Utilities association lobbies Congress against LNG exports

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Latest Oil and Gas News: 
June 24, 2011

(Environment & Energy Daily) - A group of utilities is asking top congressional Republicans and Democrats to consider the negative economic and environmental impacts of allowing U.S. companies to export LNG.

The American Public Gas Association sent a flurry of letters June 17 to warn key lawmakers, including Alaska Sen. Lisa Murkowski, against allowing U.S. companies to export large quantities of LNG from newly developed shale plays to overseas markets. U.S. companies have been lining up in recent months to begin exporting the vast amounts of gas produced at numerous shale plays.

Congress should ensure that natural gas is used domestically to power vehicles and back up renewable energy sources to improve air quality, instead of being shipped abroad, the group said. Exporting LNG could play havoc with U.S. supply and demand for gas, the utilities said, and could link the price of domestic natural gas to the volatility of international LNG and oil markets.


Koch Industries opposes federal aid for natural gas vehicles

(Los Angeles Times) - A top official of Koch Industries is sending letters to Capitol Hill urging opposition to energy legislation that would boost the use of natural gas, a proposal backed by energy billionaire T. Boone Pickens.

While Pickens and others in the natural gas industry favor a federal subsidy for development of natural gas-fueled vehicles as a way to reduce dependence on foreign oil and encourage use of cleaner burning gas, Koch is urging members to oppose the Pickens-backed legislation, saying it believes government subsidies distort the economy and create inefficiencies.

"We oppose ethanol subsidies and, indeed, all government mandates and subsidies because they artificially skew economic signals about price and demand, thereby creating inefficiencies that divert resources from productive activities to politically favored ones," wrote Phillip Ellender, who heads the Washington and government affairs office for Koch Industries, one of the world's largest privately held corporations. Koch Industries owns the Flint Hills oil refinery outside Fairbanks.


Keystone pipeline opponents call for White House demonstrations

(Postmedia) - A group of prominent environmentalists and progressives - including Danny Glover and David Suzuki - are urging opponents of TransCanada's Keystone XL pipeline to get arrested this summer in protests against the project. But Suzuki and other Canadians involved in the planned civil disobedience have indicated they won't risk being arrested themselves for fear they might lose the ability to travel to the U.S.

In an open letter released June 23, 11 high-profile Canadian and American activists said they will organize daily demonstrations at the White House this August aimed at persuading President Barack Obama to deny TransCanada's permit application to construct the controversial 1,700-mile, $7 billion pipeline to move Alberta oilsands production to U.S. Gulf Coast refineries.

The group has planned the acts of civil disobedience starting in August because that's when the U.S. State Department is likely to begin final deliberations over whether Keystone XL is in America's national interest. The department has promised a ruling by year's end. The State Department has jurisdiction because the pipeline crosses an international boundary.


Encana, PetroChina break off talks on shale gas venture

(Reuters) - China's biggest North American energy deal was called off June 21 as Encana and PetroChina failed to reach terms for a $5.6 billion joint venture. Encana, Canada's No. 1 natural gas producer, said the two companies ended a year of talks on a deal that would have seen PetroChina take a one-half stake in Encana's massive Cutbank Ridge field in northern British Columbia. "There were significant gaps in fundamentals," said Encana spokesman Alan Boras.

The two companies offered few details on what led to the collapse of the talks. Encana was expected to use the PetroChina investment to speed development of its massive unconventional natural gas reserves, despite weak North American prices for the fuel, as well as cut debt and buy back shares with the proceeds.

The joint venture was to be the largest of a string of Chinese investments in North America. State-controlled PetroChina wants new energy supplies to power China's booming economy and to gain a technical understanding of shale gas development, while Encana wants to share the costs of developing its Canadian shale gas properties.


Shale gas industry running into air quality complaints

(NPR) - Massive natural gas resources across the United States offer a cleaner source of electricity to a country that relies heavily on coal, but producing all that gas also can pump lots of pollution into the air.

