Towns in New York state win right to ban fracing

New York’s cities and towns can block hydraulic fracturing within their borders, the state’s highest court ruled, dealing a blow to an industry awaiting Governor Andrew Cuomo’s decision on whether to uphold a six-year-old statewide moratorium.

The state Court of Appeals in Albany today, June 30, ruled 5-2 to uphold the dismissal of lawsuits challenging bans in the upstate towns of Dryden and Middlefield.

The towns engaged in a “reasonable exercise” of their zoning authority when they banned oil and gas extraction and production, the court said in an opinion by Judge Victoria Graffeo.

“The towns both studied the issue and acted within their home-rule powers in determining that gas drilling would permanently alter and adversely affect the deliberately cultivated small-town character of their communities,” Graffeo wrote.

The ruling may lead the oil and gas industry to abandon fracing in New York as Cuomo considers whether to lift a statewide moratorium instituted in 2008 that he inherited when he took office. It might create a patchwork across the state of municipalities that do and don’t permit the process.

“These appeals are not just about whether hydrofracking is beneficial or detrimental to the economy, environment or energy needs of New York, and we pass no judgment on its merits,” Graffeo wrote. “These are major policy questions for the coordinate branches of government to resolve.”

Enlarging Cracks

Fracing, used in states from North Dakota to Pennsylvania, has helped push U.S. natural gas production to new highs in each of the past seven years, according to the U.S. Energy Information Administration. It has come under increasing scrutiny from environmental advocates.

Parts of New York sit above the Marcellus shale, a rock formation that the Energy Information Administration estimates may hold enough natural gas to meet U.S. consumption for almost six years.

The state barred fracing in 2008 while studying the environmental effects of the drilling method, which is allowed in more than 30 states.

N.Y. Bans

Since then, more than 75 New York towns have banned fracing while more than 40 have passed resolutions stating they support it or are open to it, according to Karen Edelstein, an Ithaca consultant affiliated with FracTracker Alliance, which analyzes the effects of oil and gas drilling.

Other jurisdictions are adopting similar laws. Beverly Hills in May became the first municipality in California to prohibit fracing. The industry also has sued the Colorado cities of Fort Collins, Lafayette and Longmont over bans.

Scott Kurkoski, attorney for a dairy farm in Middlefield that sued the township to overturn a ban passed in August 2011, argued to the Court of Appeals on June 3 that the state’s Oil, Gas and Solution Mining Law prevents local governments from enacting zoning ordinances that ban fracing. The dairy farm signed leases in 2007 to explore and develop natural-gas resources under the property.

Anschutz Lawsuit

In September 2011, Anschutz Exploration Corp., an affiliate of billionaire Philip Anschutz’s closely held company, sued Dryden over its ban after buying about 22,000 acres of gas leases there. Norse Energy, a Lysaker, Norway-based explorer whose U.S. unit filed for bankruptcy in December 2012, replaced Anschutz Exploration in the Dryden appeal.

Separate state judges dismissed the lawsuits challenging the bans in February 2012. Those rulings were affirmed by an intermediate appellate court in Albany in May 2013. A judge in Livingston County in April dismissed another lawsuit seeking to overturn a ban in Avon, a town of about 7,000 people south of Rochester.

While state law prohibits municipalities from passing laws or ordinances related to oil, gas and mining regulations, the zoning restrictions enacted in Dryden and Middletown don’t qualify as attempts to regulate the industry and aren’t preempted, the appellate court said in the May 2013 ruling.

Attorneys for the towns have contended they have the right to enact zoning laws as long as they don’t impede state regulations.

Municipalities’ Rights

Deborah Goldberg, an attorney for the nonprofit group EarthJustice representing Dryden, told the Court of Appeals on June 3 that the state legislature can take away municipalities’ rights to specific zoning laws, yet usually leaves protections in place when it does so.

Thomas West, an attorney for Norse Energy, said the industry may decide to turn its back on the state if local bans are allowed.

Cuomo, a 56-year-old Democrat, is trying to balance the prospect of the type of economic development seen in Ohio and Pennsylvania against claims by environmental groups that drilling will contaminate drinking water.

Cuomo took office in 2011. The following year he put Health Commissioner Nirav Shah in charge of studying how drilling may affect residents’ well-being. The governor had said he would base his determination on Shah’s conclusions.

Shah resigned in May to take a job with the Kaiser Foundation Health Plan in southern California, leaving the review to acting Health Commissioner Howard Zucker.

