Denver Business Journal | 31 August 2017

Denver Oil and Gas Company Warns Town That New Odor Law May Be Illegal

Erie, Colorado’s new ordinance taking aim at odors from oil and gas operations in the town is too vague and subjective and might be illegal, according to a letter from Crestone Peak Resources, the Denver-based oil and gas company working in the northern Front Range town.

The oil rig near Highway 119 and County Road 22 in Weld County, Colorado. Credit: Kathleen Lavine / Denver Business Journal.

Earlier this week, Crestone’s lawyer, David Neslin with Denver’s Davis, Graham, and Stubbs, sent a letter to the town administrator, A.J. Krieger, and the town’s attorney, Mark Shapiro, outlining a number of concerns with the new ordinance and asking for a meeting before it takes effect on 1 September.

Fred Diehl, the assistant to the town administrator, on 30 August confirmed that the town received the letter from Crestone’s lawyer and said town officials are reviewing it.

“As such, it would be premature to discuss any potential response from the town,” Diehl said.

Erie’s odor ordinance makes smells illegal and a public nuisance if they are detected offsite. Erie’s board of trustees passed the ordinance by a 5–2 vote on 25 July.

Liable parties could end up in court facing daily penalties of $2,650, orders to stop the smells, and other punishment, according to Crestone’s letter.

But applying the ordinance to Crestone would violate the company’s legal rights, according to the letter.

Neslin, Crestone’s attorney, wrote that the ordinance violates due-process rights “because the nuisance odor provision is so vague that it fails to provide fair notice to Crestone of what conduct is prohibited, and it does not contain sufficient standards to ensure reasoned and even-handed enforcement.”

Secondly, Neslin said prosecution would be unfair, because it is difficult to link smells to their sources.

Lastly, applying the ordinance to Crestone “would breach the operator agreement” between the city and the company that is already in place and outlines how oil and gas will be developed.

Crestone asked to meet with town officials before the ordinance takes effect on 1 September and warned the town that the company is “prepared to vigorously defend its legal rights.”

“But,” the letter said, “Crestone would prefer to work cooperatively with the town to address and attempt to resolve any odor concerns with its operations.”

Read the full story here.

Borden Ladner Gervais via Mondaq | 15 August 2017

Supreme Court of Canada Clarifies Duty To Consult and Accommodate Indigenous Populations

The Supreme Court of Canada has unanimously clarified several features of the crown’s duty to consult with and accommodate indigenous populations before project approvals are granted. The companion decisions of Canada’s top court in Clyde River (Hamlet) v. Petroleum Geo-Services Inc. and Chippewas of the Thames First Nation v. Enbridge Pipelines Inc. clarify when the duty to consult is triggered; confirmed that the Crown can discharge its duty to consult through the project approval process undertaken by the regulatory body (including the National Energy Board, which, for the most part, had declined to assess how a project affected aboriginal or treaty rights); and illustrated how to, and how not to, discharge the duty.

These decisions set out benchmarks for discharging the duty to consult, and, while the duty to consult is the crown’s obligation, project proponents are often left to carry out or bolster the consultation process. Without the duty being discharged, a project approval process cannot proceed, and, therefore, it is essential that the project proponent ensure the crown’s duty is discharged. This can mean paying for participation in the process by affected aboriginal parties, for example, or providing the requisite information about the project to the affected parties so that consultation can be robust.

Therefore, while the court was clear that each situation should be viewed independently, the court provides an illustrative roadmap for discharging the duty to consult and, in doing so, has reduced some of the uncertainty plaguing Canadian project approvals.

Read the full story here.

Reuters | 14 August 2017

Hundreds of Protesters Storm Shell Oil Facility in Niger Delta

Hundreds of Nigerians stormed a crude oil facility and gas plant owned by Shell in the Niger Delta on 11 August demanding jobs and infrastructure development, a Reuters witness said.

Echoing a common complaint in the impoverished swampland that produces most of Nigeria’s oil, the protesters said they were not benefiting from the region’s oil wealth and wanted an end to the oil pollution that has ruined much of the land.

Soldiers and security guards did not disperse the crowd as it entered the Belema Flow Station in Rivers State, which feeds oil into Shell’s Bonny export terminal.

The company said it had evacuated staff late on 10 August and shut the facility when it became clear the protesters were on their way there.

