Poland considers changes to its hydrocarbon licensing scheme (Part 1 of 2)

Poland’s parliament is considering amendments to its Geological and Mining Law that will change its hydrocarbon licensing regime. Submitted for consideration by the Polish Government in April 2014, the Hydrocarbons Act (the “Act”) and Hydrocarbons Tax Act will change the regulatory landscape governing both conventional and nonconventional hydrocarbon production.

The Act introduces changes in the licensing system for prospecting, exploration, and extraction. Under the current system, companies must acquire separate exploration and extraction licenses, each of which could be granted for a period of 3 to 50 years. Under the Act, however, there will be a unified licensing system. Single licenses will be granted for prospecting, exploration, and extraction, and they will be issued for a defined period of time (10 to 30 years).

Prospecting and exploration activities will have a maximum time limit of 5 years. This period may be extended a single time for a period not longer than 1 year. Production may commence with approval of the Ministry of the Environment. Before granting approval, the Ministry must assess a play’s geological, environmental, and investment data. Among other things, the Ministry will determine the approved production methods, the borders of the mining area and the time schedule for commencing the production. Production activities may be extended as necessary to complete production, but for no longer than 5 years.

The Polish Government wants the Hydrocarbons Act to be approved and functional by the beginning of 2015, and expects hydrocarbon taxes to be due and payable starting in 2020. Whether these estimates are accurate remains to be unclear.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.

North Carolina to allow hydraulic fracking

On June 04, 2014, Governor Pat McCrory of North Carolina signed a bill into law allowing hydraulic fracking within the state, lifting a moratorium that has blocked fracking permits since 2012. Fracking in North Carolina can begin as early as next year.

Gov. McCrory signed the Energy Modernization Act of 2014 at an event at North Carolina State University after the bill passed through the state House (64-50) and Senate (33-12) during the preceding week. The bill was introduced by three Republican state senators, Sens. Bob Rucho, E.S. Newton, and Andrew C. Brock. Republicans lead both the House and Senate in North Carolina.
The state’s Mining and Energy Commission is working on finalizing fracking regulations. Once regulations are complete, the Act will allow for the issuance of permits without additional approval.

The Act also prevents local governments from adopting “any local ordinance that prohibits or has the effect of prohibiting oil and gas exploration, development, and production.” It further criminalizes the disclosure of fracking chemicals or substances used by oil and gas companies. Anyone who knowingly or negligently releases this information may face a felony conviction or civil damages. However, the bill creates an exception for providing information to “first responders and medical personnel in the event that the information is deemed necessary to address an emergency.”

McCrory stated the law will spur economic development at all levels of North Carolina’s economy, and that it contains safeguards to protect the environment. According to his statement, a 2013 poll conducted by Harris Interactive found that the majority of state voters favored fracking.

Pennsylvania waste hauling company faces criminal charges

On June 6, 2014, Pennsylvania Attorney General Kathleen Kale filed criminal charges against a fracking waste hauling company and its owner.
The company and its owner face charges for violating Pennsylvania’s SolidWaste Management Act and Clean Streams Law, overbilling customers, and participating in multiple criminal conspiracies to commit insurance fraud.
According to a presentment by a statewide grand jury, the company allowed oil, waste, and other pollutants to run into storm drains. The presentment also stated that the company allowed radioactive waste to leak onto the ground at its facility in Harrisburg, Pennsylvania. The company is further accused of storing waste without proper permits from Pennsylvania’s Department of Environmental Protection, and illegally disposing of solid waste into the ground.
Moreover, the grand jury found that the company overbilled every business it contracted with by inflating their invoices.
The Office of the Attorney General additionally filed insurance fraud charges against the owner. The Office discovered that several members of the owner’s family were on the payrolls of the company and another entity which was family owned. The grand jury stated that these family members were ghost employees and that they conspired for group health insurance rates.
Current and former employees apparently testified that they risked termination if they did not follow the owner’s demands to inflate invoices and add his family members to the payroll.
A press release containing all the criminal charges can be found on the Pennsylvania Attorney General’s Office website.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.