Joe Martens, head of the state’s Environmental Conservation Department, told state lawmakers in January that he won’t issue fracing regulations until at least April 2015, signaling that Cuomo probably won’t make a decision before he faces re-election in November.

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Lamprell to deliver modules for Upper Zakum field in UAE

Lamprell reports that it has received a new contract award from Petrofac Emirates (Petrofac) for the fabrication and delivery of 29 modules.  

The modules are being constructed for use in connection with the Zakum Development Company’s (ZADCO, one of Abu Dhabi Oil Company (ADNOC) group of companies) landmark Upper Zakum, UZ750 (EPC-2) field development  n Abu Dhabi. The estimated total weight for all of the modules will be approximately 10,000 t.

Lamprell is scheduled to deliver the first shipment of modules in second-quarter 2015, with the final pipe rack expected to be delivered in first-quarter 2016.

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Former NATO commander returns to Balkans hunting for Albanian oil

Fifteen years after Wesley Clark led NATO’s bombing campaign against Serbia, the retired U.S. general is back in the Balkans - looking for oil.

Clark, who was also a presidential candidate in 2004, is a director of two Canadian explorers working in Albania, Bankers Petroleum Ltd. and Petromanas Energy Inc. They’re using modern drilling techniques to revive production in one of Europe’s poorest countries, where oil was first produced in the 1920s.

“Albania has an enormous economic significance for Europe as it has a robust supply of oil, and it should be a strong component of European energy policy,” Clark said in a telephone interview.

Oil exploration is part of Albania’s strategy to repair the damage of four decades of economic isolation under the communist regime of Enver Hoxha, who built more than 700,000 concrete military bunkers before he died in 1985. Albania’s economy, where per capita income remains the lowest in Europe after Bosnia, Ukraine and Moldova, has almost doubled in size in the last decade, according to the World Bank.

Clark, who’s been on Bankers’s board since 2008 and became a Petromanas Energy director last year, was NATO’s supreme allied commander in Europe when the alliance’s bombing campaign forced Serbia to withdraw from Kosovo, where ethnic Albanians make up the majority of the population.

Horizontal Drilling

Bankers, based in Calgary, is using horizontal drilling and water flooding to revive Patos-Marinza, first discovered in 1928 and once Europe’s largest producers. Output, which had dwindled to almost nothing in 2004, is now 20,000 bpd and Bankers plans to drill 170 wells a year to boost production to almost 50,000 bpd by 2020.

“Bankers is a lower risk investment alternative that provides predictable and growing production on a significant reserves and resource base,” Darren Engels, an analyst at FirstEnergy who rates the company a buy, said this month.

Petromanas Energy, also based in Calgary, is a partner with Europe’s largest oil company, Royal Dutch Shell Plc, to hunt for new oil fields in Albania, where the geology is similar to southern Italy, home to some of Europe’s largest onshore fields.

Two wells drilled by the companies have found about 375 MMbbl of oil, according to Petromanas, which holds a 25% stake in the venture. A third, called Molisht-1 is being drilled at the moment.

“What’s happening in Albania is representative of the fact that if price of oil stands at $100 a barrel, people are looking at new opportunities,” Clark said. “If the price stays there, it has changed the geography of oil; it is happening in Albania, it is happening elsewhere in Europe.”

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GeoPark finds new oil field in Chile

GeoPark Limited has announced the discovery of a new oil field in Chile. The Primavera Sur 1 well marks the first discovery of an oil field on the newly-acquired Campanario Block in Tierra del Fuego, Chile. GeoPark operates and has a 50% working interest in the Campanario Block, in partnership with Empresa Nacional de Petroleo de Chile (ENAP).

GeoPark successfully drilled and completed the Primavera Sur 1 well to a total depth of 8,025 ft.  A test conducted in the Tobifera formation, at approximately 7,750 ft, resulted in a production rate of approximately 215 gross bopd of 39.9° API. Further production testing will be required to determine stabilized flow rates and the extent of the reservoir.

Surface facilities and infrastructure have already been put into place in order to produce and commercialize the produced crude oil from this well. Seismic interpretation of the Primavera Sur prospect indicates the opportunity for further development drilling following further testing.

James F. Park, CEO of GeoPark, said, "Our new discovery on the Campanario Block demonstrates the exploration and growth potential of our new Tierra del Fuego acreage, where  our team has identified over 30 new prospects and leads to be drilled on our Isla Norte, Campanario and Flamenco Blocks. The quick cycle time from drilling a well to selling production also reflects the attractive operations and economics of the region. We are pleased to be working with ENAP on these blocks and look forward to further results from our approximately $150 million work program in Chile in 2014."

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