Senator Inhofe Throws Snowball On Senate Floor

FCC Net Neutrality Rulemaking

The Federal Communications Commission approved the policy known as net neutrality by a 3-2 vote at its meeting today, with FCC Chairman Tom Wheeler saying the policy will ensure "that no one — whether government or corporate — should control free open access to the Internet."

The Open Internet Order helps to decide an essential question about how the Internet works, requiring service providers to be a neutral gateway instead of handling different types of Internet traffic in different ways — and at different costs.

Republicans who warned that the FCC was overstepping its authority and interfering in commerce to solve a problem that doesn't exist. They also complained that the measure's 300-plus pages weren't publicly released or openly debated. The new policy would replace a prior version adopted in 2010 — but that was put on hold following a legal challenge by Verizon. The U.S. Court of Appeals for the D.C. Circuit ruled last year that the FCC did not have sufficient regulatory power over broadband.

After that ruling, the FCC looked at ways to reclassify broadband to gain broader regulatory powers. It will now treat Internet service providers as carriers under Title II of the Telecommunications Act, which regulates services as public utilities.

The ACLU noted that it was a victory for free speech. Americans use the Internet not just to work and play, but to discuss politics and learn about the world around them. The FCC has a critical role to play in protecting citizens' ability to see what they want and say what they want online, without interference. Title II provides the firmest possible foundation for such protections.

Opponents say: "The FCC's decision to impose obsolete telephone-era regulations on the high-speed Internet is one giant step backwards for America's broadband networks and everyone who depends upon them. These 'Title II' rules go far beyond protecting the Open Internet, launching a costly and destructive era of government micromanagement that will discourage private investment in new networks and slow down the breakneck innovation that is the soul of the Internet today."

The new FCC policy will "ban blocking, ban throttling, and ban paid-prioritization fast lanes." For the first time, open Internet rules will be fully applicable to mobile. By a 3-2 vote, the FCC voted to adopt net neutrality rules to "protect the open Internet.  (NPR)

Jewell, McCarthy & Moniz Head To Capitol Hill on Budget

Sally Jewell

Jewell Heads to Senate Energy – The Senate Committee on Energy and Natural Resources will convene a hearing tomorrow  to examine the President's proposed budget request for fiscal year 2016 for the Department of the Interior.  Interior Secretary Sally Jewell will testify.

Gina McCarthy

McCarthy Heads to House Energy and Appropriations Committees – EPA Head Gina McCarthy will visit the House Energy and Commerce Committee on Wednesday to examine the President's proposed budget request for fiscal year 2016 for EPA. 

Then on Thursday, U.S. EPA Administrator Gina McCarthy and David Bloom, U.S. EPA Acting Chief Financial Officer, will testify before the House Appropriations Subcommittee on Energy on Interior, Environment and Related Agencies on FY 2016 Budget. EPA’s proposed budget provides resources to ensure that the agency can make the investments needed to meet its mission to protect public health and the environment.

Ernest Moniz

U.S. Secretary of Energy Ernest Moniz Heads to House Energy Appropriations – The House Energy and Water Appropriations panel will examine the President's proposed budget request for fiscal year 2016 for DOE on Thursday with Energy Secretary Ernest Moniz testifying.

(Frank Maisano)

President Obama Vetoes Keystone XL Pipeline Legislation

President Obama vetoed legislation authorizing construction of the Keystone XL pipeline today, rebuffing the new Republican Congress amid a battle over Homeland Security funding. 

The veto — just the third of Obama’s presidency — was made in private and without fanfare, reflecting the tensions in the Democratic Party over whether the pipeline should be approved.

"Through this bill the United States Congress attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest," Obama said in his veto statement.

"The presidential power to veto is one I take seriously ... and because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest — including our security, safety and environment — it has earned by veto."

Speaker John Boehner (R-Ohio) ripped Obama's veto, calling it a "national embarrassment."

First proposed more than six years ago, the Keystone XL pipeline project has sat in limbo ever since, awaiting a permit required by the federal government because it would cross an international boundary. The pipeline would connect Canada's tar sands with refineries on the Texas Gulf Coast that specialize in processing heavy crude oil.

Republicans and the energy industry say the $8 billion project would create jobs, spur growth and increase America's independence from Mideast energy sources. Democrats and environmental groups have sought to make the pipeline a poster child for the type of dirty energy sources they say are exacerbating global warming.

President Obama's administration, through the State Department, is still weighing the pipeline's merits, and he has repeatedly threatened to veto any attempts by lawmakers to make the decision for him.  (The White House, The Hill, ABC News/AP, 2/24/2015)

Center Partners With Nuclear Matters

CfECE has joined Nuclear Matters as a partner.  CfECE's long history [China - France] of supporting nuclear power makes this a natural fit.  We expect this partnership to be dynamic and to enhance the maintenance of our current fleet of reactors.

