Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

On Tuesday, February 26, the Louisiana Legislature adjourned a special session called by newly-elected Governor Bobby Jindal in the hope of enacting sweeping changes to Louisiana ethics laws relating to elected officials and other state administrators. The session resulted in the passage of a number of bills designed to increase transparency with respect to state officials’ financials, to limit potential influence by lobbyists, and to reduce potential conflicts of interest in state officials’ dealings with state agencies.

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By Katie Caswell

The House Ways and Means Committee has introduced HR 5351, the Renewable Energy and Energy Conservation Tax Act of 2008, which eliminates the manufacturing tax credit for major oil and gas companies and locks the credit at six percent for other producers and refiners. Further, this bill would force oil and gas companies to change the manner in which foreign tax credits are calculated and claimed for resources extracted overseas. HR 5351 would raise taxes on current energy companies by $17.5 billion and transfers the funds to energy sources such as wind, solar, geothermal, ethanol, and other renewable energy sources in the form of tax credits and bonds.

http://www.govtrack.us/congress/billtext.xpd?bill=h110-5351

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The Energy Information Agency reported as follows in its September 13, 2007, report:

Since Wednesday, September 5, natural gas spot prices increased as tropical storms threatened to disrupt supplies and pipeline explosions in Mexico stirred concerns of supply security.  Crude oil recorded yet another record high, increasing over $4 per barrel to nearly $80.

Predictions for LNG markets continue to be mixed.  LNG Week in Review quotes an analysis that predicts that, as warm weather has abated across the United States, LNG import volumes have declined and predicts that gas prices will favor European destinations for LNG until next spring.  Platts LNG Daily quotes another that global LNG supplies will grow by 25% in 2008, spurring a 40% increase of LNG imports to the United States.  Platts also quotes other predictions, however, that emphasizes start-up delays and lag time before U.S. projects meet full output capacity.

The EIA also reports that:

• Storage overview.  Several pipeline companies have issued restriction notices to interruptible storage service (ISS) customers.
• Northwest Pipeline Corporation asked shippers to keep their nominations at or below 440,000 Dth at the Meacham compressor station.

Southern Natural Gas Company announced that the 20-inch Gate 6 Toca Loop line in Louisiana is out of service, and the company anticipates that it will return to service at the end of October. Furthermore, the 20-inch Main Pass Franklinton line, also located in Louisiana, was expected to return to service by September 18.  As a result of the outage on the Franklinton line, the Bayou Gentilly and Delacroix points in Louisiana also will remain out of service for the same duration.

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Since Wednesday, August 29, natural gas spot prices increased in most markets (exceptions were Florida and Rocky Mountain region).  Crude oil was up over $2 per barrel.

Predictions of an underuse of an LNG regasification capacity continue.  One report is that if the 22 LNG terminals that have been approved for construction are built, their combined regasification capacity could reach 349 Bcm/y.  (If US LNG consumption grows 6% annually, consumption will total 46 Bcm/y by 2020.)

The EIA also reports that:

-  Florida Gas Transmission Company (FGT) issued an Overage Alert Day for September 5 with a 25 percent tolerance level as a result of high temperatures in its service territory.  FGT announced that it would not interrupt previously scheduled market area interruptible transportation service below the elapsed-prorated-scheduled quantity.  Furthermore, on September 5, FGT announced maintenance work beginning on September 6, which is expected to last until September 8.  The unscheduled maintenance is on the larger of the two units located in Mississippi at Tennessee Carnes Interconnect, upstream of FGT Compressor Station.  Because of the maintenance, FGT announced that during the outage the company will schedule up to about 950,000 MMBtu/day, whereas, normally, the company would schedule up to 1,150,000 MMBtu/day.

-   Colorado Interstate Gas Company announced on August 30 that it is undertaking maintenance at the Beaver Compressor station located south of Springfield, Colorado. One unit at the station will be out of service from September 6 to 30.  Capacity will be reduced to 250 MMcf/d from 262 MMcf/d. 

-   El Paso Natural Gas Company announced on September 1 that there was potential for high linepack conditions on its system.  The Washington Ranch storage facility located in Eddy County, New Mexico, is currently on maximum capacity for injection.  Furthermore, the company announced a strained operating condition warning, which was cancelled on September 3.

-   Transco Gas Pipeline Corporation released a notice on September 4 regarding firm backhaul transportation service for winter 2007-2008.  During September 4 to 11, Transco will be considering requests for firm backhaul transportation service for up to 200,000 decatherms per day (Dth/d) with a primary path from the Northeast, Station 210 in Zone 6 to Northeastern Louisiana, station 65 in zone 3.  The service period will be from October 1, 2007, through April 30, 2008.