Gas production already has caused unhealthy air in Wyoming and Utah. Experts project that booming shale gas developments such as Haynesville in Texas and Louisiana, and the Marcellus in several Mid-Atlantic states, will start contributing to unhealthy levels of ozone or smog in coming years.

Industry argues the benefits of natural gas for air quality far outweigh any negatives, but experts caution that much cleaner production practices are needed to prevent the industry from becoming an air quality villain. "The industry won't be able to grow in the way it needs to grow unless it uses the cleanest technologies," said utility lawyer John Hanger, who used to run Pennsylvania's Department of Environmental Protection. "It will run into a legal brick wall."


Arkansas may ban underground disposal of drilling fluids

(The Associated Press) - State regulators recommended June 21 that the Arkansas Oil and Gas Commission implement a permanent ban on deep wells used to dispose of natural gas drilling fluids in an area north of Little Rock that has seen a swarm of recent earthquakes. Two wells were shut down in February and two others will have to stop operating if the commission approves the regulation at a July 26 hearing.

The ban would not stop natural gas drilling in central Arkansas' Fayetteville Shale. Hydraulic fracturing can continue, but the millions of gallons of fracking fluid used in the 1,150-square-mile region would have to be trucked to injection wells elsewhere in Arkansas, or in Oklahoma or Texas, Commission Deputy Director Shane Khoury said.

Khoury said the commission worked with the Arkansas Geological Survey and the Center for Earthquake Research and Information at the University of Arkansas, Little Rock, before making the recommendation. "This is similar to pending litigation -- I can't go into a lot of details. But based on our analysis ... this is the correct and warranted regulatory response," Khoury said.


W.Va. industry starts pro-drilling campaign

(The Associated Press) - As the rhetoric heats up over natural gas drilling in West Virginia's portion of the Marcellus Shale and opposition to unconventional deep wells grows, the industry is cranking up the public relations machine.

At a June 21 conference in Morgantown, the Independent Oil and Gas Association of West Virginia touted its 4-week-old Just Beneath the Surface campaign and website.

President Mike McCown said it's designed to provide factual information to counter anti-drilling groups he referred to as "wing nut organizations ... friends of the whatever" -- groups that he argues should be supporting one of the state's most promising economic engines.

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, struck a more measured tone, saying industry can no longer afford to ignore people who fear its operations. Instead, he said, it must understand their concerns, educate them and provide transparency about drilling operations.


Drillers say they have paid $400 million to fix Pennsylvania roads

(WHYY, Philadelphia) - Companies drilling into Pennsylvania's Marcellus Shale natural gas reserves say they've spent more than $400 million to repair their damage to roads since 2008. Increased truck traffic in rural areas of the state has taken a toll on the state and local highways.

Drilling companies have to get permits to haul water and supplies over the state's roadways. Those permits require them to fix the damage caused by heavy loads.

"There is wear and tear on the roads from traffic, which the key is getting ahead of those repairs, doing as much proactively as opposed to reactively and increasing the communication," said Katherine Klaber, president of the Marcellus Shale Coalition.


High-value liquids help carry low-value gas

(Forbes) - Facing a supply glut, natural gas drillers like Chesapeake Energy, EOG Resources and SandRidge Energy have shifted investments away from gas in favor of higher-priced oil. As a result, U.S. oil production was up 150,000 barrels per day to 5.51 million barrels/day last year, despite downturns in Alaska and the Gulf of Mexico. The Energy Information Administration forecasts Lower 48 growth of 230,000 barrels/day this year.

But going after oil instead of gas isn't helping reduce the gas glut, because in virtually every oil field there is associated gas. With the price of oil so high, drillers can just about give away the gas and just make money on the liquids. In Oklahoma's Woodford shale, Continental Resources said the gas it produces is so wet with liquids like butane and propane that it can get $8 per million Btus, far more than the going rate of $4.32 for dry gas.