The mission of Nuclear Matters is to inform the public about the clear benefits that nuclear energy provides to our nation, raise awareness of the economic challenges to nuclear energy that threaten those benefits, and to work with stakeholders to explore possible policy solutions that properly value nuclear energy as a reliable, affordable and carbon-free electricity resource that is essential to America’s energy future.

In furtherance of this mission, Nuclear Matters has reached out to stakeholders around the country to hear directly from them about the importance of nuclear energy to their states and communities and find the solutions that will help to preserve this essential energy resource.  Nuclear Matters reached out to CfECE and we enthusiastically reacted in the affirmative.  We look forward to a productive partnership.

Evan Bayh

Judd Gregg

Co-Chairs for Nuclear Matters are former Indiana United States Senator and former Indiana Governor Evan Bayh and former New Hampshire United States Senator and former New Hampshire Governor Judd Gregg.

Nuclear Matters is supported by a cross-section of individuals, organizations, and businesses united in their view that nuclear power plays a critical role in our energy portfolio, and that existing nuclear power plants should be preserved.

Nuclear Matters is currently recruiting partners and CfECE is proud to be among some of the original individuals, organizations, and businesses that are aligning with this dynamic pro-nuclear campaign.

Exxon Mobil Refinery Explosion in Torrance, California

An explosion at the Exxon Mobil refinery caused structural damage and was felt for miles around Torrance on Wednesday, but there were no major injuries. The blast happened in a processing unit at the refinery in the 3700 block of 190th Street at 8:50 a.m.

A structure was damaged in an explosion at the ExxonMobil refinery in Torrance, California

The explosion was followed by a ground fire, which was quickly knocked down. The explosion was so strong that it registered as a 1.7-magnitude earthquake on a nearby seismometer operated by Caltech and USGS.

Exxon Mobil said in a statement that four contractors were transported to Long Beach Medical Center for minor injuries, and everyone was accounted for. Some area residents reported feeling an earthquake-like jolt. Then, they saw ash falling in the neighborhood following the blast. The Torrance Fire Department says the white ash-like substance is non-toxic, but may pose inhalation risk as all airborne particles do.

The blast was strong enough to break a window at an apartment complex across the street from the refinery and damage a cinder block wall. Torrance police said air quality readings were normal, but area residents were advised to shelter in place temporarily. The shelter-in-place order has since been lifted. The Torrance Unified School District advised schools to shelter in their students. A total of 13 schools were affected, and parents were notified. Torrance fire officials say the situation was stabilized by noon.

The cause of the blast was not known. For more information, residents can call the Exxon Mobil hotline at (310) 505-3158.  (ABC 7Eye Witness News, Los Angeles, 2/18/2015)

L.A. Long Beach Port Strike

The International Longshore and Warehouse Union (ILWU) represents 20,000 dockworkers, who spend years earning full membership and whose current contract pays $26 to $41 an hour, with free healthcare for members, want more money. Some earn six figures with overtime.  The Pacific Maritime Association (PMA), which represents shipping companies, does not want to pay more and sees little need to back down.  Thus, the L.A./Long Beach Port is shut down.  And this is affecting the entire country with billions of dollars in commerce on the line.

The two parties are at the negotiating table, where U.S. Labor Secretary Thomas Perez is now trying to broker a deal.  Both parties say they want to avoid repeating the 10-day lockout of 2002, which then-President George W. Bush stepped in to end. They have reportedly agreed on many major elements of a new contract but remain at odds over finer points.  The same forces that have pulverized private sector unions in other industries — overseas manufacturing, lower transportation costs, global markets — have strengthened the hand of the ILWU. Every day, ship owners have to pay a lot of money for a ship. The cranes are very expensive, and if they're not being used, that's wasted money.  Containerization made the shipping industry very capital-intensive, and that effectively gave power to the union.

Center President Norris McDonald observing the cargo ships outside the port

So did two decisions by ILWU's founder and longtime president, Harry Bridges.  The first was negotiating a single contract covering every port from San Diego to Bellingham, Washington. That prevents shippers from playing one West Coast port against another, as sometimes happens on the East Coast.  The other was a 1960 agreement that embraced the arrival of containerization, essentially agreeing to shed thousands of jobs manually hauling crates and bags from ships' holds in order to save thousands in the higher-tech — and higher-paid — work of operating forklifts and giant cranes.

As container traffic boomed in the decades since, that tough choice paid off.  But the industry faces a new round of changes. Ever-larger ships are dumping more cargo at once on the docks, creating more congestion even when the work is going smoothly. That's increasing the demand for automation.  Ports in Europe and Asia increasingly use robotics to move goods that union longshoremen handle today on the West Coast. Another threat is the widening of the Panama Canal, scheduled for completion next year. That will enable some larger ships to pass more quickly to the East and Gulf Coast, though experts disagree on how much that could hurt Southern California.

