San Antonio Express-News | 9 July 2015

Farmers Would Benefit From Crude Oil Exports, too, Oil Industry Leaders Tell House Agriculture Panel

The House Agriculture Committee convened a hearing on 8 July to study how crude exports could affect rural America, but, instead of gleaning insights from farmers or livestock producers, the panel turned to oil industry leaders.

Over 2 hours, those witnesses—including Continental Resources Chief Executive Officer Harold Hamm and Texas Railroad Commission Chairman David Porter—argued that oil exports could drive more domestic crude production, with benefits rippling nationwide.

“Crude oil exports would spur new American energy production, foster economic growth, and provide direct benefits to rural America and our nation as a whole,” said Porter, who heads the Texas Railroad Commission that oversees energy in the state.

Hamm stressed that recent surges in US oil and gas development have yielded big benefits for landowners and mineral rights holders, including farmers who are using royalties and rental payments from drilling to sustain their operations.

“Royalty payments to more than 10 million landowners across America have contributed greatly to the support of the family farms and ranches and the rural way of life,” Hamm said.

EHS Journal | 6 July 2015

BP Agrees To Settle Deepwater Horizon Claims for USD 18.7 Billion

BP announced on 2 July 2015 that its United States Upstream subsidiary, BP Exploration and Production (BPXP), has executed agreements with the US federal government and five US Gulf Coast states to resolve claims made by federal, state, and more than 400 local government entities. In the agreement, BP has committed to paying up to USD 18.7 billion spread over 18 years.

Settlement Terms
Terms of the proposed agreement are as follows:

  • Clean Water Act (CWA) civil penalty—USD 5.5 billion over 15 years.
  • Natural Resource Damages (NRD)—USD 7.1 billion to the United States and the five Gulf states over 15 years. This is in addition to the USD 1 billion already committed for early restoration. BPXP will also set aside an additional USD 232 million to cover any further natural resource damages that are unknown at the time of the agreement.
  • Economic and Other Claims—USD 4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states (Alabama, Florida, Louisiana, Mississippi, and Texas).
  • Local Governments—Up to USD 1 billion will be paid to resolve claims made by more than 400 local government entities.

The NRD and CWA payments are scheduled to start 12 months after the agreement becomes final. Total payments for NRD, CWA, and state claims will be made at a rate of approximately USD 1.1 billion a year for the majority of the payment period.

The New York Times | 1 July 2015

Oklahoma Court Rules Homeowners Can Sue Oil Companies Over Quakes

The Oklahoma Supreme Court ruled on 30 June that homeowners who have sustained injuries or property damage from rampant earthquakes they say are caused by oil and gas operations can sue for damages in state trial courts, rejecting efforts by the industry to block such lawsuits from being decided by juries and judges.

The case has been closely watched both by the energy industry and by hydraulic fracturing opponents across the United States, and the 7-to-0 ruling opens the door for homeowners in a state racked by earthquakes to pursue oil and gas companies for temblor-related damage.

Goodmans via Mondaq | 16 June 2015

Canada Enacts Mandatory Payment Disclosure Rules

The government of Canada recently enacted the Extractive Sector Transparency Measures Act, which imposes new mandatory reporting standards for payments made by Canadian extractive companies (mining, oil, and gas) to foreign and domestic governments, including aboriginal entities. The act solidifies Canada’s international commitment to deter and detect corruption and is intended to align the Canadian reporting requirements with those of the US and EU.

The act was introduced into the House of Commons in October 2014 and received royal assent on 16 December 2014. The Act came into force on 1 June 2015.

Overview of the Act
The Act applies to any entity, including controlling entities, engaged in the commercial development of oil, gas, or minerals. The commercial development of oil, gas, or minerals includes exploration, extraction, and the acquisition or holding of a permit, license, or lease or any other authorization to carry out the exploration or extraction of oil, gas, or minerals. The entity must also be listed on a stock exchange in Canada or have a place of business in Canada, do business in Canada, or have assets in Canada and, for at least one of its two most recent financial years, meet at least two of the following conditions:

  • Have at least CAD 20 million in assets
  • Have generated at least CAD 40 million in revenue
  • Employ an average of at least 250 employees

Payments to be Reported
Each applicable entity must report all payments to foreign and domestic governments, including aboriginal groups, made in relation to the commercial development of oil, gas, or minerals that are at least in the prescribed amount for a particular category of payment or, where no amount is prescribed, CAD 100,000.

