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  • W&J Energy Review | March 30, 2015


Editors: Diana Stares, Jack Myint

Local Affairs

Pennsylvania Governor Proposes Big Investments in Renewable Energy and Efficiency | UCSUSA, March 3 2015

Today, in his first budget address as Governor of Pennsylvania, Tom Wolf proposed $325 million in investments in the state’s energy sector, including significant investments inwind, solar, and energy efficiency. This proposal is part of an overall economic development plan aimed at investing in education and creating high-paying jobs across the Commonwealth. The governor proposed placing a 5 percent severance tax on natural gas extraction in Pennsylvania, which is the only state that does not currently have such a tax. The Pennsylvania Education Reinvestment Act is expected to generate $1 billion in annual revenue, primarily to fund public education. Gov. Wolf’s budget outlined a suite of investments in Pennsylvania’s energy sector totaling $325 million, $250 million of which would come from a bond leveraging financing from the natural gas severance tax.

Pennsylvania's DEP chief seeking gas pipeline strategy | DailyAmerican, March 29 2015

A "spiderweb" of new natural gas pipelines will be built across Pennsylvania during the next decade, and the state's top environmental official wants to develop a strategy for minimizing the impact on the environment. John Quigley, secretary-designate of the Department of Environmental Protection, is creating a task force with members drawn from the industry, local governments and conservation groups to develop voluntary guidelines for locating 25,000 miles of gathering pipelines, which move gas from wells to transmission lines, and several thousand miles of larger interstate pipelines. The impact of this construction will be felt in every county - even areas unfamiliar with this scale of development, Quigley told the Senate Appropriations Committee last week. "We need to get ahead of it," he said. Pennsylvania lacks authority to regulate the siting of pipelines, so Quigley wants voluntary cooperation. An agreement can mean less disruption of the environment and give pipeline companies a clear and predictable direction during the building of pipelines.


New DEP rules for shallow oil and gas wells draw industry ire | Pittsburgh Post-Gazette, March 27 2015

The conventional oil and gas industry’s frustrations with proposed new environmental regulations boiled up at a Department of Environmental Protection advisory board meeting on Thursday, where representatives of the Pennsylvania’s legacy drilling industry questioned whether new rules should apply to them now or even at all. Leaders of several industry trade groups who sit on the advisory board or addressed it Thursday said proposed rules for limiting surface impacts from conventional oil and gas operations should be withdrawn and the 4-year-old process of drafting them should start again to address the specific situation of small operators in the state’s traditional, shallow drilling industry. The DEP’s proposed rules will affect the large-scale operations conducted by companies drawing gas from the Marcellus and Utica shales and the generally smaller, shallower operations of the state’s traditional industry. A budget bill passed by the General Assembly last year directed regulators to split the rules in two, so the new proposals contain separate standards for the unconventional and conventional industries.


Pennsylvania counties seek to keep impact fee on shale oil and gas wells | PennEnergy, March 24 2015

An organization of Pennsylvania's county commissioners is lining up against Gov. Tom Wolf's proposal to replace a fee on Marcellus Shale natural gas wells with a flat annual payment to the same recipients, primarily governments where wells are hosted. Keeping the three-year-old impact fee is a top priority of the County Commissioners Association of Pennsylvania, its executive director, Doug Hill, said Monday during the group's annual spring conference. Wolf was asked about his proposal during the gathering at a downtown Harrisburg hotel. The $225 million annual payment he is proposing would allow public schools to benefit from the new money that is gathered from the severance tax he wants to impose on the industry. The majority of the existing impact fee revenue goes to the local governments where the Marcellus Shale wells are drilled. But Wolf said that directing revenue from a bigger severance tax to public schools around the state would give more Pennsylvanians a stake in the industry. He also referred to part of his proposal to use some of the money from the severance tax to help extend natural gas pipelines.