The employers and the union both have a common interest in the success of L.A.-Long Beach and in keeping the port as efficient as possible. As the dispute drags on, the union's solidarity could be a key factor. The ILWU is known as an aggressive union — forged in violent strikes on San Francisco's Embarcadero in the 1930s, booted from national labor groups in the McCarthy-era 1950s for being "too red," and willing to shut down the docks several times in recent years in solidarity with smaller unions. That's what happened in 2012, when clerical workers at the L.A.-Long Beach docks went on strike and clogged the ports for several days.

In the port towns, everyone has a friend, a brother, a cousin, a niece who works in this industry and benefits from the power of the union. Many would like to join. Membership is typically earned only after years of so-called "casual" work, which involves showing up in the early morning at the cracked parking lot next to a junkyard in Wilmington, where day labor jobs are doled out — if there's work to go around — at the lower end of the pay scale. Log enough hours, and eventually you qualify for full membership, with better hours and full benefits. When they open the rolls to new casuals, the lines are thousands of people long.

Last year, it was the Justice for Port Truck Drivers work stoppage over “unfair labor practices” at Green Fleet Systems, Total Transportation Services and Pacific 9 Transportation that temporarily hemorrhaged the port system. The Teamsters affiliated group has backed three previous strikes in the last two years, each lasting less than 48 hours, at these carriers serving Southern California ports.  The Teamsters charge the three carriers violated labor laws and interfered with unionization efforts. (L.A. Times, 2/17/2015, CCJ Digital, 7/8/2014)

New York Mayor DeBlasio Releases 2015 Climate Report

Today, Mayor Bill de Blasio announced the release of the New York City Panel on Climate Change’s 2015 report, Building the Knowledge Base for Climate Resiliency, focused on increasing the current and future resiliency of communities, citywide systems, and infrastructure around New York City and the broader metropolitan region.

The New York City Panel on Climate Change (NPCC) is an independent body that advises the City on climate risks and resiliency. As the best available data, NPCC science informs the City’s comprehensive climate policies, including its multilayered, citywide resiliency plan and sweeping sustainability initiatives—in line with President Obama’s recent Executive Order. The NPCC worked in partnership with the City, including with the Mayor’s Office of Recovery and Resiliency, the Mayor’s Office of Sustainability, the Mayor’s Office of Operations, and the Department of Health and Mental Hygiene.

Today’s NPCC report provides climate projections through 2100 for the first time, for temperature, precipitation, and sea level rise, representing advancement in the science. New topics covered in the report also include public health, with a focus on extreme heat events and coastal storms and enhanced dynamic coastal flood modeling, which incorporate the effects of sea level rise. 

The full report—Building the Knowledge Base for Climate Resiliency: New York City Panel on Climate Change 2015 Report.

The City is announcing today new progress as it implements a comprehensive resiliency plan based on the NPCC’s science, including the kickoff of scoping and preliminary design work on the Lower East Side integrated flood protection system, the launch of the first-ever comprehensive regional analysis of New York City’s food supply chain resiliency, key steps forward to combat the urban heat island effect, and the start of an approximately $100 million shoreline investment program to protect the most vulnerable waterfront communities.

Additionally, Mayor de Blasio will launch NPCC3, which will build on today’s report, and, in particular, look at climate risks through the lens of inequality at a neighborhood scale in a report due early next year. NPCC3 will also focus on ways to enhance coordination of mitigation and resiliency across the entire New York metropolitan region.

In addition to providing climate projections through 2100, NPCC2’s new content today includes:

• New coastal flood risk maps to the end of the century for the current 100-year (1 percent annual chance of occurrence) and 500-year (0.2 percent annual chance of occurrence) coastal flood events.

• Enhanced dynamic flood inundation modeling of future coastal flooding that includes the effects of sea level rise. 

• A review of key issues related to climate change health risks relevant to the citizens of New York City. 

• A process for enhancing a New York City Climate Resiliency Indicators and Monitoring System. 

Key Recommendations and City Action

The City is announcing new progress on a number of key projects, including:

• The launch of scoping and preliminary design work on the Lower East Side to implement a $335 million integrated, neighborhood-sensitive flood protection system to mitigate risk and help connect the community with the waterfront. This project, which is funded by the U.S. Department of Housing and Urban Development’s Rebuild by Design competition, runs from East 23rd Street to Montgomery Street and is intended to be just the first phase of a larger project that will ultimately provide coastal resiliency for all of Lower Manhattan. To that end, the City has already allocated additional funds to advance planning and preliminary design south of Montgomery Street.
• The Office of Recovery and Resiliency (ORR), partnering with the New York City Economic Development Corporation (NYCEDC), has also launched the first-ever, comprehensive regional resiliency analysis of New York City’s food supply chain network. The study will examine key distribution assets both locally and in surrounding jurisdictions, examine regional transportation routes, and work with the city’s food community to help ensure continuity of operations during a disaster.
• To combat the urban heat island effect, as of the end of 2014, NYC Cool Roofs has coated over six million square feet of building roofs with reflective paint to address the climate change risks associated with urban heat. The City’s recent green buildings plan commits to coating at least one million square feet a year more to continue mitigating the urban heat island effect and provide energy savings in affordable housing, public buildings, and non-profit organizations. ORR has also convened urban heat island experts to advance research and understanding on this issue, and continues to focus its heat response protocols on vulnerable populations.
• ORR and NYCEDC have also launched an approximately $100 million shoreline investment program to protect the most vulnerable waterfront communities, including Coney Island Creek and Staten Island’s South Shore, and other low-lying parts of the city that will be evaluated as part of the first phase of work. This will include a nine-month first phase to identify and prioritize approximately 43 miles of at-risk shoreline, following by design and construction of site-specific resiliency measures that might include bulkhead upgrades, revetment installation, and living shoreline treatments.