Such payments include

  • Taxes other than consumption taxes and personal income taxes
  • Royalties
  • Fees, including rental fees, entry fees, and regulatory charges, as well as fees or other consideration for licenses, permits, or concessions
  • Production entitlements
  • Bonuses, including signature, discover, and production bonuses
  • Dividends other than dividends paid as ordinary shareholders
  • Infrastructure improvement payments
  • Any other prescribed category of payment

The Hill | 15 June 2015

Oil Lobby Confronts Image Problem in Arctic Drilling

The oil industry has identified public perception as one of the top issues it faces as it seeks to drill in the Arctic Ocean.

American Petroleum Institute (API) officials said that, throughout the world in places such as Canada and Russia, oil drillers have a century of experience operating in Arctic conditions and they are not worried about their ability to drill north of Alaska.

But convincing the public of those qualifications is proving a challenge.

“We need to secure public confidence,” Richard Ranger, a senior advisor at API who oversees Arctic drilling policy for the group, told reporters.

“There’s obviously a significant debate, and we recognize the fact that the idea that we can operate safely and have operated safely in the Arctic is as not broadly realized across the public as we think it should be,” he said.

As oil producers eye the largest untapped hydrocarbon resource in the world, where the federal government estimates up to 36 billion bbl of oil and 137 Tcf of natural gas sit, it is important the industry gets its ducks in a row.

Royal Dutch Shell is preparing to drill exploratory wells in northwest of Alaska in the Chukchi Sea this summer, though other companies such as ConocoPhillips and Statoil hold leases there as well and more lease sales are likely in the coming years.

The industry is trying to explain to the public that it is safe and that environmental damage is rare, but it is a difficult task, Ranger said.

“Our challenge as an industry and as people who work in the industry is, it’s too easy for us to default to technical arguments, and people’s eyes simply glaze over,” he said.

Corporate Social Responsibility Vital to Industry Operations

Corporate social responsibility (CSR) programs are now a critical part of oil and gas project development. As companies continue to work in more densely populated communities, they have gotten better at working with local authorities to protect the interests of the people their operations affect. However, plenty of work remains to be done to improve CSR efforts, a group of experts said.

Houston, TX - OTC 2015 - Panel speakers during the Corporate Social Responsibility: Technical Sessions at the Offshore Technology Conference here today, Thursday May 7, 2015. The OTC hosts the meeting at the NRG Park which has over 90,000 attendees from around the world to see the latest technology in the energy industry. Photo by © OTC/Nathan Weber 2015 Contact Info: todd@corporateeventimages.com Keywords: 15OTC_Technical Sessions

Panelists discuss corporate social responsibility at the Offshore Technology Conference on 7 May 2015.

In a panel discussion held at the Offshore Technology Conference in Houston, representatives from five national and multinational companies discussed the role CSR programs will play in the industry moving forward.

Mary-Grace Anderson said that, as the global demand for energy increases, CSR will become even more essential to industry operations. She is the vice president of safety, environment, and social performance at Shell.

Anderson said operators need to exploit a variety of energy sources to meet the rising global demand, and this need will force them to work more frequently in urban environments. Focusing on CSR will make it easier for operators to mitigate the possibility of unexpected issues happening within these environments, and early engagement with local communities will help build trust and allow operators to better share in the benefits of a project.

“In developing projects and in operating our facilities, we need to balance short- and long-term interests,” Anderson said. “Integrating societal and environmental considerations with our technical, operational, and commercial considerations into our project management processes and our business decisions from the earliest stages of our projects … is where we can make the most difference.”

Anderson spoke about the need for further collaboration between operating companies, local communities, and governments, focusing in particular on Shell’s global investment programs. Shell spent approximately USD 160 million on voluntary social investment in 2014, and a big part of its work was in the development of science, technology, engineering, and mathematical programs for students, parents, and educators. It also has spent more than USD 3 billion on goods and services from minority- and female-owned businesses in the last 3 years.

“Our intention is to … help each project become sustainable in the long term through collaborative efforts with communities and partners, and this can involve corporations, academia, and regulators. We find the larger the collaboration we can have, typically the better solutions we get,” Anderson said.

Natalie Stirling-Sanders, a global manager of local content, supplier diversity, and sustainable procurement at ExxonMobil, discussed her company’s plan for sharing the benefits of local content with the local community.

Stirling-Sanders said two of the key elements of developing a CSR program were understanding the needs of the local community and assessing those needs at an early stage. By finding out what the community wants early on in a project, the company can then customize its front-end definition to fit those wants. It is also crucial to maintain a regular flow of information with people in the community and maximize the existing resources.

A well-executed CSR program is not the same as a philanthropic effort, Stirling-Sanders said.