However, the army sent in 30 extra soldiers after protesters said they planned to stay at the facility for 2 weeks.

One of the protest leaders, Anthony Bouye, said, “I am a graduate for about 8 years without a job. Shell won’t employ me despite us having so much wealth in our backyard.”

Shell said its “commitment to the welfare of host communities in the Niger Delta remains unshaken” and was working with authorities to resume operations at the facility.

Read the full story here.

JPT | 14 August 2017

Building Relationships With a Marginalized Community in Iraq

A consortium of international and national Iraqi oil and gas companies took operatorship of the Qarmat Ali water-treatment plant, which is critical for oil production, in southern Iraq in 2013. Because of community protests, operations shut down for 6 months as the consortium strived to find the best way to work with the community. This paper explores how the consortium achieved success through engagement and by responding to community expectations for social investment while addressing the social effects of operations.

The Rumaila oil field in southern Iraq southwest of Basra is the country’s largest producing oil field, accounting for more than 40% of Iraq’s budget revenues. Since 2009, Iraq’s state-owned South Oil Company has engaged an international consortium of oil and gas companies together with the State Oil Marketing Organization of Iraq through a technical service contract to operate and modernize the oil field.

For the Rumaila oil field to continue producing 1.4 million BOPD, the consortium needs to inject more than 2 million BWPD by 2025. In 2013, the consortium began the refurbishment and expansion of the Qarmat Ali industrial water-treatment plant, a critical facility for injecting industrial water into the Rumaila oil field and thereby maintaining production.

From the start, a historically marginalized adjacent community, accustomed to using force to raise concerns, continued to use force to react to construction work at Qarmat Ali. Construction was interrupted frequently by stand-downs, gunfire, rock throwing, violence, and intimidation. After months of strained community relations, construction was shut down for 6 months. With government representatives lacking community support and local security forces providing inadequate protection, management considered abandoning refurbishment and expansion work.

To support the information-gathering process and begin the development of a new community-relations plan, the consortium commissioned a nongovernmental organization to gather data on baseline conditions in Qarmat Ali, undertaking 500 household interviews to provide a representative and diverse perspective on the thoughts, opinions, and recommendations of the community.

The AMAR International Charitable Foundation was selected to spearhead a study because of its 20-year legacy of supporting vulnerable populations in southern Iraq and reliance on trained local staff to provide an understanding of the local context and needs of the community.

On the first day of the study, in-­country staff were threatened with firearms. It is a testament to their professionalism and expertise that they were able to move past this barrier and sit down with and start listening to the community. This initial step fostered respect and goodwill and allowed re-engagement to start. This study identified a number of challenges as possible conflict triggers:

  • Qarmat Ali is an impoverished fence-line community of 5,226 people, made up of a wide range of tribes displaced by the draining of the Iraqi marshes in the 1990s. Given their experience of resettlement and insecurities of land ownership, community members felt wary of all outsiders.
  • Basic household conditions are extremely poor, made worse by social marginalization. The community survey found some of the lowest levels in the region for literacy (38%), employment (21%), and access to potable water (17%).
  • Weapons are commonplace in the community, and any incident can become dangerous quickly.

Having assessed the local context, the consortium’s primary goal was to respond to community expectations for social investment while addressing the social effects of operations and avoiding past problems arising from violence and threats.

Following numerous discussions with the Iraqi minister of oil and the governor of Basra, a community committee was established with representatives from the government, civil society, and the consortium to identify the challenges facing local people and address expectations as to what benefits realistically could be delivered to the community.

In October 2014, following weeks of intensive negotiations, the consortium brokered an agreement with the local sheikhs, allowing the consortium to return to work. The consortium’s first commitment was to facilitate a large stakeholder conference with local sheikhs and council members to build relationships and allow local leaders to share their vision of development.

While other oil fields in southern Iraq have struggled to implement social-­investment projects and regularly face demonstrations, not a single day of work at Qarmat Ali has been lost to community disruptions since the first community committee meeting.

