Monday, January 21, 2013

Texas Asking Supreme Court to Settle Water Disputes with Neighboring States

Article first appeared on The Wall Street Journal

Texas officials are heating up the water wars with neighbors New Mexico and Oklahoma over river water rights and allotments in an attempt to alleviate some of the continually growing demand.  A Washington DC Agricultural Lawyer is monitoring this case.

The U.S. Supreme Court agreed this month to take up a dispute between Texas' Tarrant Regional Water District, an agency that supplies water to 1.7 million people in north Texas, and Oklahoma, over water that flows into the Red River. So far, lower courts have ruled for Oklahoma.  A Chicago Environmental Lawyer firm has been reviewing the details in these proceedings.

Drought-plagued Texas also asked the Supreme Court this month to consider a separate lawsuit alleging that New Mexico isn't giving Texas its allotted share of water from the Rio Grande as spelled out under a 1938 compact. No other court has ruled on that case.

Texas officials maintain they had to take action against New Mexico because farmers and ranchers are illegally siphoning off some of Texas' share of the river, which provides about half of the drinking water for El Paso.  A Boston Environmental Defense Lawyer has been reviewing court decisions as the case progresses.

Legal and political battles over river water are common in Western and Plains states, especially over the water in the Colorado River, which is rationed among seven states and Mexico, and used by more than 30 million people.

But the skirmishes are becoming more serious across the nation because of current drought conditions. Texas was experiencing moderate or greater drought in 84% of its territory as of Jan. 8, according to federal monitors.  Birmingham Environmental Defense Lawyer offices are aware of the battle between the states.

Texas has been one of the fastest-growing states for years and gained more people in the year ended July 1, a total of 427,400, than any other state, according to the Census Bureau. Texas officials forecast it will need an additional 8.3 million acre-feet of water by 2060, when its population is expected to surpass 46 million, up from 25 million now. (An acre-foot is the amount of water needed to cover an acre a foot deep.)

Some state water agencies have already been forced to make tough decisions about who should receive limited supplies. For an unprecedented second straight year, many rice farmers in Texas, the nation's fifth-largest rice producer, will probably not receive enough water to flood their fields. An agency overseeing reservoir management in central Texas, the Lower Colorado River Authority, voted this month to withhold deliveries to the farmers if rainfall does not increase substantially by March.  A Denver Environmental Lawyer has also been monitoring the case.

Fearful that water shortages could stunt growth in Texas, the legislature is considering tapping the state's rainy-day fund to finance water projects. A leading proposal by state Rep. Allan Ritter, chairman of the House Natural Resources Committee in Texas, would use $2 billion from the rainy-day fund to create a revolving loan program for water infrastructure.

Meanwhile, Texas officials say they are taking legal measures to ensure the state receives all the river water to which it is entitled under interstate compacts. That has become increasingly important because some other water sources, such as the Ogallala Aquifer, are slowly being depleted, according to state forecasters.

The amount of water that trickles down to the state from mountain snows also has fallen in recent years. Federal forecasters warned this month that snowfall so far this winter in the upper Rio Grande basin was less than 70% of the average for the past three decades, an ominous sign for downstream reservoirs supplying Texas.  A Valrico Environmental Lawyer has been keeping tabs on this case as well.

Water in the Red River is divided among four states—Arkansas, Louisiana, Oklahoma and Texas. The Tarrant Regional Water District is trying to force Oklahoma officials to allow it to capture water in Oklahoma, where it is less salty, and pipe the water into Texas.

Texas argued in a friend-of-the-court brief that the state could lose $49 billion in annual income by 2060 if its agencies can't meet the water needs of north Texas, and claimed Oklahoma didn't even need the water in dispute.   There is an Atlanta Environmental Lawyer monitoring the ongoing battle.

"The result of Oklahoma's economic protectionism is the ongoing flow of billions of gallons of water, unused, into the Gulf of Mexico," the state's lawyers wrote.

But the U.S. Court of Appeals for the Tenth Circuit sided with Oklahoma, which passed a law in 2009 barring water from being transported to other states without the consent of Oklahoma's legislature.   In Pennsylvania, there is a Philadelphia Environmental Lawyer as well as a Philadelphia Environmental Defense Lawyer that are watching the progressing multi-state water legal fight.

