Category Archives: News

For those of you attending the Environment Virginia Symposium at VMI, I highly recommend attending a panel that I am moderating on fracking.  The panel is from 3:30-4:45 tomorrow in the Turman Room, I’ve posted the details below.

The panel should be a very interesting discussion about the current state of drilling, horizontal drilling, and hydraulic fracturing here in Virginia.  If you cannot attend and have some questions for the panelists, please post them in the comments and I will ask them tomorrow and report back.

Potential Impacts of Hydraulic Fracturing on Water Resources and George Washington National Forest

Moderator: Benjamin Koopferstock, Student, Washington & Lee University School of Law - Journal of Energy, Climate, & the Environment

• Greg Kozera, President, Virginia Oil and Gas Association
• Gary Eide, Inspector, Division of Gas and Oil, VA Department of Mines, Minerals, and Energy

G (3:30 – 4:45)                                                                                                                                       Turman Room, Preston Library

Today we are holding our Spring symposium.

Here is a link to the program for the symposium: JECE Symposium Program 2013

We hope that you have time to tune in for some of the panels today, we are expecting some great discussions.

On Tuesday the Energy Department released a report of recent domestic production rates for crude oil. There are a few things that are important to note in this report.

(1) We are currently seeing the highest domestic crude oil production since 1998. In September 2012 the U.S. produced 6.5 million barrels of oil per day, the highest it has been since 1998. This production level is the culmination of an increase in domestic oil production since September 2011.

(2) There are 2 Key State Players at the Head of this Race: Texas and North Dakota. In the September 2011 to September 2012 period Texas increased production by 500,000 barrels per day and North Dakota increased by 250,000 barrels per day.

(3) This increase in production is primarily from On-Shore oil production. Both the Texas and North Dakota increases have been a result of new techniques of oil extraction from rocks combining horizontal drilling with hydraulic fracturing, allowing for easier access to more difficult sources of oil.

In addition to the domestic crude oil production data, the U.S. held out another 20 million acres for lease sale in the Gulf of Mexico for oil production purposes. In the end they sold 652,522 acres for production. The most recent sale is a part of the President’s “all of the above” energy policy, and will in time add to our current production rates.

Based on these two reports and an article in the N.Y. Times discussing oil production in the U.S., the U.S. is clearly on a trajectory to be one of the, if not the, largest oil producer in the world. Groups such as the International Energy Agency are forecasting that American oil production is quickly on the rise and set on a trajectory to reach peak production levels from the 1970′s, while our actual consumption is actually on the decline. We are currently on a trajectory to reach our lowest consumption levels since the 1960′s by 2035.

Whether this decline in consumption followed by subsequent rise in production is a product of current oil and gasoline prices on the market is yet to be seen. It will be interesting to watch how these numbers continue to pan out over time and if we see a subsequent reduction in energy costs with the rise in production.  Also, broader changes in the US economy are likely to have some impact on all of these numbers.

Thanks to reader April from the DoE for the post suggestion!

This past election season has brought another important energy issue squarely in the forefront of our American legal system, hydraulic fracturing as a natural gas extraction method. One notable town to have recently passed a ban on fracking is Longmont, CO, a small conservative town outside of Boulder, CO. With this most recent ban the city is likely to see a number of lawsuits arise involving both the energy industry as well as the state.

Longmont, has seen more than it’s fair share of lawsuits regarding bans on oil extraction near schools within the city. With a threat from the governor of Colorado, John Hickenlooper, expect a very long and drawn out legal battle to occur.

These city bans bring up interesting issues of local governance and what communities are able to control and not able to control. Is it good policy to allow the state to be the only government to decide on what types of energy production are allowed, or are small communities better able to make these decisions through an open democratic process governing their immediate surroundings.

Having spent 2 years living in Longmont while a graduate student at the University of Colorado, my sentiments align with the local community and the ban on fracking for the community and in the immediate vicinity of schools.

Moreover, it seems as though there is a very serious democratic deficit if the state government is the only entity allowed to regulate energy production, particularly when the residents of communities are not given extra weight for the fact that they have to live with whatever decision is made.

This issue is not a purely Colorado issue but one that is arising throughout the United States, earlier this year the city of Binghamton lost a battle in the N.Y. state court system regarding their own ban. Just looking at a list of New York state communities that are seeking to ban fracking, it seems that the movement is one that is growing and will continue to grow as fracking becomes a more prevalent means of energy extraction.

Early this morning the New York Times reported that the US Department of Justice and British Petroleum were close to having agreed on a settlement arrangement for the variety of criminal charges and SEC violations that arose from the Deepwater Horizon incident. It did not take too long for the agreement to happen and pending court review BP has agreed to plead guilty to 11 felony counts of misconduct, 1 misdeamonor count under the Clean Water Act, 1 misdeamonor under the Migratory Bird Treaty Act, and 1 felony account for obstruction of Congress. In addition to the pleading of guilt BP has agreed to settle the claims for a penalty of $4.5 billion dollars and a term of 5 years probation.

I picked out a few key points from BP’s press release that may have an effect on energy, particularly deepwater drilling.

Pursuant to the terms of the plea agreement, BP has also agreed to take additional actions, enforceable by the court, to further enhance the safety of drilling operations in the Gulf of Mexico. These requirements relate to BP’s risk management processes, such as third-party auditing and verification, training, and well control equipment and processes such as blowout preventers and cementing. In addition, BP has agreed to several initiatives with academia and regulators to develop new technologies related to deepwater drilling safety.

The resolution also provides for the appointment of two monitors, both with terms of four years. A process safety monitor will review, evaluate and provide recommendations for the improvement of BP’s process safety and risk management procedures concerning deepwater drilling in the Gulf of Mexico. An ethics monitor will review and provide recommendations for the improvement of BP’s Code of Conduct and its implementation and enforcement.

With deepwater drilling such a prolific part of American oil production and attempts to be as energy independent as possible, this is an important step. Deepwater drilling is inherently dangerous and as we saw when things go wrong it can be absolutely catastrophic.

BP has taken significant steps to further enhance safety and risk management throughout its global operations. It launched an internal investigation immediately after the accident, publicly released the results, and has been implementing all 26 of the investigation’s recommendations. BP has also, among other things, made key leadership changes, reorganized its upstream business, created a centralized Safety and Operational Risk organization, and adopted new deepwater drilling standards in the Gulf of Mexico that exceed current regulatory requirements. BP has shared what it has learned with industry and regulators around the world.

The move to standards that exceed regulatory standards may also be a good sign n reducing the risks that come with deepwater drilling.

One thing to note from all of this is the extreme expense that has arisen from this event in relation to BP’s drilling practices, a $4.5 billion criminal settlement claim, along with a $20 billion dollar trust for all civil claims arising from the incident, and the additional costs that will arise from implementing these new features.

Whether these features will be preventative is yet to be seen, however, regardless, the fact that a resolution has arrived for BP’s actions is good and it will hopefully lead to future more responsible drilling practices and procedures across the whole industry.