The City has already implemented short-term measures to immediately reduce risk. For example:

• 4.15 million cubic yards of sand placed on city beaches.
• 26,000 linear feet of dunes on Staten Island alone, with additional dunes on the Rockaway peninsula.
• 10,500 linear feet of bulkhead repairs around the city.
• Updated building and zoning codes, including 16 new local laws to improve residential and commercial resiliency.
• $1 billion in resiliency investments being made by ConEd to harden critical assets like substations and other critical distribution equipment.
• Reforms to FEMA’s national flood insurance program, critical flood insurance affordability studies, and education efforts for homeowners across the city.

Additional longer-term measures are being advanced all across the entire city, including but not limited to:

• Over $450 million to construct new armored levees and other infrastructure along Midland Beach and Staten Island’s East Shore, to substantially reduce risk in the future, in partnership with the U.S. Army Corps of Engineers and the State.
• Substantial investment in the next phase of coastal protection in the Rockaways and the communities surrounding Jamaica Bay, in partnership with the Army Corps and State.
• T-groins and beach nourishment in Sea Gate, on which ground was broken on Saturday, in partnership with the Army Corps and the State.
• Dunes and other coastal protection in Breezy Point.
• Integrated flood protection system measures in Red Hook.
• Over $15 million in natural infrastructure resiliency projects funded by the Department of Interior in Jamaica Bay, the Bronx River, and elsewhere.
• Additional coastal protection projects funded by the federal Rebuild by Design program (in addition to the Lower East Side flood protection system), including:
  • Hunts Point Lifelines—food distribution center investments in coastal protection, waterfront access, and energy resiliency.
  • Living Breakwaters—natural infrastructure investments in wave attenuation off of Staten Island’s South Shore, being implemented by the State.
• Major investments in the Staten Island Bluebelt and other stormwater infrastructure across the city to better accommodate increasing precipitation.
• Key resiliency upgrades at critical facilities, such as hospitals like Staten Island University Hospital, Coney Island Hospital, Bellevue, and more.
• NYCHA recovery and resiliency funds to elevate boilers and install emergency generators and flood protection systems.
• Agency recovery and resiliency funds to restore and protect critical City agency services like schools, parks, and other facilities.
• Major flood and coastal protection studies, including at Coney Island Creek, Gowanus Canal, Southern Manhattan, and Newtown Creek, to evaluate the feasibility of additional tidal barrier and surge barrier investments.
• Department of City Planning Resilient Neighborhoods studies to advance land use measures to support the vitality and resiliency of individual communities in the flood zones.
• Small business resiliency support, including new resiliency technologies to be applied through the NYC: RISE competition and assistance through Business PREP, a new program to provide small businesses with education and technical support to enhance their resiliency.

The City is also taking dramatic steps to reduce its contributions to climate change, including becoming the largest city in the world to commit to an 80 percent reduction in greenhouse gas emissions by 2050. That commitment kicks off with Mayor de Blasio’s sweeping 10-year green buildings plan, One City: Built to Last, to retrofit public and private buildings, while creating green jobs and generating operational savings. (Office of the Mayor of New York)

EPA Announces Fiscal Year 2016 Budget Proposal

The Obama Administration Fiscal Year 2016 budget for the U.S. Environmental Protection Agency (EPA) is $8.6 billion.  The request is $452 million above the agency’s enacted level for FY 2015.  (More at EPA)

EPA Proposes Emission Standards for New & Modified Oil & Gas Wells

The U.S. Environmental Protection Agency (EPA) is inviting small businesses, governments, and not-for-profit organizations to participate as Small Entity Representatives (SERs) for a Small Business Advocacy Review (SBAR) Panel. The panel is part of a standard federal government process and will focus on the agency’s development of a rule that proposes to reduce emissions of greenhouse gases, including methane, and volatile organic compounds (VOCs) under its New Source Performance Standards for the oil and natural gas industry.

EPA will build on the cost-effective standards, issued in 2012, that are currently in place for several sources in the oil and natural gas industry. The agency intends to add equipment and processes to those sources currently covered by the standards. Equipment and processes the agency is considering adding include hydraulically fractured oil wells, pneumatic pumps, and leaks from new and modified well sites and compressor stations. 