Natural gas, coal part of Pa.'s quest to find energy sources that 'provide the most juice' | The Patriot News, March 25 2015

Pennsylvania must consider all energy sources and partnerships with other states in order to meet federal emissions limits, the state's top environmental official said Wednesday. "A government that works is a government that listens," said Acting Environmental Secretary John Quigley, at a Senate budget hearing. "We need to listen to all stakeholders and figure out what works for us." Quigley said the Wolf administration plans to pursue both "legacy industries" like coal and natural gas and renewable energies like wind power as the state faces down a Environmental Protection Agency mandate to reduce greenhouse gas emissions by 31 percent by 2030. "We need to take a serious look at all of the sources and see what provides the most juice," he said. Meanwhile, Quigley said, the state has other options for cutting emissions. Wolf's budget would use $225 million from the proposed severance tax on natural gas drillers to promote green energies and the efficient transport of natural gas to industrial and residential consumers. The severance tax proposal, however, has been criticized from both the industry and some environmental groups. The former group says it would stunt growth while the latter says it effectively links the state to an energy source that has been poorly regulated and has the potential to pollute the state for decades to come.


Methane in drinking water unrelated to fracking, study suggests | Science Magazine, March 30 2015

Fracking doesn’t appear to be allowing methane to seriously contaminate drinking water in Pennsylvania, a new study finds—contrary to some earlier, much publicized research that suggested a stronger link. But the lead authors of the two bodies of research are sparring over the validity of the new results. The new study of 11,309 drinking water wells in northeastern Pennsylvania concludes that background levels of methane in the water are unrelated to the location of hundreds of oil and gas wells that tap hydraulically fractured, or fracked, rock formations. The finding suggests that fracking operations are not significantly contributing to the leakage of methane from deep rock formations, where oil and gas are extracted, up to the shallower aquifers where well water is drawn. The result also calls into question prominent studies in 2011 and 2013 that did find a correlation in a nearby part of Pennsylvania (To read an article on aforementioned studies, please click here). There, wells closer to fracking sites had higher levels of methane. Those studies, however, were based on just 60 and 141 domestic well samples, respectively.


National Affairs

Obama administration tightens federal rules on oil and gas fracking | Washington Post, March 20 2015

The Obama administration imposed tougher restrictions (to read the official statement from the DOI, please click here) Friday on oil and gas “fracking” operations on public lands, seeking to lower the risk of water contamination from a controversial practice that is chiefly behind the recent boom in U.S. energy production. The regulations represent the administration’s most significant effort to tighten standards for hydraulic fracturing, a technique that helped make the United States the world’s No. 1 producer of natural gas while igniting a fierce debate over environmental consequences. The Interior Department rules apply only to oil and gas drilling on federal lands, or about a quarter of the country’s current fossil-fuel output. But the prospect of new regulations has drawn sharp opposition from industry groups who say the new requirements will drive up production costs everywhere. The rules announced on Friday are intended chiefly to minimize the threat of water contamination from fracking. Companies that drill on public lands would be subject to stricter design standards for wells and also for holding tanks and ponds where liquid wastes are stored. Interior officials also introduced new transparency measures that require firms to publicly disclose the types of the chemical additives they use.


U.S. Support for Nuclear Energy at 51% | Gallup, March 30 2015

A slim majority of Americans (51%) now favor the use of nuclear energy for electricity in the U.S., while 43% oppose it. This level of support is similar to what Gallup found when it last measured these attitudes two years ago, but it is down from the peak of 62% five years ago. Current support is on the low end of what Gallup has found in the past 20 years, with the 46% reading in 2001 the only time that it sank lower. Since 2013, support for "more emphasis" on natural gas production has dropped 10 percentage points and there has been a five-point drop in the percentage who want more emphasis on oil, possibly reflecting that the U.S. is producing more of these two commodities than in 2013. There has been no meaningful change in support for expanding solar power or wind as part of a national energy strategy; the same is true for nuclear and coal energy. A solid majority of Republicans support more emphasis on oil, natural gas, wind and solar power, similar to their views in 2013. Meanwhile, a majority of Democrats support more emphasis on wind and solar power. The percentage of independents wanting greater emphasis on various energy sources is generally in between that of Republicans and Democrats.