“In a lot of situations, the industry finds itself with communities that want more than philanthropy,” she said. “They want jobs, contacts, better infrastructure, and better education. When CSR is done well, there can be a symbiotic relationship between businesses and community.”

Ana Paula Grether presented the outline of Petrobras’ CSR policy. Grether, an advisor in social responsibility guidance and practices with the company, said it has launched social investment initiatives in select areas of operation that focus primarily on job protection, community relations, and environmental conservation.

Grether said that, through these initiatives, the company created more than 20,000 jobs in the last 8 years and conserved more than 935,000 hectares of wildlife habitat in Brazil, numbers that highlight its goal to improve the communities in which it works.

“For us, social responsibility is a mechanism for integrating management of Petrobras business and activities in its relations with our communities,” Grether said.

Geneviève Mouillerat, vice president of global projects and construction at Total, spoke mostly about the work her company has done to support local content on the CLOV project offshore Angola. Mouillerat, who directed the project, said CSR efforts centered on creating shared value for both the country and the company, in part by establishing employee pride in the work being produced.

Training programs are at the heart of Total’s efforts to build value. Mouillerat said the company trained Angolan employees for 2 years before hiring them to work on its floating production, storage, and offloading unit. The company also hired Angolans to work in its fabrication yards at an early stage in the project.

“In-country value is evolving to include the individuals working in the country,” Mouillerat said. “Personally, I’m proud to be part of this challenge and part of this project where we had so many Angolans trained and working on the facilities.”

Paulino Jeronimo, an executive administrator at Sonangol, said that, despite these improvements, there is still plenty of work needed to make local content in Angola more economically viable for the country.

“In terms of quality, we are almost there, but we’re still missing one important point, and that is the pricing. We want to continue working with operators to help become more competitive,” he said.

The panelists each talked about the importance of establishing a clear strategic emphasis during the late stages of a project that accounts for the needs of the local community. Stirling-Sanders said ExxonMobil had developed a system to address the social issues that arise in the shift to the production stage. However, she said communities must be prepared for the economic realities that come with post-project stage work, as the shift to production means the loss of construction jobs typically filled by local content.

“There is a lot of short-term work and lots of construction activity in [the project phase], and, especially for the community, it’s a huge adjustment when you move into production. I think one of the keys is helping all the stakeholders understand that that’s what it looks like from the very beginning and assure that the expectations are understood,” Stirling-Sanders said.

Stephen Whitfield is a Staff Writer for Oil and Gas Facilities.

Borden Ladner Gervais via Mondaq | 20 May 2015

Alberta Court of Appeal Decision a Reminder of the Importance of Municipal Approvals Before Oil and Gas Operations

The Alberta Court of Appeal recently issued a tough reminder that oil and gas service companies need municipal approvals to operate—and not just assumptions or assurances that those approvals will come.

Background
In Site Energy Services Ltd. v Wood Buffalo (Regional Municipality), 2015 ABCA 106, the applicant, Site Energy, leased four lots in the Hamlet Commercial District for temporary offices, parking, washrooms, security, and fuel storage to support its work on a pipeline project. It applied to the respondent, Wood Buffalo, for development permits. Wood Buffalo refused the application because it categorized the use as an “Industrial Support Facility”, which was neither a permitted nor discretionary use in the district under the land use bylaw.

Rather than appeal the refusal, Site Energy continued operating because it anticipated reaching “an understanding” with Wood Buffalo. It had, on other occasions, commenced operations without permits in anticipation of subsequent approval.

Wood Buffalo issued a stop order, requiring Site Energy to remove its equipment and buildings. Site Energy appealed the stop order to the Subdivision and Development Appeal Board, arguing that the use could and should be recategorized as a “business support facility,” a discretionary use in the district. The board upheld the stop order and appears to have reasoned that it could not issue development permits for the alternate use because only the stop orders (and not the earlier refusal) had been appealed.

The Daily Signal | 13 May 2015

The Valley of Missed Opportunity: One Town’s Fight for Economic Revival

Marian’s Pizza Shack sits 10 miles north of the Pennsylvania line, an invisible boundary that separates this small business from economic opportunity.

After 23 years in business, owner Marian Szarejko has decided to sell her pizza shack.

“There are no jobs here,” Szarejko said. “Business has gone down so much that I am dipping into my savings just to keep this afloat.”

Szarejko’s decision echoes a common theme that has plagued the southern tier of upstate New York for years—a lack of economic development.

