click here to view the Pruitt memorandum.  If you have any questions or would like to discuss potential approaches, please contact Wayne D’Angelo at wdangelo@kelleydrye.com or (202) 342-8525.

President Trump’s Executive Order Withdraws the Social Cost of Carbon

On March 28, 2017 President Trump issued an executive order that seeks to completely reverse the Obama Administration’s climate policies. Executive Order 13783, Promoting Energy Independence and Economic Growth signals a profound shift in federal climate change policy, and reflects the Trump Administration’s desire to systematically reduce regulatory burdens across the energy industry and to promote the development of American energy resources.

A critical component of the Executive Order is the disbandment of the Interagency Working Group (IWG), which the Obama Administration had tasked with developing Social Cost of Carbon metrics for use in federal policy making. The Order also withdraws all of the technical documents that set forth the analytical framework for considering the Social Cost of Carbon in regulatory analyses.

The Social Cost of Carbon is an analytical tool that attempts to quantify the incremental climate impact that will result from a unit of carbon dioxide emissions so that an economic value can be assigned to the emissions. That value is then used as a point of comparison for regulatory actions that reduce carbon dioxide emissions.  Many competing models exist, and each offers different productions about the future interactions between human behavior and the climate.  These models frequently predict how climate change will affect net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services.

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EIA: Crude production in Gulf of Mexico Continues to Increase

Our humble little blog is so focused on the onshore shale plays, we sometimes need to be reminded that offshore crude oil production is increasing as well.   According to the U.S. Energy Information Administration, “U.S. crude oil production in the Federal Gulf of Mexico (GOM) set an annual high of 1.6 million barrels per day (b/d) in 2016, surpassing the previous high set in 2009 by 44,000 b/d. In January 2017, GOM crude oil production increased for the fourth consecutive month, reaching 1.7 million b/d. On an annual basis, oil production in the GOM is expected to continue increasing through 2018, based on forecasts in EIA’s latest Short-Term Energy Outlook.”

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Hearings: Week of April 3

Senate Energy and Natural Resources Committee on efforts to protect U.S. energy delivery systems from cybersecurity threats.
Date: Tuesday, April 4, 10 a.m.
Place: 366 Dirksen Bldg.
Witnesses: Patricia Hoffman, acting assistant secretary of Energy for the Office of Electricity Delivery and Energy Reliability
Andrew Bochman, senior cyber and energy security strategist at Idaho National Laboratory
Gerry Cauley, president and CEO of the North American Electric Reliability Corporation
Duane Highley, president and CEO of the Arkansas Electric Cooperative Corporation
Dave McCurdy, president and CEO of the American Gas Association
Col. Gent Welsh, commander of the 194th Wing in the Washington National Guard

Senate Foreign Relations, Subcommittee on Africa and Global Health Policy hearing on “A Progress Report on Conflict Minerals.”
Date: Wednesday, April 5, 2 p.m.
Place: 419 Dirksen Bldg.
Witnesses: Rick Goss, senior vice president for environment and sustainability at the Information Technology Industry Council, Washington, D.C.
Mvemba Dizolele, lecturer at Johns Hopkins University, Washington, D.C.
Arvind Ganesan, director for business and human rights at Human Rights Watch, Washington, D.C.

House Energy and Commerce, Subcommittee on Environment hearing on “Discussion Draft: Brownfields Reauthorization.”
Date: Tuesday, April 4, 10 a.m.
Place: 2123 Rayburn Bldg.
Witnesses: TBA

Domestic Crude Oil Production Down in 2016

According to the U.S. Energy Information Administration, ““Despite increasing crude oil prices throughout most of 2016, total U.S. crude oil production in 2016 was below its 2015 level. However, monthly production began growing in the fourth quarter of the year after declining over the first three quarters. Total 2016 production remained above the five-year average. With the removal of restrictions on exports of domestically produced crude oil at the end of 2015, crude oil exports increased. At the same time, the difference between Brent and West Texas Intermediate (WTI) crude oil prices narrowed, which made crude oil imports relatively more attractive and caused total imports of crude oil in 2016 to also increase.” 

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Trump’s SCOTUS Nominee is a Chevron Skeptic

On January 31, President Trump introduced Judge Neil Gorsuch as his nominee for the Supreme Court vacancy left by Justice Antonin Scalia.  Gorsuch, who currently sits on the U.S. Court of Appeals for the Tenth Circuit, has been widely-praised for his lucid, well-reasoned opinions on a wide range of federal law questions.  Like Scalia, his opinions reveal a textual orientation in matters of constitutional and statutory interpretation, a belief that criminal laws should be clear and interpreted in favor of defendants even at the expense of government prosecutions, and a skeptical stance toward administrative agencies.

Unlike Scalia, however, Gorsuch has criticized the so-called Chevron doctrine – the rule that courts must defer to permissible agency interpretations of ambiguous statutory language – which Scalia generally defended.  Indeed, Gorsuch’s view of Chevron is more conservative than Scalia’s.  In the words of Eric Citron at ScotusBlog:

[Gorsuch] believes even . . . broadly worded enforcement statutes have objective meanings that can be understood from their texts; that it is the job of the courts to say what those laws mean and to tell agencies when they do not have the best reading; and that if the agency disagrees, the only proper recourse is for Congress to change the law or the Supreme Court to correct the error.

Scalia, on the other hand, wanted to limit courts to the role of reviewing agency implementations of these kinds of statutes for clear error in order to prevent “ossification,” recognizing that the understanding of these kinds of laws might need to change from time to time to accommodate changing priorities among presidents and changing conditions on the ground. Continue Reading

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