On Jan. 14, 2015, the Obama Administration announced its next steps to cut methane emission under the March 2014 Strategy to Reduce Methane Emissions. That strategy, part of the administration’s Climate Action Plan, identified the oil and gas industry as a key source of methane emissions and set out a series of steps to reduce those emissions while allowing continued responsible growth in U.S. oil and natural gas production. As part of that strategy, in April 15, 2014, EPA released for external peer review and public input five technical white papers on potentially significant sources of emissions in the oil and gas sector.

The white papers set out data and information available to the agency at that time on potentially significant sources of emissions in the oil and gas sector, and options for reducing those emissions. EPA used the papers, along with the input received from the peer reviewers and the public, to identify potential common sense, cost-effective approaches to achieve emission reduction from these sources. Peer reviewers’ comments, and instructions for reading input from the public are available on EPA’s website. 

The panel is being established pursuant to the Regulatory Flexibility Act, and will include federal representatives from the Small Business Administration (SBA), the Office of Management and Budget (OMB), and EPA.  The panel members ask a selected group of SERs to provide advice and recommendations on behalf of their company, community, or organization to inform the panel members about the potential impacts of the proposed rule on small entities.

EPA seeks self-nominations directly from the small entities that may be subject to the rule requirements. Other representatives, such as trade associations that exclusively or at least primarily represent potentially regulated small entities, may also serve as SERs. Self-nominations may be submitted through the link below and must be received by February 11, 2015. More information about EPA’s strategy for reducing air pollution form the oil and gas industry. (EPA)

Obama Plans To Expand Offshore Oil Drilling

President Obama plans to open up parts of the Atlantic and Arctic oceans to new oil and gas exploration.  We support the plan for the Arctic but oppose the plan for the Atlantic.

The Interior Department’s five-year lease plan would allow drilling in three areas off the coast of Alaska and one in a portion of the Atlantic for the first time in nearly four decades.  The five-year plan determines what areas will be on the auction block for oil and gas exploration between 2017 and 2022.  The Interior expects 2021 to be the earliest a lease sale could happen.

The Interior Department believes the proposals would make available nearly 80 percent of the undiscovered, technically recoverable resources, while protecting areas that are simply too special to develop. The plan prohibits drilling in some areas and that the administration could close off additional areas going forward. 

The plan was released days after the administration moved to declare the 1.5 million-acre coastal plain region of the Arctic National Wildlife Refuge (ANWR) off-limits to oil and gas development.

A focus of the plan is development in the Gulf of Mexico, where 10 lease sales are proposed. It includes a new approach to hold two annual sales in the western and central Gulf, as well as a portion of the eastern Gulf.  The move allows for industry for invest more in the Gulf, one of the most productive basins for oil and gas. We support expanded Gulf development.

Only one sale each will be allowed in the Chukchi Sea, Beaufort Sea and Cook Inlet areas of Alaska, according to the proposed plan. New development in the Pacific Ocean is excluded from the plan.

Four of the five areas deemed off-limits by Obama had previously been excluded from the 2012-2017 lease sales. Those include the Barrow and Kaktovik whaling areas in the Beaufort Sea, and 25-mile coastal buffer in the Chukchi Sea.

In the Atlantic, the proposal will open the door to oil and gas development along the coasts of Virginia, North and South Carolina and Georgia.  A 50-mile coastal buffer zone would be required for lease sales in the Atlantic. We oppose this part of the plan.

It’s not the first time Obama has proposed opening up the Atlantic. He floated oil and gas development in the region for the 2012-2017 plan but scrapped the notion after BP’s 2010 Gulf of Mexico oil spill.  (The Hill, 1/27/2015)

Fewer Oil Rigs Needed To Produce More Oil in Lower 48

Lower 48 oil production outlook stable despite expected near-term reduction in rig count

Source: U.S. Energy Information Administration, January Short-Term Energy Outlook
Note: Graph does not include production from Alaska and the Federal Gulf of Mexico.

---

The Department of Energy, Energy Information Administration (EIA) projects that the sharp decline in oil prices over the last quarter of 2014, which has continued in January, is already having a significant effect on drilling activity in the United States, as shown by the 16% decline in the number of active onshore drilling rigs in the Lower 48 states between the weeks ending on October 31, 2014 and January 23, 2015, according to data from Baker-Hughes.

Moving from what has happened to forecasting the future is challenging, in part because market expectations of uncertainty in the price outlook have increased as reflected in the current values of futures and options contracts. When the latest edition of EIA's monthly Short-Term Energy Outlook (STEO) was issued on January 13, the 95% confidence interval for market expectations for prices in December 2015 was extremely wide, with upper and lower limits of $28/barrel (bbl) and $112/bbl, respectively. The growing uncertainty surrounding oil prices presents a major challenge to all price forecasts. EIA's January STEO forecasts Brent crude oil prices averaging $58/bbl in 2015 and $75/bbl in 2016, with annual average West Texas Intermediate (WTI) prices expected to be $3/bbl to $4/bbl lower.

