Texas Oil and Gas Attorney Blog

In April 2013. representatives in the US House of Representatives announced that bipartisan legislation would be introduced in 2014 to take out corn based ethanol requirements in the federal Renewable Fuel Standard

The bill is called the Renewable Fuel Standard Reform Act. Those involved in the oil and gas industry know that the standards involving ethanol can effect the market by conferring an artificial advantage for the so called “renewable” fuels over oil and gas.

The current Renewable Fuel Standard requires 36 billion gallons of renewable fuels to be included in the domestic fuel supply by 2022, and almost all of that is from corn-based ethanol. This requirement uses a massive percentage of America’s corn supply and diverts it to fuel. In 2011, 40% of the nation’s corn went to making ethanol, which is about five billion bushels of corn. Because so much of the corn crop is used for ethanol, there is less for food and for livestock feed. The end result is a substantial increase in the price of corn and everything that has corn as an ingredient, hurting consumers and many small businesses. In addition, ethanol in fuel wrecks havoc on everything from car engines, to lawnmowers to chainsaws. No one has bothered yet to assign a cost for these damages to consumers.

The US House of Representatives Natural Resources Committee has held at least five meetings in the last two years on the problem of federal oil and gas regulations overlapping with existing state regulations. The Committee’s chairman, Representative Doc Hastings, had a common sense solution to this confusion: “There is a simple solution to prevent duplication: Don’t duplicate the states. The ‘one size fits all’ regulatory structure being pursued by the Obama administration is a waste of time and energy.” This issue is particularly significant in light of the increase in hydraulic fracturing, a process that has become increasingly politicized at the national level.

That is exactly the message of three of the witnesses at the Committee’s latest meeting. These three witnesses, all state officials, agreed that states are in a unique position to understand the geological and environmental conditions and issues within their states. The states represented by these three witnesses were Utah, Texas, and Ohio.

Utah’s Lieutenant Governor Gregory Bell told the Committee: “From Utah’s perspective, increasingly national political considerations are unduly influencing land use decisions that are more effectively addressed locally.” He went on to assert that “political jockeying” in Washington within national policy debates hurts local communities, who are better placed to decide what is best for their land. He pointed to the sequester cuts to mineral lease royalty payments, which confuses what royalties are supposed to be- they should be dedicated revenues held in trust, not subject to federal spending rules.

Due to increasingly onerous regulations, oil and gas industry associations have filed suit in federal court over the Environmental Protection Agency’s (EPA) planned regulation of greenhouse gases from power plants and vehicles. The regulations come from a 2009 EPA finding that greenhouse gases pose a public health threat- the so-called “endangerment finding”.

Last year, a three judge panel at the District of Columbia’s Circuit Court of Appeals upheld the EPA regulations. That same court denied the energy industry Petitioners a rehearing in December, so the Petitioners recently asked the US Supreme Court to review the regulations at issue.

The Petitioners’ request explains that the regulations are hurting the economy, that there are clear legal issues that need to be adequately addressed, and that the need for review was particularly acute in light of two articulate dissenting opinions at the Court of Appeals, one by Judge Brett Kavanaugh and one by Judge Janice Rogers Brown.

The Environmental Protection Agency’s (EPA) Science Advisory Board, recently announced the creation of a new panel on hydraulic fracturing, generally referred to as “fracing”. The formation of the panel comes as the Obama administration is working to revise draft rules for fracing. With new technologies like fracing leading to historic amounts of oil and gas production for the US, this topic is hotter than ever.

The new panel, called the Hydraulic Fracturing Research Advisory Panel, will be made up of 31 experts (see the list of experts here).Among the 31 are several consultants, two government employees, and 21 academics and college professors. To compose the panel, the EPA asked for nominations of recognized scientists and engineers in the field of hydraulic fracturing, which resulted in 144 candidates. That group was whittled down to 31 through checks for financial and other conflicts of interest. There are at least three experts representing each of the following areas: Petroleum/Natural Gas Engineering; Petroleum/Natural Gas Well Drilling; Hydrology/Hydrogeology; Geology /Geophysics; Groundwater Chemistry/Geochemistry; Toxicology/Biology; Statistics; Civil Engineering; and Waste Water and Drinking Water Treatment. The Chair of the panel is Dr. David A. Dzombak, an environmental engineering professor at Carnegie Mellon University in Pittsburg.

This panel of experts will peer review the EPA’s 2014 draft report on the potential impact of hydraulic fracturing on drinking water. It will also provide scientific feedback on the EPA’s research methods. In particular, the panel is expected to provide information on emerging science and technology for the Science Advisory Board. The report itself is the product of a request by Congress that the EPA commenced in 2010. The draft study plan for the proposed report was submitted in March 2011.

Recently the IHS hosted CERAWeek in Houston, Texas (you can view the brochure here). CERA stands for Cambridge Energy Research Associates, an organization founded in the early 1980s to consult on energy issues for both the government and private companies, and that hosts the annual event in Houston each year. This year’s event, the 32nd such conference, had about 2,200 participants from the energy industry coming from about 50 countries around the world, including 300 speakers.

This year’s CERAWeek’s conference was called “Drivers of Change: Geopolitics, Markets & the New Map of Energy.” It focused on the profound transformations in the industry and hoped to shed new light on the future of energy and focus on changes in the competitive landscape, the unconventional oil and gas revolution, and new fuels and technologies of the future. Daniel Yergin, the conference’s chairman, said, “All this is leading to a vigorous discussion of how the energy needs of a growing world economy will be met over the next 2 decades and what the mix will be. Will an energy transition unfold over years or over decades?”

In terms of the US, we are expected to average 7.3 million barrels per day of oil in 2013, up 900 million barrels since just last year. Our oil imports have been declining since they peaked in 2005, because of this growth in production. Tight oil development in the US and Canada has far outpaced any other region of the world, and the question will continue to be one of the pace of growth. Michael Stoppard, managing director of global gas for IHS, said there was a “redrawing” of the global gas map focusing on three supplies- unconventional gas, deepwater gas, and gas from tight oil. He noted that the world demand for gas would continue to grow in the next few years but that the US probably could not export significant light natural gas until 2015. He also predicted a rebalancing of gas prices from their “unsustainably low levels” of today.