The community committee has identified and delivered a range of community projects including healthcare, education, potable water, road infrastructure, and gender equality. Highlights of the partnership’s contributions to community-driven development include

  • Rehabilitating 3.7 km of road to Qarmat Ali, providing a greatly improved transport link, cutting journey times, and reducing road traffic accidents
  • Supporting the provision of quality healthcare with construction of a health clinic for a 10,000-person catchment and new mother and child health services
  • Empowering women as community health advocates to deliver health messaging and influence health-seeking behavior through more than 40,000 household visits
  • Investing in water infrastructure to improve access to safe water for 1,000 households, which previously spent up to 50% of their income on potable water
  • Managing a women’s center for training and technical expertise for more than 300 women, creating income through women-entrepreneur crafts and other livelihoods
  • Training for literacy and vocation skills and work placements for 43 unemployed community members

Case Studies
To contribute to rebuilding trust and to demonstrate how it could improve lives if the parties worked constructively, the community committee initially identified a quick-impact project to refurbish local schools.

The project provided a way to open doors and engage with the community, but, in the medium term, the aim was to develop strategic, long-term, social-­investment projects that aligned business objectives with government priorities and community needs.

Case Study 1: Road Infrastructure. A strategic issue for the business was road safety. The community has long been affected by the poor condition of their main access road shared with the industrial water-treatment plant. With road accidents being the main cause of death within the oil and gas industry and one of the more significant causes of in­juries and fatalities among members of the public worldwide, in 2014, a road infrastructure project was implemented to help share the road safely with the community.

Knowing that a new road was a strong wish of local residents, the community committee agreed on the project with local sheikhs and assisted with the acquisition of permits and permissions for the work from government departments.

The 3.7-km road was completed in just 3 months, minimizing the disruption to local residents caused by construction dust and diversions.

The success of the community committee in promoting community development alongside business objectives was especially evident at the road-opening ceremony where provincial government and local council representatives, local sheikhs, community members, and the consortium were all in attendance.

Case Study 2: Gender Equality. A strategic issue for the business was the potential effect of latent conflict on operations, with large groups of unemployed youth with nothing to do. Women were identified as one stakeholder group able to influence youth behavior positively. In 2015, a gender-equality project was implemented that addressed the challenge that women experience fewer benefits from oilfield operations than men.

A community center for women was set up and has trained 336 women in subjects including basic literacy, sewing, handicrafts, and hairdressing. Female heads of households, widows, and women living in poverty were targeted. Business skills combined with free childcare enabled many marginalized women to set up their own businesses.

Twenty women’s volunteers, selected from low-income families, were also trained as community health advocates, making weekly household visits in Qarmat Ali to promote healthier lifestyles and build trust in local health services. To date, these volunteers have made 41,600 visits.

Challenges and Innovation
The consortium, with its strong commitment to adhere to international good practice to create a successful strategic social-investment portfolio, faced a number of challenges:

  • The consortium did not have a secure budget for projects, with all expenditure needing to be approved by the state-owned South Oil Company.
  • The business case for strategic social investment was not always clear, with the community tending to focus its needs on infrastructural projects.
  • The fragmented tribal nature of the community led to parochial requests that would only have benefited specific sections and not the community as a whole.
  • Given the seniority of committee members on the community committee, they had other commitments and responsibilities that they naturally had to deal with in addition to their assistance and support for this work.
  • A clear exit strategy for each project, to ensure that positive effects could be sustained, was not always evident with limited government capacity and budgets.

The consortium’s solution to these challenges was to create a sustainable development partnership with one of the more marginalized communities in Iraq, which had a transformative effect on operator/community relations and community well-being. The community committee, with representatives from the government, civil society, and the consortium, embedded creativity and originality into the partnership by

  • Supporting a multistakeholder process for the community to get involved in local development discussions
  • Building a stronger cooperative relationship between the government and community, promoting the legitimacy of government by aligning government priorities with local needs
  • Avoiding intracommunity jealousy or fragmentation by bringing all community stakeholders to the table for local development dialogue
  • Helping the community distinguish between local development issues and those related to operations and providing a means to resolve grievances
  • Ensuring a solid agreement on the roles and responsibilities of each partner for each community project before budget approval was sought
  • Involving the South Oil Company in the partnership and in all aspects of decision making to ensure a secure budget for community projects
  • Enabling the process to be community and government driven, while ensuring that oversight for community projects remains with the consortium

Business Outcomes
Since the agreement, partners have trusted each other to deliver on respective obligations, resulting in the following clear, positive business outcomes:

  • USD 5.44 million of community development projects were identified and implemented in line with government priorities.
  • No significant community disturbances and not one day of work stoppage occurred at the industrial water-treatment plant.
  • Because of increased industrial water injection, oil production in northern Rumaila has increased from 500,000 to more than 700,000 B/D.

