Many Hearings, Some Questions, Few Answers

AAPG provided a glowing introduction to me last month in this column, but now that it is time for my first column:

Washington policy continues to defy simple explanations. Washington is essentially shut down for pre-election campaigning and Congress passed almost no bills this year.

There were, however, many House hearings regarding energy issues as representatives sought to define their positions before the Nov. 6 election.

One, the Aug. 2 hearing of the Energy and Commerce Subcommittee on Energy and Power, featured witnesses who testified that federal onshore petroleum production declined in the past year, and regulatory changes could spur – or hinder – future production increases.

The hearing, called by Rep. Ed Whitfield (R-Ky.), looked into the disparity in energy production of onshore federal versus non-federal lands, a topic that impacts a variety of current issues – jobs, energy security, protection of environmentally sensitive lands, and state and federal deficits, to name a few.

U.S. oil production grew in 2012 to an average of 6.2 million barrels per day – a level not seen since 1998, according to the Energy Information Administration. Natural gas production also rose, primarily in liquids-rich shale gas areas.

On the other hand, oil production from federal and Indian lands decreased from two million barrels per day in fiscal year (FY) 2010 to 1.8 million barrels in FY2011, the most recent annual statistics. This represents a decline in oil production on federal lands from 36 percent of total U.S. production in FY2010 to 32 percent in FY2011.

Natural gas production from federal and Indian lands continued a multi-year decline; in FY2011 federal and Indian lands produced 21 percent of domestic natural gas, compared to 35 percent in FY2003.

The roots of these changes are relatively straightforward; however, the role of federal government policy in driving this decline is less clear.

Let’s start with the simple elements:

The major reason for the onshore federal-private land production disparity is the increased industry emphasis on oil and gas from shales, which are located predominantly on state and private land.

Offshore, the price-driven movement of operators from the gas-prone shelf to oil-prone deep water cut gas production. The deep-water drilling moratorium and regulatory restrictions after the 2010 Macondo blowout also have reduced oil production in federal waters.

The hearing highlighted the differences between a booming oil industry working primarily on private land in North Dakota and a declining oil industry in Alaska, where future potential resources are primarily on federal lands.

Lynn Helms, the director of the North Dakota Industrial Commission, stated that North Dakota drilling permits on private land are processed within 20 to 30 days, but federal drilling permits require more than six months.

Dan Sullivan, a commissioner for the Alaska Department of Natural Resources, recommended modernizing and reforming the federal permitting system and provided several detailed examples of what he viewed as excessive federal regulation that hindered oil and gas development.

One of his examples, Shell’s Chukchi Sea well, did get the necessary permits – in September, too late in the season to allow drilling to the potentially productive formations.

Additional witnesses at the hearing opined that leasing reform, instituted at the beginning of 2011 by the Bureau of Land Management (BLM), may be the root cause of production declines on federal lands, or it may be the beginning of a production growth spurt.

On the positive side is BLM’s effort to reduce leasing delays due to protests. On the negative side is a proposed BLM regulation of hydraulically fractured wells.

The assistant director of the BLM, Michael D. Need, lauded new procedures that allow for greater environmental review and public participation before a lease sale, which greatly reduces the number of legal protests that can significantly delay lease development.

In the past, protests were the only ways for organizations or individuals to raise concerns about a lease sale.

Christy Goldfuss, a witness from the Center for American Progress Action Fund, noted the Wilderness Society’s July 2012 report, “Making the Grade,” which tallied a two-thirds reduction in protests in 2011, the first full year under the BLM reforms. The result is that companies are now receiving their leases within one to two months of the lease sales.

There is still a large backlog of protested leases sold between FY2007 and FY2009.

On the other hand, a proposed BLM regulation could slow oil and gas production from federal lands. BLM’s proposed rules for hydraulically fractured wells would require disclosure of the chemicals used in hydraulic fracturing operations, strengthen regulations to assure wellbore integrity and establish water management requirements for flow-back fluids. The public comment period that resulted in over 7,000 comments closed on Sept. 10.

At press time, BLM had not announced when it will complete its analysis of the public comments or issue the final regulation.

The proposed BLM regulation and the Environmental Protection Agency’s hydraulic fracturing study have motivated many bills that were introduced in Congress this session to revise or streamline federal regulatory processes, or to assure that states rather than the federal government control the regulatory processes for oil and gas development. However, none of these have passed both the House and Senate and none are expected to become law.