This deal between the states does not allow Texas to enter Oklahoma to take water, Oklahoma officials argue, instead, Texas should be taking its share of the water from farther downstream.

Wednesday, January 9, 2013

Arctic Drilling to Be Reviewed in Light of Accidents

originally appeared in The New York Times:

The Interior Department on Tuesday opened an urgent review of Arctic offshore drilling operations after a series of blunders and accidents involving Shell Oil’s drill ships and support equipment, culminating in the grounding of one of its drilling vessels last week off the coast of Alaska.

Officials said the new assessment by federal regulators could halt or scale back Shell’s program to open Alaska’s Arctic waters to oil exploration, a $4.5 billion effort that has been plagued by equipment failures, legal delays, mismanagement and bad weather.

Interior Secretary Ken Salazar said that the expedited review, which is to be completed within 60 days, was prompted by accidents and equipment problems aboard Shell’s two Arctic drilling rigs, the Kulluk and the Noble Discoverer, as well as the Arctic Challenger, a vessel designed to respond to a potential well blowout and oil spill.

In addition, the Coast Guard announced Tuesday that it would conduct a comprehensive marine casualty investigation of the grounding of the Kulluk on Dec. 31.

Shell’s repeated and early misadventures have confirmed the fears of Arctic drilling critics, who said that the company and its federal partners had not shown that they had the equipment, skill or experience to cope with the unforgiving environment there.

The director of the Interior Department’s Bureau of Ocean Energy Management, will lead the review. As part of our department’s oversight responsibilities, he said in a statement, our review will look at Shell’s management and operations in the Beaufort and Chukchi Seas. We will assess Shell’s performance in the Arctic’s challenging environment.

The assessment will look at Shell’s safety management systems, its oversight of contracted services and its ability to meet federal standards for Arctic oil and gas operations.

According to the president of Shell Oil, said of the government assessment: It’s not a concern to me. I welcome this kind of high-level review. It’s important that both we and the Department of Interior take a look at the 2012 season.

Shell's president added: There are obviously some issues that need to be worked on, particularly the marine transport. He said that it was too early to say what damage may have occurred to the Kulluk but that he had great confidence in this program.

Shell’s rigs drilled two shallow wells last summer, but were halted by government officials before they reached oil-bearing formations. Officials would not allow Shell to drill deeper because the company did not have the required capacity to contain spills after the testing failure of a device designed to cap a runaway well and collect the oil.

In the past several months, the Coast Guard has examined the containment barge and the rebuilt dome, and both passed necessary tests. But the Bureau of Safety and Environmental Enforcement still needs to inspect the equipment before it can be deployed. Those inspections were originally to be done later this month, but have been put off because of the Kulluk accident.

Environmental advocates have been leery of the Arctic drilling program for years and became especially vocal after the Kulluk ran aground.

Greenpeace, which is circulating petitions calling on President Obama to halt the Arctic drilling program, said that the Interior Department’s reassessment was long overdue.

We’ve repeatedly been told Shell is the best in the business, and so we can only conclude after this series of mishaps that the best in the business is simply not good enough for the Arctic, according to Greenpeace's deputy campaigns director. We only hope that 60 days is long enough to properly examine the extraordinary number of dangerous incidents that have beset Shell’s accident-prone drilling program and put Alaska’s environment at risk.

The senior Pacific counsel for the environmental advocacy group Oceana, said that government regulators were too lax in allowing the program to go forward without adequate assurances that Shell could operate safely and competently.

We hope this review amounts to more than a paper exercise, he said. The Department of the Interior, after all, is complicit in Shell’s failures because it granted the approvals that allowed Shell to operate.

The Kulluk was towed to a safe harbor on Monday, where it will undergo extensive inspections before continuing its journey to its winter home in Seattle.

If the Kulluk, which Shell has upgraded in recent years at a cost of nearly $300 million, is found to have been wrecked or substantially damaged, it will be hard for the company to find a replacement and receive the numerous government permits needed to resume drilling in July, as it has planned.

Under Department of Interior rules governing Arctic drilling, the company must have two rigs on site at all times to provide for a backup vessel to drill a relief well in case of a blowout, an uncontrolled escape of oil or gas.

The Kulluk, which does not have a propulsion system of its own, ran into trouble in late December when its tow ship, the Aiviq, lost engine power and the towline separated in high winds and heavy seas.