“If I owned a place in Pennsylvania, I wouldn’t be thinking of closing. I would be thinking about expanding,” Szarejko said. “The difference is they did fracking.”

The issue of high-volume hydraulic fracturing, commonly referred to as fracking, has emerged as a contentious national debate. Communities and states are deciding whether to embrace or ban the new form of natural gas extraction.

But nowhere is the issue as real as it is for upstate New Yorkers who see the prosperity of neighboring communities in Pennsylvania.

New York and Pennsylvania are two of five states that sit above the nation’s largest natural gas field, the Marcellus Shale.

New York bans fracking. Pennsylvania allows it.

Business for Social Responsibility | 7 April 2015

Column: Don’t Forget the Ethics

Those of us in the corporate responsibility profession often assume that definitions of “good” and “bad” are easily defined. The vocation is full of binary assumptions and pseudoscientific rankings: Reach the top of this index, adhere to that code, apply this new standard. This is the stuff upon which the profession is made.

There are many good reasons why this is the case. Environmental limits are scientifically defined. Human rights are clearly set out in declarations and covenants on which near-universal international consensus exists. Development that lifts people up from poverty is undeniably a good thing.

But I feel uneasy by this sense of certainty. Something is niggling inside of me—is our thinking too lazy?

There are many times when “good” and “bad” are not easily defined. Consider each of these scenarios, where wise and responsible people could reach very different conclusions on what the “right” course of action should be.

  • Plenty of countries have poor human rights records and inadequate governance. Is it “right” for companies to stay clean by not entering those markets, or is it “right” for companies to invest in and engage with them to improve human rights protections?
  • The entertainment industry has come under criticism for the portrayal of torture and human rights abuses in film, TV, and games. Are films that portray torture promoting torture or exposing it?
  • Governments have a duty to enforce laws that protect the rights of their citizens. But how do we balance surveillance activities without violating the right to privacy? When is it right for a company to collaborate with law-enforcement agencies?
  • The printing of 3D objects has the potential to offer huge social and environmental benefits. But what should companies do to make sure that the software and hardware making 3D printing available isn’t misused for nefarious applications?
  • And my favorite one: Is it “right” to design ever more sophisticated weapons systems that are more likely to hit their target?

While we can always refer to universal standards and international codes, they often leave significant room for maneuver in how to achieve them. Indeed, different schools of thought in ethics will lead us to different courses of action: A utilitarian focused on the greatest happiness of the greatest number would reach a different conclusion than someone taking a rights-based approach. For some, intent matters more than outcomes, and for others, outcomes matter more than intent.

 

The Associated Press | 18 February 2015

Report Says Dutch Authorities Put Gas Revenues Ahead of Citizen Safety

An independent report into natural gas drilling that has triggered a rash of small earthquakes in the northern Netherlands said on 18 February that energy companies and the government put production ahead of people’s safety in their decision making.

The Dutch Safety Board has issued a report of an investigation into the manner in which the safety of the inhabitants of the province of Groningen was taken into account when decisions on extraction of natural gas in Groningen in past years were made.

The Dutch Safety Board reached the conclusion in a report prompted by dozens of small but damaging earthquakes caused by gas drilling that have rocked the northern province of Groningen for years, causing structural damage to thousands of buildings.

Companies and government bodies involved in drilling, including Shell, ExxonMobil, and the Ministry for Economic Affairs, formed a “closed system” in which “security concerns in practice played an inferior role,” the safety board said.

It added that they should now repair their relationship with locals in part by “acknowledging that, until 2013, they did not take sufficient care with the security of citizens of Groningen.”

Blakes Lawyers via Mondaq

Procedures Introduced To Administer and Coordinate First Nation Consultation

On 4 February 2015, the Aboriginal Consultation Office (ACO) and the Alberta Energy Regulator (AER) released the Joint Operating Procedures for First Nations Consultation on Energy Resource Activities. The procedures were released in accordance with Energy Ministerial Order 105/2014 and Environment and Sustainable Resource Development Ministerial Order 53/2014.

The procedures expand upon the Government of Alberta’s Policy on Consultation with First Nations on Land and Natural Resource Management released on June 3, 2013, and the Government of Alberta’s Guidelines on Consultation with First Nations on Land and Natural Resource Management released on 28 July 2014.

Purpose
The purpose of the procedures is to help facilitate First Nation consultation related to energy projects in Alberta. The procedures introduce new processes to administer and coordinate the operations of the ACO and the AER on matters related to First Nation consultation. The procedures also encourage the ACO and AER staff to  engage one another informally, as needed, to coordinate the processing of individual energy resource development files or applications.