Look for more on this topic in next month’s Washington Watch.

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Policy Watch

Policy Watch - Edie Allison
Edie Allison began as the Director of the AAPG Geoscience and Energy Office in Washington D.C. in 2012.

Policy Watch

Policy Watch is a monthly column of the EXPLORER written by the director of AAPG's  Geoscience and Energy Office in Washington, D.C. *The first article appeared in February 2006 under the name "Washington Watch" and the column name was changed to "Policy Watch" in January 2013 to broaden the subject matter to a more global view.

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Alternative Resources, Coal, Gas Hydrates, Geothermal, Renewable Energy, Bioenergy, Hydroelectric Energy, Hydrogen Energy, Solar Energy, Wind Energy, Uranium (Nuclear), Business and Economics, Economics, Reserve Estimation, Resource Estimates, Risk Analysis, Development and Operations, Engineering, Conventional Drilling, Coring, Directional Drilling, Infill Drilling, Drive Mechanisms, Production, Depletion Drive, Water Drive, Hydraulic Fracturing, Primary Recovery, Secondary Recovery, Gas Injection, Water Flooding, Tertiary Recovery, Chemical Flooding Processes, Microbial Recovery, Miscible Recovery, Thermal Recovery Processes, Reservoir Characterization, Environmental, Ground Water, Hydrology, Monitoring, Natural Resources, Pollution, Reclamation, Remediation, Remote Sensing, Water Resources, Geochemistry and Basin Modeling, Basin Modeling, Maturation, Migration, Oil and Gas Analysis, Oil Seeps, Petroleum Systems, Source Rock, Thermal History, Geophysics, Direct Hydrocarbon Indicators, Gravity, Magnetic, Seismic, Petrophysics and Well Logs, Carbonates, Sedimentology and Stratigraphy, (Carbonate) Shelf Sand Deposits, Carbonate Platforms, Carbonate Reefs, Dolostones, Clastics, Conventional Sandstones, Deep Sea / Deepwater, Deepwater Turbidites, Eolian Sandstones, Estuarine Deposits, Fluvial Deltaic Systems, High Stand Deposits, Incised Valley Deposits, Lacustrine Deposits, Low Stand Deposits, Marine, Regressive Deposits, Sheet Sand Deposits, Shelf Sand Deposits, Slope, Transgressive Deposits, Evaporites, Lacustrine Deposits, Salt, Sebkha, Sequence Stratigraphy, Structure, Compressional Systems, Extensional Systems, Fold and Thrust Belts, Geomechanics and Fracture Analysis, Salt Tectonics, Structural Analysis (Other), Tectonics (General), Coalbed Methane, Deep Basin Gas, Diagenetic Traps, Fractured Carbonate Reservoirs, Oil Sands, Oil Shale, Shale Gas, Stratigraphic Traps, Structural Traps, Subsalt Traps, Tight Gas Sands
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This article reviews the mechanisms of shale gas storage and discusses the major risks or uncertainties for shale gas exploration in China. At a given temperature and pressure, the gas sorption capacities of organic-rich shales are primarily controlled by the organic matter richness but may be significantly influenced by the type and maturity of the organic matter, mineral composition (especially clay content), moisture content, pore volume and structure, resulting in different ratios of gas sorption capacity (GSC) to total organic carbon content for different shales. In laboratory experiments, the GSC of organic-rich shales increases with increasing pressure and decreases with increasing temperature. Under geologic conditions (assuming hydrostatic pressure gradient and constant thermal gradient), the GSC increases initially with depth due to the predominating effect of pressure, passes through a maximum, and then decreases because of the influence of increasing temperature at greater depth. This pattern of variation is quite similar to that observed for coals and is of great significance for understanding the changes in GSC of organic-rich shales over geologic time as a function of burial history. At an elevated temperature and pressure and with the presence of moisture, the gas sorption capacities of organic-rich shales are quite low. As a result, adsorption alone cannot protect sufficient gas for high-maturity organic-rich shales to be commercial gas reservoirs. Two models are proposed to predict the variation of GSC and total gas content over geologic time as a function of burial history. High contents of free gas in organic-rich shales can be preserved in relatively closed systems. Loss of free gas during postgeneration uplift and erosion may result in undersaturation (the total gas contents lower than the sorption capacity) and is the major risk for gas exploration in marine organic-rich shales in China.
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