Hydraulic Fracturing: State Regulatory Roundup Vol. 10
Fracking Insider Readers: We are pleased to bring you Volume 10 of our State Regulatory Roundup, including updates on Georgia, Kansas, Texas and the Groundwater Protection Council (GWPC) program in effect in multiple states . As we explained in earlier volumes, we designed the Roundup to provide quick overviews on state regulatory activity. If you have any questions on any of these summaries, please do not hesitate to ask.
Georgia – The American Public Gas Association (APGA) petitioned the Department of Energy to intervene in an LNG export application submitted by Southern LNG Co. APGA represents publicly owned natural gas local distribution companies. It is requesting that DOE reject LNG Co.’s proposal to export LNG from Elba Island, Georgia as “inconsistent with the public interest.” The Gas Act of 1938 requires such a public interest determination by the DOE before natural gas can be exported to countries with which EPA does not have a free trade agreement. Currently, there are more than a dozen LNG export requests awaiting determinations by DOE.
Elba Island currently houses a large LNG import facility, but massive increases in domestic natural gas supplies from hydraulically fractured shale plays have changed the economics of international natural gas trade and made LNG export potentially highly profitable. APGA is concerned that LNG export projects such as the Elba Island conversion would increase domestic natural gas prices.
Kansas – We can add Kansas to the list of states experiencing development booms made possible by hydraulic fracturing. Kansas sits on the Mississippi Lime formation, a carbonite rock formation that holds 3.6 billion barrels of oil equivalent. While the development potential is decidedly smaller than the Bakken’s 12.4 billion barrels of oil equivalent, the Mississippi Lime formation is about half as deep as the Bakkan formation (4,000-6,000 feet), which substantially lowers drilling costs. It is also much closer to key distribution networks in Cushing, Oklahoma. Oil and Gas companies have taken notice and leased more than $2 billion in subsurface rights from landowners. We expect formations like the Mississippi Lime formation to be aggressively developed as oil and gas economics drive more industry resources to oil shale and tight oil formations, and away from dry gas plays.
Texas – On December 17, 2012, Cheniere Energy Partners, which is constructing the Sabine Pass LNG export facility (the only project to receive the DOE’s public interest determination), announced a 20 year supply contract with Total SA. The contract gives Total access to 91.25 trillion BTUs of LNG per year from a processing chain that Cheneire will be building in 2013. The Total contract comes on the heels of several other major export contracts to India, Spain and South America. Cheniere is clearly seeing a competitive benefit of holding the country’s only DOE public interest determination under the Gas Act of 1938. Despite opposition from environmental groups and some natural gas users, the pressure for increased LNG export will only continue as natural gas prices in Europe and Asia remain several times higher than domestic natural gas prices.
Multiple States – In November, the Groundwater Protection Council (GWPC), an association of state groundwater agencies and the driving force behind Fracfocus.org, the hydraulic fracturing chemical disclosure database, announced that it is revising its peer review program to focus on new emerging issues in underground injection control (UIC). The GWPC has a peer review program that allows state groundwater programs, including UIC programs, to be reviewed by peer regulators in other states. In response to concerns that states are not effectively managing wastewater disposal under their UIC programs, the GWPC is adding to its peer review program guidance that will look as seismic impacts, the impacts of EPA’s guidance for diesel fuels under the Safe Drinking Water Act (SDWA), and well integrity and construction. GWPC plans the first new peer reviews in 2013. This program is another great example of how states are using resources like the GWPC to regulate more effectively.