Recent studies concerning induced seismicity and wastewater disposal wells

At the Seismological Society of America’s annual conference held in early May 2014, several studies examined whether there is a correlation between the injection of wastewater into disposal wells and seismic activity.

In an abstract entitled “Potential Case of Induced Seismicity from A Water Disposal Well in South-Central Oklahoma,” the researcher found that a swarm of earthquakes in Love County, Oklahoma beginning on September 17, 2013, were occurring at shallow depths consistent with the injection depths of a near-by injection disposal well.

However, because this area had seen similar shallow earthquakes in the past, the researcher could not address whether the earthquake swarm was caused by fluid injection or simply an “unlikely coincidence.”

In another presentation, seismologists at the US Geological Survey indicated that, while the total volume of wastewater injected into a disposal can be a factor in a seismic episode, another important factor “is the presence of high-permeability fluid pathways that can channel the injection effects on pore pressure from the target aquifer into a fault zone, especially a fault that is well oriented for slip in the ambient stress field.” Often, these faults are only revealed after the seismic incident. “The available data corroborate the notion that the likelihood of induced earthquakes large enough to be felt is largely independent of injection rate.”

It should be noted that previously, a representative of the Oklahoma Corporation Commission, who was reviewing the relationship between certain earthquakes and injections wells, stated that there was not enough evidence to say that the seismic events were caused by injection of oil and gas waste and urged everyone to keep an “open mind” regarding the cause of the earthquakes.

Also the causal connection between hydraulic fracturing and earthquakes continues to be unresolved – studies and experts have produced research and opinion on both sides of the issue. Oklahoma state geologist G. Randy Keller called the claims "a rush to judgment," while Interior Department Deputy Secretary David Hayes said his teams have found "no evidence to suggest that hydraulic fracturing itself" is the cause of earthquakes.

For additional information, please see “Injection Wells and Their Possible Link to Seismic Activity” and “What’s Shaking? Induced Seismicity.”

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.

Ban on hydraulic fracturing in Santa Cruz County, California

On March 20, 2014, the Santa Cruz County Board of Supervisors voted 5-0 to prohibit hydraulic fracturing and oil and gas development in their county. This ban continues the ten-month moratorium that was started in September 2013.

Santa Cruz’s ban of hydraulic fracturing is largely symbolic because there are no known oil leases in the county nor has the area been targeted by oil and gas developers.

While Santa Cruz becomes the first county in California to prohibit hydraulic fracturing, other counties are considering their own bans or moratoria, including Butte, Mendocino, Monterey, Santa Barbara, San Benito, and Orange.

Beverly Hills recently enacted a ban on fracking and other well stimulating operations from any surface within the city as well as from any site outside of city limits that would extract oil and gas underneath the city. Los Angeles and Culver City are considering the same action. Meanwhile, in Carson, California, the city council refused to extend a temporary moratorium on fracking and other extraction activities.

Several state legislators are pushing for a statewide moratorium on hydraulic fracturing and acidizing activities, both onshore and offshore, until a sufficient state study on the threats and impacts of fracking is completed and regulations are in place to protect the state and its citizens. The proposed statewide moratorium is opposed by Governor Jerry Brown who supports the “great opportunities” that hydraulic fracturing can give to the state.

In October 2012, the Center for Biological Diversity and other environmental groups sued the state, seeking to prohibit the use of fracking until the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR) “complies with its legal requirements to evaluate and mitigate the significant environmental and public health impacts caused by hydraulic fracturing.” In January 2014, the lawsuit was dismissed. with the Court stating that the questions were “not ripe for judicial review because the DOGGR has not yet completed its regulations.”

Of interest is that next month, the US Energy Information Administration (EIA) is expected to announce that the Monterey Shale has less shale oil reserves than previously estimated – a reduction from the estimated 13.7 billion barrels to just over 600 million barrels of recoverable crude.

The lawsuit referenced above is Center for Biological Diversity, Earthworks, Environmental Working Group, and Sierra Club v. California Department of Conservation, Division of Oil, Gas, and Geothermal Resources, and DOES I through X, Case No. RG12652054, In the Superior Court for the State of California for the City and County of Alameda (October 16, 2012).

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.