This article, written by Special Publications Editor Adam Wilson, contains highlights of paper SPE 183110, “To the Edge and Back: Building Relationships With a Marginalized Community in Iraq,” by Ilya Bourtman, BP; Hassan Al-Mudhaffar, Christopher Boyd, and Brendhan Skerritt, Rumaila Operating Organization; and Nicholas Abrahams, SPE, Social Risk Strategy, prepared for the 2016 Abu Dhabi International Petroleum Exhibition and Conference, Abu Dhabi, 7–10 November. The paper has not been peer reviewed.

Reuters | 11 August 2017

KeystoneXL Opponents Vow Long Fight as Nebraska Hearing Concludes

Opponents of the Keystone XL pipeline vowed on 10 August to block construction of the controversial project if Nebraska regulators approve the proposed route later this year.

Nebraska regulators wrapped up a final public hearing a day early on 10 August on TransCanada’s proposed Keystone XL pipeline after 4 days of contentious exchanges between lawyers. They will make their final decision by 23 November.

After the hearing, two dozen landowners and other pipeline opponents vowed nonviolent civil disobedience if the commission rules in favor of TransCanada. The action, they said, would be similar to months-long protests in North Dakota led by the Standing Rock Sioux tribe against the Dakota Access pipeline.

“Standing Rock was a dress rehearsal compared to what this will be,” said Jane Kleeb, chair of Nebraska’s Democratic party and founder of antipipeline group the Bold Alliance, her voice cracking. “We are not going to let an inch of foreign steel touch Nebraska soil.”

Read the full story here.

Reuters | 24 July 2017

Backing of Workers, Communities Key to Libya’s Oil Revival

When the head of Libya’s state energy company visited Sharara oil field in early July, community leaders and workers crowded into a conference room to ask about jobs, training, and services for local people.

Mustafa Sanalla, chairman of Libya’s National Oil Corporation, greets guards at Sharara oil field near Ubari, Libya, on 6 July 2017. Credit: Aidan Lewis/Reuters.

When, they asked, would their villages start to see the benefit of the country’s rising oil production?

“You’ve been very patient,” Mustafa Sanalla reassured them, before adding: “You need to be patient a little longer.”

Libya’s National Oil Corporation (NOC) raised output to more than 1 million B/D at the end of June for the first time since 2013, a feat that seemed near impossible after the chaos that followed the toppling of Muammar Gaddafi in 2011.

The NOC did it by cajoling community leaders, shaming blockaders, and navigating a bewildering range of tribal feuds as it reopened fields and patched up infrastructure.

But the comeback, crucial to Libya’s survival, is fragile.

To keep it going, NOC chief Sanalla has to tour the country regularly, placating restive armed factions and local groups while at the same time tussling with the UN-backed government in Tripoli over budget and control over the oil sector.

Even if the NOC can continue to stop the port and field blockades that crippled Libya’s production in recent years, its goal of pushing production to 1.25 million B/D later this year will be difficult to achieve.

Output is already wavering because of problems linked to long shutdowns and a lack of maintenance and investment.

Idled pipelines have corroded, thieves have stolen copper wiring at desert oil facilities. No new drilling has been done for 3 years, and few foreign contractors have returned. Funds to replace and maintain infrastructure are badly needed.

“Unless we have the money, not only can we not increase production, we cannot sustain production,” Sanalla told Reuters as he flew back from the visit to Sharara and another southwestern field called El Feel. “Until now, we haven’t received one penny.”


Independent Project Analysis | 24 July 2017

Linking Sustainability Practices to Improved Capital Project Outcomes

Recently, Independent Project Analysis (IPA) partnered with the sustainability department of a major integrated oil company to study the effect of core sustainability practices on capital project outcomes. IPA’s robust database of capital projects all over the world, combined with research expertise, allowed it to measure the company’s sustainability approaches against other major companies and pinpoint areas that should be maintained or strengthened on future projects.