U.S. gas production hit a record 26.8 trillion cubic feet last year. The wildcard? Fracking. If environmental paranoiacs can convince politicians to limit or ban the use of controversial hydraulic fracturing techniques required to drill up shale plays, then those excess gas supplies could quickly disappear and prices would soar.


New $700 million Texas pipeline will move natural gas liquids

(Houston Chronicle) - Energy Transfer Partners and Regency Energy Partners will spend $700 million in a joint venture to build a 530-mile pipeline to carry natural gas liquids from West Texas to a processing plant west of Galveston, Texas, near the Gulf Coast.

The joint venture, Lone Star NGL, expects to complete the 130,000 barrel-per-day pipeline by the first quarter of 2013, the Dallas-based partners said June 22.

With oil prices not far from $100 a barrel, producers have decreased output of natural gas and sought crude and high-value natural gas liquids including propane, ethane and butane. But the liquids boom has brought infrastructure constraints. Oil production has risen so quickly that some companies have to transport it to buyers by truck rather than by pipeline.


Analysts say floating LNG projects could 'transform' the industry

(The Financial Times) - New technology led by Shell to produce natural gas stranded offshore could transform the global LNG industry. The breakthrough - floating LNG terminals - will enable gas to be recovered from fields that were in the past considered too small or too far offshore to warrant the infrastructure required to pipe the gas onshore to LNG plants.

"This is a key milestone in the development of the LNG business," said Andrew Pearson, head of LNG research for consultants Wood Mackenzie. "This will change the business." Shell is aiming for the first cargo to be unloaded from its Prelude project offshore Australia by 2017. Others companies also are looking at their own floating LNG projects in Asia and offshore Brazil.

Joe Stanislaw, Deloitte independent senior adviser, likened it to the technological breakthrough in producing gas from shale. "Floating LNG is the same as shale," Stanislaw said. "In both cases, we knew the gas was down there. It just was not economic to produce it. This has the potential to transform the offshore industry."


Gazprom, Exxon negotiate over gas from Sakhalin-1

(Wall Street Journal) - Gazprom expects to reach a deal by the end of this year to buy all of the natural gas produced from the Sakhalin-1 project, operated by ExxonMobil, Gazprom Deputy Chief Executive Alexander Ananenkov said June 21.

An Exxon Mobil spokeswoman declined to comment. The project holds about 17 trillion cubic feet of gas off the coast of Sakhalin Island but has yet to develop the deposits because it hasn't reached a pricing deal with Gazprom.

ExxonMobil holds the right to export Sakhalin-1 gas - despite Gazprom holding a Russian monopoly on exports - and originally intended to export the gas to China.  Gazprom, however, has its own needs. It is building a new pipeline from Sakhalin to Vladivostok that will be ready this year, but doesn't have enough gas at its Sakhalin-2 and Sakhalin-3 projects to fill the line. Gazprom wants to take all of Exxon's Sakhalin-1 gas at prices fixed at low, local market levels to meet the shortfall.


Study says 1 in 7 Oklahoma jobs tied to oil and gas industry

(The Oklahoman) - The oil and natural gas industry in Oklahoma is booming, an Oklahoma City University economist said June 22. Nearly 300,000 state jobs are tied to the industry, which injected as much as $51 billion into Oklahoma's economy in 2009, said Russell Evans, executive director of OCU's Steven C. Agee Economic Research and Policy Institute.

The oil and gas industry in Oklahoma now employs about 71,000 people, or about 3% of the state's workforce, according to the study. The average income for those jobs is more than $107,000 a year. Almost 300,000 jobs are tied directly or indirectly to the industry, with income totaling $14 billion to $17 billion in 2009, Evans said, citing the OCU study and another one commissioned by the American Petroleum Institute.

Those studies concluded the oil and gas industry added $42 billion to $51 billion to Oklahoma's economy, which Evans said totals about $150 billion a year. "About one out of every seven jobs in the state is directly or indirectly tied to the oil and gas industry," he said.


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