West Coast Region


On the West Coast, Alaska is in the news with promising new develop- ments. The USGS issued updated es- timates of recoverable oil and gas and Interior Secretary Salazar announced a new lease sale for the North Slope. In California oil and gas producers battle to prevent severance taxes and plan for improved pipeline safety.


Alaska in the News


The Federal government has recently an- nounced significant news regarding explora- tion in Alaska and especially the North Slope. The United States Geological Survey released in May the new estimates of recoverable gas and oil for Alaska. On June 17th Secretary of the Interior, Ken Salazar announced a new lease sale for the North Slope. Salazar directed the Bureau of Land Management to hold a lease sale in the National Petroleum Reserve-Alaska. The accelerated lease sale will take place before the end of 2011. The timing of the lease sale announcement comes one month after the USGS estimated 18-23 Tcf of economically recoverable oil and gas for the National Petroleum Reserve-Alaska (NPR-Alaska). Extensive environmental stud- ies were available prior to announcement of the new lease sales.


The 18 Tcf estimate is based on a natural gas price of $8/Mcf. As the price of gas goes up, so do the estimates of recoverable gas. At a price of $10/Mcf, 32 Tcf gas is economically recoverable if the natural gas pipeline from the North Slope is built. The analysis also made estimates of economically recoverable undiscovered oil at 273 million bbl based on a market price of $72/bbl and 500 million bbl at $90/bbl. The estimates are based on USGS’s 2010 resource assessment for Alaska and update previous 2003 economic analysis based on the 2002 resource assessment of NPRA. All estimates of economically recov- erable oil depend on gas exploration, because oil is expected to be discovered incidental to gas exploration in NPRA. The lead scientist for USGS on the NPRA assessment, Emil Attanasi, says that “estimates are based on 2010 costs and technology and these results could change over time.” Because there is no pipeline from Alaska’s North Slope, the eco- nomic assessment anticipates a 10-20 year lag between discovery and production for NPRA. The resource estimates may promote renewed exploration on Alaska’s North Slope.


Excerpted from “Salazar Announces Expe- dited NPR-A Lease Sale by Year End,” www.


PTTC


ogj.com/index/article-display/5205374171/ articles/oil-gas-journal/exploration-develop ment-2/20100/june-2011/salazar-announces. html and “USGS sees 18-32 TCF Recover- able in NPR-Alaska,” www.ogj.com/index/ article-display/4692087740/articles/oil-gas- journal/exploration-development-2/reserves /20100/may-2011/usgs-sees_18-32_tcf.html.


Pipeline Safety Regulations an Issue for California Legislators


Democratic Senators from California, Barbara Boxer and Dianne Feinstein, recently spon- sored Senate bill 234 in the 111th Congress. The bill, Strengthening Pipeline Safety and Enforcement Act of 2011, is partly in response to a pipeline accident in San Bruno, CA in September 2010. Concerns were raised over the operating pressure of the pipeline run- ning through San Bruno. The new bill would require pipeline operators to verify the maxi- mum allowable operating pressures based on the weakest section of a pipeline. House Rep- resentative Jackie Speier introduced a House version of the bill, The Pipeline Safety and Community Empowerment Act of 2011. The House bill, adds public education programs to the responsibilities of the pipeline operators. U.S. pipeline transmission systems extend over 292,000 miles and the focus on safety comes after several incidents in recent years. In addition, Federal regulations apply to 2.1 million miles of distribution lines. These regulations are enforced by state agencies, which also have jurisdiction over gathering lines that are exempt from federal regulation. One of the provisions of the House bill would be the notification of all property owners and residents located within 2,000 feet of a natural gas transmission line.


Based on “Congress Mulls Different Ap- proaches to Pipeline Safety,” The American Oil & Gas Reporter, April 2011, p. 35.


California Severance Tax


California legislators continue to promote plans to use severance tax revenue to reduce California’ budget deficit. Assemblyman Warren Furutani from South Los Angeles introduced a 12.5% severance tax on oil and natural gas production. His plan, AB 1326, would dedicate all revenue to higher educa- tion, which has taken a hit from the California budget deficit. Hormoz Ameri, chairman of the California Independent Petroleum As- sociation (CIPA), told a recent audience at the CIPA annual convention that, “California


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always has consumed more crude oil and natural gas than it produces.” He noted that “California also produces the cleanest and most environmentally regulated oil on the planet.” Supporters of AB 1326 say the bill is not a tax, since it is designed to fund a spe- cific program and is therefore revenue neutral. Ameri called the AB 1326 severance tax bill “an absolute job killer.” No matter what it is called, a 12.5% tax would hurt the California petroleum industry. Currently California taxes are similar to other producing states. Impos- ing the tax would make it difficult for produc- ers to sell properties or assets and it would be difficult to attract investment or new capital.


Based on “California Legislators Keep Sever- ance Tax Alive,” The American Oil & Gas Reporter, May 2011, p. 163-166.


Regulations Drive Design


The Environmental Protection Agency’s newest regulations on natural gas engine emissions; Spark Ignition New Source Per- formance Standards is 1.0 grams of nitrogen oxide, 2.0 grams of carbon monoxide and 0.7 grams of volatile organic compounds per horsepower-hour. These stringent require- ments to lower engine emissions are demand- ing improved engine design and encouraging buyers to make decisions on engine capac- ity. Two strategies are currently in use for designing more efficient natural gas burning engines; lean-burn engines with oxidation catalyst after-treatment, and rich-burn engines with a three-way catalyst after-treatment. Lean-burn engines are limited to engines larger than 600 horsepower. Selective catalytic reduction for lean-burn engines can


achieve lower NOx emissions and is a proven technology. Rich-burn engines have a higher air-to-fuel ratio control and provide more flexibility for changes in future emission standards. However, the maximum efficiency level requires monitoring of the air-to-fuel level to maintain emissions standards. Lean- burn engines tend to provide longer engine life and lower operating cost, but have limits for achieving newer emission standards. Buyers want the best of both designs and that is the challenge for engine manufacturers. En- gine designers and manufacturers are working closely with EPA to meet guidelines and provide practical and cost-efficient engines.


Excerpted from “Engine Design Driven by Regulations,” The American Oil & Gas Re- porter, May 2011, p. 139, 141.


June 2011 Engine Emission


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