Sustainability is increasingly a key metric for capital projects, both in developing and developed countries around the world. As companies invest overseas or in their own backyards, sustainability issues must be well managed for a business to acquire and maintain its “social license to operate.” This social license “mandates” that to move a major project forward smoothly, the company must demonstrate it is a conscientious partner to the community.

Sustainability is commonly cited on corporate websites as a key value or practice, and companies are under pressure to demonstrate leadership in this area, which can encompass environmental preservation, heritage conservation, economic advancement, and institutional capacity building. However, the topic can be nebulous and difficult to measure. IPA was able to measure the integrated oil company’s sustainability approaches compared to others:

  • From IPA’s database of more than 18,000 capital projects, it identified a sample of about 200 projects globally that faced similar sustainability concerns
  • Representation of 49 owner companies, including major international companies and national companies in the oil and gas exploration and production, mining and minerals, chemicals, refining and distribution industries
  • Projects averaging total costs of approximately half a billion dollars, with many multi-billion-dollar investments

Read the full story here.

IPIECA | 24 July 2017

Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas

IPIECA has partnered with the United Nations Development Programme (UNDP) and the International Finance Corporation to develop a shared understanding of the implications of the UN SDGs for the oil and gas industry and how the industry can most effectively contribute. Their joint report, “Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas,” was launched at the UN High-Level Political Forum in New York in July 2017; the UN’s central platform for follow-up and review of the 2030 Agenda for Sustainable Development and the Sustainable Development Goals.

The Atlas explores the links between the oil and gas industry and the SDGs and seeks to facilitate a shared understanding of how the industry can most effectively support the achievement of the SDGs. The oil and gas industry is committed to responsible and sustainable business, as well as serving as an essential partner to meet the challenge of achieving the SDGs.

The Atlas outlines the typical roles and responsibilities of key stakeholders in enhancing the industry’s contribution to sustainable development. It presents examples of good practice in the industry, alongside existing knowledge and resources on sustainable development that could help the industry make useful contributions to the SDGs. The Atlas presents the SDGs goal by goal, focusing on the contribution the oil and gas industry can make to each goal by integrating it into core business operations and by identifying opportunities for oil and gas companies to collaborate with other stakeholders and leverage experiences and resources in support of the goal. Each chapter also includes case studies of innovative and sustained efforts by companies, often working collaboratively.

Find the report here.

The Denver Post | 3 July 2017

Anadarko Caps More Than 6,000 Flowlines To Comply With State Order Following Firestone Blast

Anadarko Petroleum said late on 30 June that it has tested more than 4,000 active oil and gas lines and plugged another 2,400 inactive ones per a state order issued after a fatal home explosion in Firestone, Colorado, in April.

In this 4 May 2017 file photo, workers dismantle the charred remains of a home at the location where a gas line leak explosion killed two people inside their home in Firestone, Colorado. Credit: Brennan Linsley/Associated Press.

“We are looking at everything,” said John Christiansen, a spokesman for the Houston-area company. “We aren’t taking any chances.”

On 17 April, gas from an abandoned flowline still attached to an Anadarko well in Firestone’s Oak Meadows neighborhood ignited in the basement of 6312 Twighlight Ave., killing Mark Martinez and Joey Irwin as they worked on a water heater.

Right after the explosion, Anadarko shut down 3,000 vertical wells similar to the one implicated in the blast and, 10 weeks later, has brought only 30 of them back into production.

The company has pledged to permanently shut-in a half dozen wells located near the Oak Meadows neighborhood, which Century Communities built on top of an old oil and gas field criss-crossed with numerous flowlines.

The 2,400 inactive lines plugged under the state order were 2 or 3 in. in diameter. As an added precaution, the company capped another 3,600 1-in. lines no longer in use, bring the total number of abandoned lines to 6,000 plus.

Christiansen said the bulk of the abandoned lines were located on tank farms, or facilities that store and process oil and gas coming from surrounding wells. In Weld County, Colorado, Anadarko has switched to a tankless system where oil and gas is transported on larger pipelines and handled at a centralized facility.

Also per the state order, the company said it has pressure tested more than 4,000 active lines and that 99.6 percent had passed. The 16 that failed are undergoing repairs and will be retested.

“There are no hydrocarbons flowing through them,” Christiansen said.

Read the full story here.