Should its price forecast be realized, EIA projects that the number of operating rigs will decrease by approximately 24% from January to October 2015 before beginning to rebound in November 2015. However, the outlook for Lower 48 production reflects more than just the rig count. Other key factors include the efficiency of drilling, which EIA tracks in its Drilling Productivity Report, the rate of decline in production from existing wells, and changes in the amount of time between the start of drilling (called spudding) and the completion of the well.

As discussed in a previous Today in Energy article on the effect of declining crude oil prices on U.S. production, permits and drilling in North Dakota declined during the financial downturn of 2008-09, but production rates did not decline as substantially. At the time of the July 2008 oil price peak, drilling activity in the Bakken-Three Forks formations outpaced well completion activity as increasing numbers of wells were drilled. Averaging about 70 days before the oil price peak, spud-to-completion times almost doubled within two months, reaching more than 130 days. This increase created a backlog of wells that had been drilled but not yet completed. As fewer wells were drilled during the subsequent drop in oil prices, the spud-to-completion times decreased. Increased drilling activity in the Bakken since 2011 has once again increased spud-to-completion times, which have stabilized at more than 120 days per well, almost twice previous minimum levels. (DOE-EIA)

EPA Ozone Public Hearing Set for DC

EPA Headquarters

EPA will hold its ozone rule hearing on Thursday at EPA headquarters.  EPA will hold several public hearings on the proposed updates to the national air quality standards for ground-level ozone, also known as smog. EPA has proposed to strengthen the standards to a level within a range of 65 to 70 parts per billion(ppb) to better protect American’s health and the environment, while taking comment on a level as low as 60 ppb.

While the low end of the range in the proposed rule (65 ppb) is very troubling for industry and states, as low as background levels of ozone in many parts of the country and pushing as much as 94% of the nation out of attainment, 60 ppb would be devastating for manufacturing, oil and gas production and agriculture across the country.  One thing to consider: the Administration only has so much political capital at its disposal and it has made clear that controlling greenhouse gases is its legacy issue.

It is unclear that the Administration has the bandwidth to sustain both rules.  There is no doubt that many in Congress and the states will demand that the proposed ozone NAAQS be placed on a more realistic course.  Look for Strong pushback on Ozone/NAAQS from Oil and gas.  (Frank Maisano)

Domestic Refining Shifting From Imported Heavy to Domestic Light Crude

Regional refinery trends evolve to accommodate increased domestic crude oil production

Source: U.S. Energy Information Administration
Note: As of January 1, 2014, there were 133 operating refineries with atmospheric crude oil distillation units (ACDU) totaling capacity of 18.9 million barrels per stream day. Heavy capacity denotes refineries with coking capacity; light capacity denotes refineries without coking capacity.
Note: Click to enlarge.

---

Recent rapid growth in U.S. production of light tight oil has raised interest in understanding how U.S. refineries, many of which are configured to process heavier crude oil, might accommodate increased volumes of domestic light crude. The U.S. refinery fleet, which is distributed across Petroleum Administration for Defense Districts (PADDs), varies both within and across regions in capacity, quality of crude oil inputs, utilization rates, and sources of crude supply.

Changes to crude oil supply patterns are most pronounced in the Gulf Coast. Net imports into the region have fallen by 2.3 million bbl/d, and light sweet crude imports have been largely replaced by domestically produced light, tight oil.  

More than 50% of the country's refinery capacity and most of the country's heavy crude processing capacity is located in the Gulf Coast (PADD 3). The region's 51 operating refineries with atmospheric crude distillation units (ACDU) have capacity totaling 9.7 million barrels per stream day (bbl/sd), 81% of which is located at facilities with coking capacity.

Crude oil production in the Gulf Coast region has increased by 1.9 million barrels per day since 2010. Gulf Coast receipts of crude oil from the Midwest (PADD 2), including both U.S. and Canadian production, also have increased. With more Canadian and domestic barrels moving south from the Midwest to the Gulf Coast region and lower demand for crude shipments from the Gulf Coast to the Midwest, net receipts for the Gulf Coast were positive in October 2014 for the first time since December 1985. This situation, with shipments and receipts of crude oil to and from other PADDs being roughly equal in the Gulf Coast region, is a change from the region's traditional role. The Gulf Coast has long been a source of crude supply for neighboring PADDs, both through the movement of domestic production and from imported crude oil coming into Gulf Coast ports.

With U.S. crude production in 2015 expected to average 9.3 million bbl/d, 700,000 bbl/d above the 2014 level, domestic refiners will continue to face changing supply and demand conditions, even as continued production growth in the first months of the year transitions to a more static production outlook as the effects of the recent sharp decline in oil prices are reflected in drilling decisions. Changes to infrastructure, refinery capacity, crude oil price differentials based on quality, and policy decisions will also affect refinery operations in the coming year. (DOE-EIA)

EPA's Methane & Ozone Reduction Strategy for Oil & Gas Industry

EPA’S STRATEGY FOR REDUCING METHANE AND OZONE-FORMING POLLUTION FROM THE OIL AND NATURAL GAS INDUSTRY

As part of the Obama Administration’s commitment to addressing climate change, the U.S. Environmental Protection Agency (EPA) has outlined a series of steps it plans to take to address methane and smog-forming VOC emissions from the oil and gas industry, in order to ensure continued, safe and responsible growth in U.S. oil and natural gas production. The agency’s commonsense strategy will reduce methane pollution from new sources in this rapidly growing industry, reduce ozone-forming pollutants from existing sources in areas that do not meet federal ozone health standards,  and build on work  that states and industry are doing to address emissions from existing sources elsewhere.

