Insight and Information on the Oil, Gas, Pipeline, & Mining Industries
On the heels of a preliminary injunction motion filed in the action by two industry groups challenging the federal Bureau of Land Management’s (BLM) final rule regulating hydraulic fracturing on public lands, the states of Wyoming and Colorado likewise filed a preliminary injunction motion in their related case last Friday.
In their brief, the…
Three states have recently taken a stand for or against controversial bans on hydraulic fracturing. Oklahoma, Texas, and Maryland have all passed laws within the past month relating to hydraulic fracturing bans.
Oklahoma
Last Friday, Oklahoma Governor Mary Fallin signed Senate Bill 809, which prohibits local governments from choosing whether to have oil and gas operations within their jurisdictions. Oklahoma’s law allows exceptions for “reasonable” restrictions for setbacks, noise, traffic issues and fencing. Governor Fallin said “A patchwork of regulations that vary across the state would be inconsistent with the goal of reasonable, easily understood regulations and could damage the state’s economy and environment.” Senate Bill 809 reaffirms that the Oklahoma Corporation Commission is the primary entity charged with establishing a unified regulatory framework for the energy industry. Chad Warmington, president of the Oklahoma Oil and Gas Association, said “This bill was a good compromise for all involved. It maintains the Corporation Commission’s role in regulating oil and gas activities, without limiting cities’ ability to protect their residents.” Senate Bill 809 passed with wide margins in both the House and the Senate.
Continue Reading States Show Their True Colors on Fracking – One Enacts a Ban, While Two Others Prohibit All Local Bans
Last Friday, the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance (WEA) opened their arguments on a preliminary injunction motion to halt the federal Bureau of Land Management’s (BLM) final rule regulating hydraulic fracturing on public lands until resolution of the litigation.
In its supporting memorandum, the IPAA and WEA detail the…
Today, May 8, 2015, the Pipeline and Hazardous Materials Safety Administration published a final rule for rail transport of crude oil in the Federal Register. These rules come after several high-profile oil train derailments, including one recently in North Dakota that caused the evacuation of a nearby town.
The final rule applies to “high-hazard flammable trains,” defined as trains with a continuous block of 20 or more tank cars loaded with a flammable liquid or 35 or more tank cars loaded with a flammable liquid dispersed through a train. The final rule regulates: (1) tank car design standards, (2) braking systems, (3) speed restrictions, (4) routing restrictions, (5) classifications of unrefined petroleum-based products, and (6) notification requirements.
Tank Car Design
New tank cars constructed after October 1, 2015 are required to meet new design criteria. Tank cars must be constructed with 9/16 inch steel walls and a head shield with a minimum thickness of 1/2 inch. The entire protection system must be covered with a metal jacket of at least 11 gauge steel. Tank cars must also include improved pressure relief valves and bottom outlet valves. All existing tanks must be retrofitted according to a risk based schedule in the next three to five years.
Continue Reading New Federal Oil-By-Rail Regulations Published
On Tuesday, May 5, 2015, the Internal Revenue Service (“IRS”) released proposed regulations defining qualifying income for Master Limited Partnerships (“MLPs”). MLPs are publicly traded partnerships that are taxed as a partnership rather than a corporation.
Being taxed as a MLP has many advantages. While shareholders in a corporation face double taxation ̶ paying taxes first at the corporate level, and then at the personal level when those earnings are received as dividends ̶ owners of a partnership are taxed only once, when they receive distributions. The absence of taxes at the company level gives MLPs a lower cost of capital than is typically available to corporations, allowing the MLPs to pursue projects that might not be feasible for corporations.
To qualify as a MLP, at least 90% of the entity’s gross income must be “qualifying income.” Previously, there had been no detailed list of what constitutes qualifying income.
These proposed regulations use the term “qualifying activities” to describe activities relating to minerals or natural resources that generate qualifying income. The IRS has now provided an exclusive list of operations that constitute qualifying activities. The activities addressed include exploration, development, mining or production, processing, refining, transportation, and marketing of any natural resource.
Continue Reading New Rules on MLPs & Qualifying Income: What Oil Services and Exploration Companies Need to Know
On Tuesday, April 21 the Obama Administration released the first Quadrennial Energy Review (“QER”) as a component of President Obama’s Climate Action Plan. The extensive report analyzes energy infrastructure in the United States, and “identifies the threats, risks, and opportunities for U.S. energy and climate security, enabling the federal government to translate policy goals into a set of integrated actions.” The primary purpose of the QER is to “modernize” the U.S. energy sector by replacing crumbling infrastructure, by increasing reliance on domestic energy sources, and by implementing a “clean energy economy built to last.”
The report highlights the United States’ complex and advanced energy production system, and includes descriptions and analysis of the different energy sectors. For example, the report notes that the U.S. is the world’s leading producer of oil and natural gas, and the country is less dependent on foreign oil than it has been in over 40 years.Continue Reading Department of Energy Report Calls for U.S. to Modernize Energy Infrastructure, Invest in Natural Gas Pipelines
On Tuesday, April 7, the U.S. Environmental Protection Agency (“USEPA”) published a proposed rule in the Federal Register for regulation of wastewater from unconventional oil and gas operations (“UOG”), which includes hydraulic fracturing. The rule, titled “Effluent Limitations Guidelines and Standards for the Oil and Gas Extraction Point Source Category,” is a Clean Water Act (“CWA”) regulation and imposes pretreatment requirements for existing and new sources. In accordance with the prescribed standards, oil and gas operators would be required to pretreat their wastewater fluid before it is transferred into publicly owned utilities. The proposed rule contains technology-based pretreatment standards.
Continue Reading USEPA Releases Proposed Rule on Fracking Wastewater Treatment; Says There Will be No Costs to Industry
On Wednesday, April 1, the state of North Dakota filed a motion to intervene in Wyoming’s lawsuit challenging the Bureau of Land Management’s (“BLM”) federal hydraulic fracturing regulations. (Wyoming v. U.S. Dept. of Interior, Case No. 15-CV-43-5 (Mar. 26, 2015).) The BLM’s Final Rule, released on March 26, 2015, governs fracking on Federal and…
Less than one week after the Bureau of Land Management (BLM) released its Final Rule governing hydraulic fracturing practices on federal lands, North Dakota will proceed to explore the state’s legal options for challenging the new regulations. At their March 24 meeting, the members of the North Dakota Industrial Commission—comprised of Governor Jack Dalrymple,…
Today, Friday, March 20, the Bureau of Land Management (“BLM”), an agency within the Department of the Interior, published regulations for hydraulic fracturing on Federal and Indian lands. The Final Rule becomes effective in 90 days and will impact about 2,800-3,800 wells each year. In 2013, 90% of the 2,800 new wells on Federal and Indian lands were stimulated using hydraulic fracturing techniques, according to the BLM. (Hydraulic Fracturing on Federal and Indian Lands, Final Rule, at p. 14.) The regulations do not apply to fracking activity on private and state-owned land, where most of the fracking in the United States occurs.
Requirements under the Final Rule
The overarching purpose of the Final Rule is to provide a “baseline for environmental protection.” (Id. at p. 12.) Principally, a permit is required under existing oil and gas regulations. Before beginning operations, an operator must submit an Application for a Permit to Drill (“APD”) to the BLM and wait for approval. As the new regulations supplement the existing regulations, and do not replace them, this permit requirement will continue under the new regulations.Continue Reading Obama Administration Releases Federal Fracking Regulations