Report: Arctic oil drilling needed now to sustain U.S. energy security | FuelFix, March 27 2015

The oil industry has the technology to tap tremendous reserves of crude and gas locked under U.S. Arctic waters and should move swiftly to harness that potential, while working to improve the equipment it uses to drill wells and sop up spills, according to a government advisory committee report released Friday. The analysis, conducted by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, makes the case for the United States to aggressively develop Arctic oil and gas resources that can help supply the country with energy long after some onshore fields’ production starts tailing off. A recent surge in domestic oil production is tied to the extraction of oil from dense rock formations in North Dakota, Texas and other parts of the contiguous United States, but “production profiles for these oil opportunities will eventually decline,” the NPC says. “Given the resource potential and long timelines required to bring Arctic resources to market, Arctic exploration today may provide a material impact to U.S. oil production in the future, potentially averting decline, improving U.S. energy security and benefiting the local and overall U.S. economy.”


No Country for King Coal — the Changing U.S. Energy Mix | Time, March 24 2015

As of late last year coal formed the backbone of U.S. electric generation capacity. At a share of roughly 39 percent, it still does. However, the U.S. energy mix is rapidly changing and coal is past its peak. In 2015, the U.S. is expected to retire nearly 13 gigawatts (GW) of coal-fired generation – three times more than last year. An additional 5.2 GW will be retired in 2016. The Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) are the primary cause of this year’s large-scale retirements. MATS are slated to enter into force by year’s end, and the retrofits necessary to meet the increased emissions standards are largely, and by design, cost-prohibitive. Most of the closings, more than 8 GW, are centered in the Appalachian region. Hardest hit is Ohio – and some of its largest utilities, AEP and FirstEnergy – where approximately 2.4 GW is leaving the fold. Indiana and Kentucky round out the top three with closings of more than 2 GW and 1 GW respectively. Outside of Appalachia, the U.S.’ largest carbon dioxide emitter Southern Company will convert its 1.4 GW Yates plant to natural gas.

U.S. Energy Storage Market Could Triple This Year |, March 23 2015

The energy storage market is poised for substantial growth over the next five years, with installed capacity this year expected to more than triple to 220 MW from last year’s 62 MW. A recent report from GTM Research and the Energy Storage Association, ‘U.S. Energy Storage Monitor,’ projected that the market will grow from $128 million last year to $1.5 billion by 2019, when more than 800 MW will be installed. Moreover, non-utility storage – residential and non-residential – will grow from just 10% of installed capacity last year to 45% over the same period. So far there has been a high degree of geographic concentration in energy storage deployment, the report says, attributing this to the right combination of policies, regulatory environment and wholesale market designs. In the downstream value chain for energy storage, the report identifies several categories of companies among the three market segments with market leaders in each category. These are power electronics vendors, battery management system vendors, energy storage system vendors and energy storage system developers.


Itemizing The Oil Bust: 75,000 Layoffs And Counting | Forbes, March 16 2015

The Oil Bust of 2015 is making it cheaper to fill up our tanks at the gas station, but it is decimating our nation’s oil and gas workforce as companies slash spending in hopes of surviving the downturn. Just this week Talisman Energy has cut about 200 workers in Calgary, while Nexen Energy (a division of China’s Cnooc) slashed 400 jobs. On Tuesday, Quicksilver Resources filed for Chapter 11 bankruptcy protection. The conclusion: the worldwide oil and gas industry, including oilfield services companies, parts manufacturers and steel pipe makers, has laid off at least 75,000 so far. Considering that about 600,000 work in the U.S. oil and gas sector, this is a big hit. And it’s important to note that most of these are solid middle class jobs. There’s not many industries where a guy with little more than a high school education can make $100,000 a year, but that’s a common pay package for drilling rig workers. Among people who operate a lot of drilling rigs, it is common knowledge that that for every rig mothballed about 40 people lose their jobs. The U.S. rig count is down by more than 700 from this time last year. Indeed the average oil and gas worker makes $108,000, according to government numbers (read further here). The tremendous growth in these oil and gas jobs has been vital to helping the United States crawl out of the Great Recession. And keep in mind the add-on effect — every oil layoff means that much less money to be spent on meals, clothes, trucks, homes, and on and on. 