Building on Commonsense Standards for Methane and VOC Emissions

• Methane – the key constituent of natural gas – is a potent greenhouse gas with a global warming potential more than 25 times greater than that of carbon dioxide. Nearly 30 percent of methane emissions in the U.S. in 2012 came from oil production and the production, processing, transmission and distribution of natural gas. While methane emissions from the oil and gas industry have declined 16 percent since 1990, they are projected to increase by about 25 percent over the next decade if additional steps are not taken to reduce emissions from this rapidly growing industry.

• EPA’s strategy will help avoid this anticipated increase in methane emissions from new sources, and will use both regulatory and voluntary approaches to accomplish this goal.

• The agency also will extend requirements for addressing emissions of volatile organic compounds (VOCs) to additional sources, further reducing this key ingredient of ground-level ozone (smog).

• The agency plans to build on its 2012 New Source Performance Standards for the oil and natural gas industry to achieve both methane reductions and additional reductions in VOCs. Those cost-effective standards relied on proven technologies already in use, provided flexibility and incentives for industry to modernize equipment and reduce pollution early, and strengthened accountability, all while supporting continued growth in the sector.

• EPA will follow a similar approach as it develops cost-effective, commonsense requirements for new oil and gas sources that are significant emitters of methane and VOCs. The agency will talk with industry, states and tribes as it evaluates a range of approaches that can reduce methane and VOC emissions from sources such as the equipment and processes discussed in the 2014 White Papers. These could include completions of hydraulically fractured oil wells, pneumatic pumps, and leaks from new and modified well sites and compressor stations.

• In developing the proposal EPA anticipates a process for engaging directly with states on approaches the agency should consider in setting standards. This engagement will help ensure that the standards the agency issues are effective in protecting public health and the environment while supporting continued growth in this sector.

• A number of states regulate, or are considering regulating, air pollution from the oil and gas industry, and EPA’s strategy anticipates that they will continue to do so. Under the Clean Air Act, states have the authority to regulate air emissions from sources within their boundaries, provided their requirements are not weaker than federal rules. EPA plans to issue a proposed rule later this summer and a final rule in 2016.

• In addition, EPA will continue and expand its work to promote voluntary adoption of cost-effective methane reduction technologies by the oil and natural gas sector.

Reducing Additional Pollution in Areas with Ozone Problems

• EPA also plans to extend VOC reduction requirements to existing oil and gas sources in areas that could particularly benefit from VOC reductions: ozone nonattainment areas and states in the Ozone Transport Region. Reducing VOCs can help reduce smog, which is linked to a number of serious effects on public health.

• The agency will do this by issuing Control Techniques Guidelines (CTGs) that provide an analysis of the available, cost-effective technologies for controlling VOC emissions from covered oil and gas sources. States would have to address these sources as part of state plans for meeting EPA’s ozone health standards.

• CTGs give states critical information on cost-effective control technologies.  States have some discretion in applying these guidelines to individual sources.

• Many controls to reduce VOCs also reduce methane as a co-benefit.  The CTGs that EPA issues also will also provide states and any tribes that choose to do so with a model they can put in place to address emissions from sources in other areas where oil and gas activities are concentrated.

• EPA plans to propose CTGs in the summer of 2015, and issue final guidelines in 2016.

Industry Action to Reduce Methane Emissions

• In addition to regulatory activities, several voluntary efforts to address these sources are underway, including EPA’s plans to expand the successful Natural Gas STAR Program by launching a new partnership in collaboration with key stakeholders later in 2015.

• Under the new program EPA will work with the departments of Energy and Transportation and leading companies, individually or through broader initiatives such as the Downstream Initiative or the One Future Initiative, to develop and verify robust commitments to reduce methane emissions.

• Voluntary efforts to reduce emissions in a comprehensive and transparent manner have the potential to yield significant methane reductions in a quick, flexible and cost-effective way. Achieving significant reductions through these voluntary industry programs and state actions could reduce the need for future regulations. The Administration stands ready to collaborate with participants in these and other voluntary efforts, including in the development of a regime for monitoring, reporting and verification.  (EPA)

Governor Andrew Cuomo To Ban Fracking in New York State

Governor Andrew Cuomo's environmental commissioner, Joe Martens, and acting Health Commissioner, Howard Zucker have recommended a ban on fracking across the state  of New York, citing excessive environmental and health concerns.  Governor Cuomo is deferring to their recommendations in making a final decision. A ban would end the state's current six-month moratorium on fracking.