Shell’s other Arctic drill ship, the Noble Discoverer, has also had problems. In July, before sailing to the Arctic, it nearly ran aground after dragging its anchor in the Aleutian Islands. Then in November it had a small engine fire.

Later that month, during an inspection in the Alaskan port of Seward, the Coast Guard found more than a dozen violations involving safety systems and pollution equipment.

At the end of December, the Noble Corporation, the Swiss company that owns the 512-foot-long drill ship and is leasing it to Shell for $240,000 a day, said that many of the problems had been repaired and that the ship was preparing to sail to Seattle to fix the remainder of them.

Monday, January 7, 2013

Exports of U.S. Gas May Fall Short of High Hopes

originally appeared in The New York Times:

Only five years ago, several giant natural gas import terminals were built to satisfy the energy needs of a country hungry for fuels. But the billion-dollar terminals were obsolete even before the concrete was dry as an unexpected drilling boom in new shale fields from Pennsylvania to Texas produced a glut of cheap domestic natural gas.

Now, the same companies that had such high hopes for imports are proposing to salvage those white elephants by spending billions more to convert them into terminals to export some of the nation’s extra gas to Asia and Europe, where gas is roughly triple the American price.

Just like last time, some of the costly ventures could turn out to be poor investments.

Countries around the world are importing drilling expertise and equipment in hopes of cracking open their own gas reserves through the same techniques of hydraulic fracturing and horizontal drilling that unleashed shale gas production in the United States. Demand for American gas — which would be shipped in a condensed form called liquefied natural gas, or L.N.G. — could easily taper off by the time the new export terminals really get going, some energy specialists say.

It will be easier to export the technology for extracting shale gas than exporting actual gas, according to the former administrator of the Energy Department’s Energy Information Administration. I know the pitch about our price differentials will justify the high costs of L.N.G. We will see. Gas by pipeline is a good deal. L.N.G.?  Not so clear.

Even the terminal operators acknowledge that probably only a lucky few companies will export gas because it can cost $7 billion or more to build a terminal, and then only after a rigorous federal regulatory permitting process. The exploratory process to find a suitable site for a new terminal alone can take a year and cost $100 million, operators say, and financing can be secured only once long-term purchase agreements — 20 years or more — are reached with foreign buyers.

It’s a monumental effort to put a deal together like this, and you need well-heeled partners, according to the president of Sempra Energy, which is based in San Diego and is applying for permits to turn around a Hackberry, La., import terminal for export. There are only a handful of people who can do this kind of thing.

At least 15 proposed terminal projects have filed regulatory applications to export gas, and if all were approved, they could export more than 25 billion cubic feet a day, equivalent to more than a third of domestically consumed natural gas.

Environmental advocates say that kind of surge in demand would produce a frenzy of shale drilling dependent on hydraulic fracturing of hard rocks, an industrial method they say endangers local water supplies and pollutes the air. Dow Chemical, a big user of natural gas, and some other manufacturers express concerns that an export boom could threaten to raise natural gas prices for factories and consumers and, ultimately, kill jobs.

Opponents are already lobbying the Obama administration to reject most of the planned terminals, and protests have already occurred. Sempra, Exxon Mobil, Cheniere Energy and others have already built import terminals on the Gulf of Mexico. With docking facilities and giant gas tanks already built on land they had acquired and received permits for, they have a huge advantage over companies that have not yet built terminals. Cheniere, the only company to secure an export license, already has entered long-term purchase agreements for its L.N.G., and several other companies are only a few steps behind.

Dominion Power, which operates a nearly idle import terminal near Cove Point on Chesapeake Bay in Maryland, is also expected to proceed with a conversion to exports, since it is strategically located near the mid-Atlantic gas fields of the Marcellus Shale.

You have got to be able to change, adapt as changes take place in the world, according to the manager of the Cove Point plant.

The companies with import terminals now wanting to export won a victory in December when an Energy Department report said exports of L.N.G. could produce $30 billion a year in export earnings without driving up domestic gas prices significantly.

Many energy specialists expect the Obama administration to approve several export license applications in the next couple of years, and exports could begin as soon as 2015.

The plans for a gas export boom are based on the theory that cheap American gas will remain cheap for decades while Asian and European gas supplies remain tight and expensive. Global demand for natural gas is expected to expand for decades as nations seek a replacement for coal, nuclear energy and increasingly expensive oil, energy specialists say.