Reuters | 19 June 2017

Tunisia Gasfield Protesters Reach Deal, Production To Restart: Government

Protesters blockading oil and gas fields in southern Tunisia have reached an agreement with the government to end a sit-in and allow production to restart immediately, the government and protesters said on 16 June.

Protests over jobs in southern Tataouine and Kebili provinces hit oil and gas production in a region where French company Perenco and Austrian producer OMV operate. The deal calls for jobs in oil companies and development projects.

Labor Minister Imed Hammami told a press conference the agreement would allow production to restart immediately.

“It is an agreement that addresses all our demands for the region, and we will end the sit-in,” Tarek Haddad, one of the protest leaders at the Kamour site, told Reuters.

The deal calls for 1,500 jobs in oil companies, a budget of 80 million dinars (USD 32.66 million) for a development fund and another 3,000 jobs in environmental projects.

Protesters were pressing demands for jobs and a share of the country’s energy wealth and forced the closure of two oil and gas pumping stations in Kamour in Tatatouine and in Kebili.

Read the full story here.

Bloomberg | 19 June 2017

Blast Backlash Hangs Over Drillers

Two months after a Colorado home exploded near an Anadarko well, the reverberations are still rattling the oil industry, driving down driller shares and raising fears of a regulatory backlash.

The 17 April blast, which killed two people and injured a third, was followed a month later by a second deadly explosion at an Anadarko oil tank in the state. The incidents have revived calls to restrict drilling near populated areas within Colorado’s rich Niobrara shale formation, the fourth-most productive shale basin in the US. They have also spurred the state to order new inspections around thousands of oil and natural gas wells.

While the repercussions aren’t expected to kill off operations in Colorado, they could raise costs for an industry already walking a financial tightrope, with oil prices down 14% this year. Since 2 May, when authorities publicly tied Anadarko to the home explosion, company shares have lost about 14%, while the S&P 500 Energy Index is down less than 1%.

“Something like that will be remembered,” said Joe Ryan, an environmental engineering professor at the University of Colorado at Boulder who studies the industry. “Even if statistically it’s infrequent, that may be the kind of thing that pushes the public to say, ‘we have to see improvement.’”

Other drillers active in Colorado have also seen their shares slide, with Extraction Oil and Gas falling 8% and Noble Energy down almost 5%.

Read the full story here.

Forbes | 7 June 2017

Column: Another Hydraulic Fracturing Time Bomb Lurks Beneath the US

You’ve heard about the earthquakes; the controversial claims of flammable tap water; and the potential contamination of streams, lakes, and drinking water aquifers, but the system that’s supposed to pay for these calamities may itself be a pending disaster.

Machinery used to fracture shale formations stands at a Royal Dutch Shell hydraulic fracking site near Mentone, Texas, on 2 March 2017. Credit: Matthew Busch/Bloomberg.

Most states protect taxpayers from cleanup costs by requiring oil and gas producers to buy a surety bond that will pay in the event of a disaster. But those bond amounts, nearly everywhere in the US, are woefully inadequate to pay likely cleanup costs, said Ryan Kellogg, a professor of public policy at the University of Chicago.

“In just about any state, the bond amounts are absolutely laughable,” Kellogg said, calling the system a sham. “The bond amounts are minuscule compared to what reclamation costs often turn out to be.”

And reclamation projects are likely to multiply in coming decades as the more than 1.7 million hydraulically fractured wells in the US age.

The Mineral Leasing Act requires a bond of USD 10,000 for a single lease on federal land. With an average of five wells per lease, that comes to USD 2,000 per well. That number was set in 1960 and has never been increased, according to economists, even to adjust for inflation. Yet, a well blowout can cost tens of millions of dollars to clean up, according to various studies of this issue. A well that’s merely orphaned—abandoned without being properly sealed—costs about USD 13,000 to reclamate.

Sometimes, the responsible party disappears by the time cleanup costs become evident.

“Sometimes you’re able to go back and find the firms and actually make them liable for doing the cleanup,” said Kellogg, an associate with the Energy Policy Institute at Chicago. “A lot of the time … the taxpayers have to clean it up because the firms that caused the problem are long gone and you can’t find them or they’ve gone bankrupt.”

States have bond requirements of their own, but most of those are also inadequate, economists say.

Read the full column here.