International Affairs

U.S. oil drillers scrambling to thwart OPEC threat | The Columbian, March 29 2015

OPEC and lower global oil prices delivered a one-two punch to the drillers in North Dakota and Texas who brought the U.S. one of the biggest booms in the history of the global oil industry. Now they are fighting back. Companies are leaning on new techniques and technology to get more oil out of every well they drill, and furiously cutting costs in an effort to keep U.S. oil competitive with much lower-cost oil flowing out of the Middle East, Russia and elsewhere. "Everybody gets a little more imaginative, because they need to," says Hans-Christian Freitag, vice president of technology for the drilling services company Baker Hughes. Spurred by rising global oil prices, U.S. drillers learned to tap crude trapped in shale starting in the middle of last decade and brought about a surprising boom that made the U.S. the biggest oil and gas producer in the world. The increase alone in daily U.S. production since 2008 — nearly 4.5 million barrels per day — is more than any OPEC country produces other than Saudi Arabia. But as oil flowed out and revenue poured in, costs weren't the main concern. Drilling in shale, also known as "tight rock," is expensive because the rock must be fractured with high-pressure water and chemicals to get oil to flow. It became more expensive as the drilling frenzy pushed up costs for labor, material, equipment and services.


Can US Energy Exports 'Pivot to Asia'? | The Diplomat, March 27 2015

The past decade has brought ground-shaking changes to global energy markets. The unconventional fuel boom has unexpectedly reduced U.S. dependence on oil imports, while in the Asia-Pacific region, energy-constrained nations are increasingly reliant on foreign sources to meet their soaring demand. With the U.S. slated to export liquid natural gas (LNG) to Asia as early as 2017, a new energy era has come. The shifting landscape is forcing countries such as Japan, South Korea, and China to rethink regional cooperation on energy issues such as strategic oil stocks, and technological and institutional coordination, said Mikkal E. Herberg, senior lecturer at the University of California, San Diego, and research director of the Energy Security Program at the National Bureau of Asian Research, at a Capitol Hill event on February 24. Expanding LNG and crude oil imports from the United States is key to strengthening energy security in the Asia-Pacific and bolstering trade ties, said Minister Yasushi Akahoshi from the Embassy of Japan. Japan and South Korea will soon be the first recipients in Asia to receive U.S. LNG exports, and the U.S. may well be on the eve of an energy pivot to the region.


Saudi Arabia's role in global energy markets is changing, paper finds |, March 27 2015

Saudi Arabia's role in global energy markets is changing, according to a new paper from an energy expert at Rice University's Baker Institute for Public Policy. The researcher found that the kingdom is reshaping itself as a supplier of refined petroleum products while moving beyond its long-held role as a simple exporter of crude oil. "A Refined Approach: Saudi Arabia Moves Beyond Crude" examines the growth of Saudi refining, the country's increased domestic demand for crude oil and the geopolitical effects of this development. The paper was published in Energy Policy and authored by Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute, who specializes in energy geopolitics. However, there are also downsides, starting with an erosion of Saudi Arabia's traditional role as the global "swing supplier" of crude oil. With more oil production diverted into refining, the kingdom will have reduced flexibility to "swing" oil production alongside fluctuations in global price and demand. It will be less able to influence prices and balance global oil markets, which has provided some protection against volatility.


Could the Moon Hold the Key to the World’s Energy Crisis? | International Policy Digest, March 1 2015

The worlds largest energy consumers are deeply aware of the urgency of addressing their energy trilemmas – how to balance energy security, energy equity (access and affordability) and environmental sustainability. Helium 3 might be the answer they are looking for. Over the last few decades, the world’s energy situation has been dominated by feelings of uncertainty and fear. Tensions loom as global energy demands are expected to increase significantly by 2020, parallel with rapid population growths, particularly in India and China. On December 2, 1992, the American Geophysical Union published an article in Science Daily (read article here) claiming there was an isotope of great value on the Moon: a light, non-radioactive isotope of Helium with two protons and one neutron. The unique atomic structure of Helium-3 makes it possible to use it as fuel for nuclear fusion (the process that powers the sun) to generate vast amounts of electrical power without creating the radioactive byproducts produced in conventional nuclear reactors. Based on estimates, the potential energy of a ton of Helium-3 would be equivalent to 50 million barrels of crude oil. Helium-3 based fusion could drastically reduce global dependence on fossil fuels and help governments meet environmental sustainability goals at a much quicker and more effective rate.