If the American terminals could be built tomorrow, they would have a perfect market opportunity. The production glut in the United States has reduced natural gas prices in this country by more than two-thirds since 2008.

Gas prices in most other places around the world are much higher because they are linked to oil, which has remained comparatively expensive. Gas prices in the United States are around $3.30 per thousand cubic feet, compared with $10 to $11 in Europe and over $15 in Asia.

But analysts say that the price spread could quickly shrink as a host of factors converge. Gas prices in the United States will face upward pressure as exports rise, electric utilities switch to gas-fired plants from coal, and companies use more natural gas in manufacturing and for fleet vehicles.

With rising U.S. gas prices, U.S. L.N.G. could be priced out of the market, according to the head of global gas research at the consultancy Wood Mackenzie. Even without L.N.G. exports, the price of gas will go up.

The indexing of Asian and European gas to oil prices is beginning to erode. At the same time, huge natural gas pipelines are being built around Asia to supply China, while new gas finds around Australia, East Africa and the eastern Mediterranean are likely to flood the markets with more L.N.G. Russia, a major global gas producer, is also moving aggressively to protect its markets.

And the cost of shipping and processing liquefied gas will cut into American suppliers’ competitiveness.

A gas analyst at PFC Energy, said if the current gas price of slightly less than $3.30 per thousand cubic feet rose to $6, by the time it gets to Asia, it’s double that price and that means there is no arbitrage. The biggest threat, over the long term, is the spread of the American shale boom overseas. The United States has a big lead; shale drilling has been slow to get started in Europe, South Africa and South America because of environmental concerns, water shortages and political obstacles.

But China, which potentially has more shale resources than the United States, is poised for development. And Poland, Britain and Argentina are moving forward with more shale drilling.

Resistance from environmental groups like the Sierra Club could help stop some export projects, especially outside the Gulf of Mexico region, which has long been comfortable with the oil and gas industry. And manufacturers like Dow Chemical are campaigning against unfettered exports to keep their costs down.

Over all, these factors will make it challenging for export projects to raise enough financing. L.N.G. terminal developers note that more than 20 import terminals proposed a decade ago were never built because of local opposition or lack of government permits and financing.

Can all these projects get financed? That’s a good question, according to the president of Shell Oil Company, which is looking at various possible L.N.G. terminal sites to invest in. The outcome of this is not likely to be unlimited L.N.G. exports.

Cheniere’s chief executive, predicted that by 2018, the country would manage to export only one billion to two billion cubic feet of gas a day, or roughly 2 percent of current domestic consumption. In 10 years, after two to four projects have received permits and have been built, he said he expected exports to grow to three billion to five billion cubic feet a day. The total global production of L.N.G. is about 40 billion cubic feet a day, and growing rapidly.

Dow Chemical’s vice president for energy and climate change, said that exports that come near other projections that would ease Dow’s concerns. That is a range that I think will maintain a competitive advantage for the United States, he said.

Wednesday, January 2, 2013

Breakaway Oil Rig Runs Aground in Gulf of Alaska

originally appeared in The New York Times:

One of Shell Oil’s two Arctic drilling rigs is beached on an island in the Gulf of Alaska, threatening environmental damage from a fuel spill and calling into question Shell’s plans to resume drilling in the treacherous waters north of Alaska in the summer.

The rig, the Kulluk, broke free from a tow ship in stormy seas and ran aground Monday night. The Coast Guard was leading an effort to keep its more than 150,000 gallons of diesel fuel and lubricants from spilling onto the rocky shoreline.

At a news conference in Anchorage on Tuesday afternoon, the federal on-scene coordinator, said that a reconnaissance flight showed the Kulluk was upright and stable, with no significant motion.

The results are showing us that the Kulluk is sound, he said. No sign of breach of hull, no sign of release of any product. He said the response team hoped to get salvage experts aboard the ship to get a better picture of damage.

A representative of the Alaska Department of Environmental Conservation said that, so far, there was no sign of harm to the environment or wildlife.

The Kulluk’s 18 crew members had been evacuated by Coast Guard helicopters on Saturday after the rig first went adrift in high winds and rough seas.