The process of fracking involves shooting a mix of pressurized water, sand and chemicals to split rock formations to release natural gas and so-called tight oil.  The widely used, deep-drilling process, combined with horizontal drilling, has resulted in a surge in domestic-energy production.

State and local governments are pushing for bans over the health and environmental concerns, including the potential for earthquakes and the contamination of natural water supplies.

New York sits atop the Marcellus shale formation, which stretches 600 miles along the Appalachian Basin and is rich in natural gas deposits.

The state’s Department of Environmental Conservation will put out a final impact study early next year that will suggest a ban on fracking.  Martens will follow the report with an order prohibiting the process.  (Fox News, 12/18/2014)

2015 Gasoline Expenditures To be Lowest in 11 Years

Source: U.S. Energy Information Administration, Short-Term Energy Outlook

---

The average U.S. household is expected to spend about $550 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years. Lower fuel expenditures are attributable to a combination of falling retail gasoline prices and more fuel-efficient cars and trucks that reduce the number of gallons used to travel a given distance.

Household gasoline costs are forecast to average $1,962 next year, assuming that EIA's price forecast, which is highly uncertain, is realized. Should the forecast be realized, motor fuel expenditures (gasoline and motor oil) in 2015 would be below $2,000 for the first time since 2009, according to EIA's December 2014 Short-Term Energy Outlook (STEO).

The price for U.S. regular gasoline has fallen 11 weeks in a row to $2.55 per gallon as of December 15, down $1.16 per gallon from its 2014 peak in late April and the lowest price since October 2009. Gasoline prices are forecast to go even lower in 2015. Gasoline prices are falling because of lower crude oil prices, which account for about two-thirds of the price U.S. drivers pay for a gallon of gasoline.

EIA's latest STEO forecasts that Brent crude oil prices will average $68 per barrel (bbl) in 2015, with prices up to $5/bbl below that annual average early in the year. The forecast for West Texas Intermediate (WTI) crude oil spot prices averages $63/bbl in 2015. However, the current values of futures and options contracts show high uncertainty regarding the price outlook. For example, WTI futures contracts for March 2015 delivery traded during the five-day period ending December 4 averaged $67/bbl. Implied volatility averaged 32%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of WTI prices at the expiration of the March 2015 contract at $51/bbl and $89/bbl, respectively. Last year at this time, WTI futures contracts for March 2014 delivery averaged $96/bbl and implied volatility averaged 19%, with only a $30/bbl spread between the corresponding lower and upper limits of the 95% confidence interval.

Increases in fuel economy are also contributing to lower motor fuel expenditures, as cars and trucks travel farther on a gallon of gasoline. According to the Environmental Protection Agency, the production-weighted fuel economy of cars has increased from 23.1 miles per gallon (mpg) for model-year (MY) 2005 cars to almost 28 mpg for MY2014, an increase of about 21%. Similarly, the fuel economy for trucks has increased 19%, from 16.9 mpg to 20.1 mpg in the same time frame.

In recent years, gasoline expenditures have accounted for about 5% of household expenditures. In the Bureau of Labor Statistics' (BLS) Consumer Price Index, gasoline accounted for 5.1% of consumer spending, as of October 2014. Reductions in the gasoline price ultimately impact the relative weight of gasoline compared to other expenditures (shelter, clothing, food, entertainment, and so on) in price indices compiled by BLS and the Bureau of Economic Analysis at the U.S. Department of Commerce.

The demand for gasoline is very price inelastic over short time periods, meaning changes in price have little impact on the number of gallons used. Falling gasoline prices allow households to spend their income on other goods and services, pay down debt, and/or increase savings.  (DOE-EIA)

Gasoline Prices Have Little Effect On Car Travel

The U.S. average retail price per gallon of regular motor gasoline has fallen 28% from its 2014 peak of $3.70 per gallon on June 23, to $2.68 per gallon on December 8. However, this price decline may not have much effect on automobile travel, and in turn, gasoline consumption. Gasoline is a relatively inelastic product, meaning changes in prices have little influence on demand.

Price elasticity measures the responsiveness of demand to changes in price. Almost all price elasticities are negative: an increase in price leads to lower demand, and vice versa. Air travel, especially for vacation, tends to be highly elastic: a 10% increase in the price of air travel leads to an even greater (more than 10%) decrease in the amount of air travel. Price changes have greater effects if the changes persist over time, as opposed to being temporary shocks.

Automobile travel in the United States is much less elastic, and its price elasticity has fallen in recent decades. The price elasticity of motor gasoline is currently estimated to be in the range of -0.02 to -0.04 in the short term, meaning it takes a 25% to 50% decrease in the price of gasoline to raise automobile travel 1%. In the mid 1990s, the price elasticity for gasoline was higher, around -0.08, meaning it only took a 12% decrease in the price of gasoline to raise automobile travel by 1%.  (DOE-EIA)