UK and Norway to build world's longest undersea energy interconnector | The Guardian, March 26 2015

The UK and Norway are to build the world’s longest undersea interconnector – a method of linking up electricity and gas networks – to provide enough low-carbon energy for almost 750,000 British homes. National Grid and Statnett, the Norwegian transmission system operator, are due to sign the ownership agreement for the 450-mile (730km) interconnector at the British embassy in Oslo, on Thursday. The two-way 1,400MW electricity cable will run from Blyth in Northumberland to Kvilldal, in Rogaland, on the Norwegian side. It will cost about €2bn (£1.5bn) and completion is planned for 2021. The agreement with Norway will save UK households up to £3.5bn over 25 years by importing cheaper electricity, according to an estimate by Britain’s energy regulator Ofgem.

The Top 8 Stories You Need To Know About Oil & Gas Today | OilPro

  • MENA Supply Fears Ease, Oil Down More Than $1.
    Brent fell more than $1/bbl on Friday morning as concerns abated over the threat of potential supply disruptions in MENA due to Saudi Arabia-coordinated air strikes in Yemen. Air strikes against Saudi's southern neighbor will have little direct impact on oil supplies, as Yemen output represents less than 0.2% of global oil production. [Oilpro]

  • In The UK, Available Gas Storage Continues To Shrink.
    UK natural gas prices for next winter increased to a one-month high after SSE Plc announced it will close a portion of a storage site, thereby further limiting volumes available during cold weather, Bloomberg reported. The gas contract increased as much as 3.5% on London's ICE Futures Europe exchange on Thursday. SSE's partial closure of the storage site will hit a third of withdrawal capacity at its Hornsea location in east England, which represents roughly 5% of UK gas storage capacity. [Oilpro]

  • Motiva To Create Another Top 5 US Refinery.
    Motiva announced plans to integrate its two Louisiana refineries- Norco and Convent- to create the Louisiana Refining System, which will rank in the top five of North American refineries in terms of capacity. (Motiva's Port Arthur, Texas, facility is the largest refinery in the US.) The project is set to be implemented in multiple phases and is intended to create "significant operational opportunities," Shell said Thursday. These include increasing access to advantaged light oil, optimizing inter-plant intermediates and conversion units, increasing distillates yield and cutting operating costs. [Oilpro]

  • Schlumberger's Eurasia Drilling Acquisition Faces Russian Scrutiny.
    Schlumberger has been informed that it must satisfy a list of conditions to secure approval for its $1.7 billion bid to acquire a 45% stake in Russia's Eurasia Drilling Company, potentially paving the way for sole ownership of Russia's largest drilling company. Igor Artyemev, chief of Russia's anti-monopoly service, said Thursday that the country's commission on foreign investment will meet with SLB officials to review the conditions in the next 10 days, and that a positive decision is possible. [Oilpro]

  • 2 US Funds to Invest $900 Million In Mexican Gas Pipeline.
    Mexico's Pemex has signed an agreement giving two investment funds a 45% stake in a natural gas pipeline in exchange for $900 million. The Los Ramones pipeline will transport natural gas from Texas to Mexico and is intended to facilitate imports of cheap US gas and lower Mexico's high commercial electricity rates. [ABC News]

  • Brazil's Petrobras To Quit Oil Business In Japan.
    Petrobras will jettison its Japanese oil business, shutting down an Okinawa Prefecture refinery as early as this year. Shrinking gasoline demand here and cheap crude have taken a toll on profitability. Petrobras will build an import terminal instead to secure a supply of oil products from South Korea and other Japanese refineries, selling the facility to another wholesaler. [Oilpro]

  • Chevron Seeks Over $3.6 Billion For Caltex Australia Stake.
    Chevron plans to sell its 50% stake in Caltex Australia, the country's biggest refiner, to institutional investors for at least A$4.6 billion ($3.6 billion) as the second-biggest U.S. energy producer accelerates asset sales. Chevron is selling the shares at a minimum of A$34.20 apiece, a 9.7 percent discount to Friday’s close, according to terms for the deal obtained by Bloomberg. [Bloomberg]

  • UK Shale Gas Debate Ignites Again.
    The debate over shale gas is increasingly regaining footing in the UK, with shale enthusiasts putting on the table new proposals, and shale skeptics equally voicing their vitality. Against this backdrop, Task Force on Shale Gas, a group established in September 2014 aiming at providing trusted and impartial platform for public scrutiny, proposed a single regulator in charge of both permitting and oversight. [Natural Gas Europe, Oilpro]