The grounding was the latest in a series of mishaps to befall Shell’s ambitious plans to prospect for oil in the Beaufort and Chukchi Seas off the North Slope of Alaska.

Shell halted drilling for oil in September after equipment failures, unexpected ice floes, operational missteps and regulatory delays forced the company to scale back its plans.

Its drilling rigs completed two shallow pilot holes and left the Arctic in late fall to return to Seattle for maintenance work but have encountered problems in transit.

If the Kulluk, which Shell upgraded in recent years at a cost of nearly $300 million, is wrecked or substantially damaged, it will be hard for the company to find a replacement and receive the numerous government permits needed to resume drilling in July, as planned.

Under Department of Interior rules governing Arctic drilling, the company must have two rigs on site at all times to provide for a backup vessel to drill a relief well in case of a blowout, an uncontrolled escape of oil or gas.

A separate containment system designed to collect oil in the case of a well accident failed during testing, preventing Shell from drilling into oil-bearing formations during its abbreviated exploration season last summer and fall. Shell’s Alaska vice president said he could not discuss the latest accident, saying that company officials were working with a Coast Guard-directed unified command and could not comment separately.

An official involved in the response operation, who spoke on the condition of anonymity because he was not authorized to comment, said: We don’t know about the damage. It’s too dark. The weather is horrendous. The official said that when a helicopter flew over the rig Monday night: It looked upright about 1,600 feet off the beach. There was no sign of any spill. The official said the fuel tanks on the vessel were well protected inside the hull, making a spill unlikely.

The Kulluk, which does not have a propulsion system of its own, ran into trouble late last week when its tow ship, the Aiviq, lost engine power and the towline separated. A Coast Guard cutter and other ships arrived, and crews struggled through Monday, in seas up to 35 feet, to reconnect tow lines to the rig, succeeding several times. But each time the lines separated.

On Monday night, the Kulluk, 266 feet in diameter, broke free from one tow ship and the Coast Guard ordered a second ship to disconnect, fearing for the safety of its crew.

The Kulluk is sitting on the southeast coast of Sitkalidak Island, an uninhabited island separated by the Sitkalidak Strait from the far larger Kodiak Island to the west. The nearest town, Old Harbor, is across the strait on Kodiak Island; it has a population of about 200 people. The strait is home to a threatened species of sea lion.

A spokesman for the Interior Department’s offshore drilling safety office would not say whether the latest problem would cause a re-evaluation of the agency’s approval of Shell’s overall Arctic program. But the spokesman of the Bureau of Safety and Environmental Enforcement, said that any equipment Shell proposes to use off the Alaskan coast must meet federal safety and testing standards. He added that regulations require a federal inspector be present around the clock during drilling operations.

The other ship Shell has used in the Arctic, the Noble Discoverer, has had problems of its own. In July, before sailing to the Arctic, it nearly ran aground after dragging its anchor in the Aleutian Islands. Then in November it had a small engine fire.

Later that month, during an inspection in the Alaskan port of Seward, the Coast Guard found more than a dozen violations involving safety systems and pollution equipment. Last week, the Noble Corporation, the Swiss company that owns the 512-foot-long drillship and is leasing it to Shell for $240,000 a day, said that many of the problems had been repaired and that the ship was preparing to sail to Seattle to fix the remainder of them.

Critics said that the accident confirmed their worst fears about Shell’s Arctic project and should force federal regulators to stop it.

We’re learning that oceans, while beautiful, are dangerous and unforgiving, according to a senior Pacific counsel for the environmental group Oceana. Shell has demonstrated again and again that it’s not prepared to operate in Alaskan waters. Hopefully something good will come out of this latest incident, and the government will take a careful look at whether activities such as this can be conducted safely, and if so, what changes are needed to make that possible.

Shell was on the verge of drilling in 2011, but delays in getting final approval for an air quality permit forced the company to put off drilling until 2012. More equipment failures and unpredictable weather continued through the year. In September, Shell had to abandon preliminary drilling in the Chukchi Sea when sea ice moved toward the drilling area only a day after work began.

And finally, the company was forced to put off completing the two wells it had begun to drill for another year when a barge containing a spill containment dome was badly damaged during a testing accident. During the testing, a mechanical device malfunctioned as the containment dome was lowered into the water, and a submarine robot became tangled in some of the dome’s anchor lines.