From the EIA

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By Joe Giarrusso: 

In Louisiana, a lawsuit is generally deemed abandoned when the parties fail to take any step in its prosecution for three years.  This rule is operative without any formal order.  La. Code Civ. P. art 561.  However, Act 361 of 2007 extended the period for abandonment to five years where (1) the action was initiated prior to August 26, 2005, and was not previously declared abandoned under the general three year period, and (2) the party proves that the failure to take a step in the prosecution or defense of the suit was caused by or was a direct result of Hurricanes Katrina or Rita.  The revision became effective July 9, 2007.   Click here to read the Act.

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Since Wednesday, August 15, all prices reported in the weekly chart (for both natural gas and crude oil) have decreased as Hurricane Dean failed to have a significant impact on domestic production in the Gulf of Mexico, and temperatures moderated demand.  Natural gas volumes in storage continue to increase.

The EIA also reports that:

• Northwest Pipeline Company announced that effective gas day August 22, and until further notice, injection requests for interruptible storage capacity at the Jackson Prairie storage facility in Washington State will not be accepted. Furthermore, all interruptible storage holders that have a balance in the storage facility must bring their storage balance to zero by September 7, 2007. Park and loan service remains available on a limited basis at the Jackson Prairie facility.

• Questar Pipeline Company announced that it will be performing piping modifications between September 18 and 19, 2007, as part of the Southern System Expansion II project. To facilitate the work, Mainline 40 will be taken out of service from the Fidlar Station in Utah to the Green River block valve, located 24 miles west of Fidlar. In all, the pipeline plans on shutting in 18 points and reducing nominations to zero during the modifications. In addition, the Mainline 40 capacity will be reduced to about 330,000 decatherms per day for the 2 days. Nominations are expected to return to normal for gas day September 20.

• Dominion Gas Transmission Company took the Smithburg station in Virginia out of service between August 22 and 23 for work related to a planned expansion of the station. During the outage, producer compression in bubble 4403 was shut in.

• Southern Natural Gas Company announced that it has experienced an unscheduled outage at the DeArmanville compressor station located on the north system in eastern Alabama. As a result of this outage, Southern may be required to limit interruptible capacity in Group 4 – Chattanooga Group, Group 13 – East Tennessee Group, and Group 59 – Tallapoosa Group and/or limit deliveries to 6 percent hourly entitlement rights. The limitation of interruptible capacity is supposed to remain in place until further notice

As reported by the Energy Information Agency

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In preparation for hurricane season, which began on June 1, the Minerals Management Service has established a web site that brings together extensive hurricane-related information and resources. The web site is designed to describe and explain improvements instituted since Hurricane Season 2005, when Hurricanes Katrina and Rita cut a destructive path through the Gulf of Mexico, Louisiana and Mississippi. These operational enhancements focus on personnel safety, environmental protection, and energy security, and include reporting procedures for offshore operators.  These practices were developed in collaboration with industry and many of the new requirements have already been implemented.  The website will be updated throughout the season with all available information regarding hurricane activity related to Gulf of Mexico energy operations.  Click here to visit the site.

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By Jonathan A. Hunter

MMS has issued a proposed notice scheduling Central Gulf of Mexico Lease Sale 205 for October 3, 2007.  This will be the first  sale in the newly configured Central Gulf of Mexico Planning Area, and is the first Central GOM sale to be held in MMS’ 2007 – 2012 Outer Continental Shelf Oil and Gas Leasing Program.  The proposed sale includes approximately 5,000 unleased blocks, covering over 28.5 million acres, and ranging from 3 to 210 miles offshore.   Click here for information on obtaining the proposed notice of sale.

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By Jana Grauberger:

Recently, Amy Myers Jaffe of Rice University's Baker Institute spoke to the Women's Energy Network of Houston on the topic of "The Changing Role of National Oil Companies in International Energy Markets." One interesting fact she presented is that, based on the amount of oil and gas reserve holdings, 14 of the top 20 upstream oil and gas companies in the world are national oil companies or newly privatized national oil companies. The focus of her speech was to share some of the results of case studies that the Baker Institute has done on several of these national oil companies to explore their company cultures, priorities, etc. To learn more about this project and to view the actual case studies, see the attached link.

www.rice.edu/energy/research/nationaloil/index.html

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By Jana Grauberger

Oil prices of $60/barrel are expanding the industry and providing incentive and opportunities for more small independent "wildcatter" companies. For some interesting statistics concerning exploration trends and a profile of one wildcatter, Cobalt International Energy, see the attached article from the New York Times.

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The Oil & Gas Journal's Annual Forecast & Review will be available as a live webcast on 1:30pm, CST Thursday, January 25. To watch the webcast of this valuable industry information:

1. Click on www.ogjonline.com

2. Scroll down to webcasts

3. Click on "Annual Forecast & Review " to go to the registration page.

The webcast will continue to be available online for one year following the live presentation.  Liskow & Lewis is a sponsor of this webcast.

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Two developments this week will increase protections for South Louisiana' s Port Fourchon and Louisiana Offshore Oil Port (LOOP).  Port Fourchon handles more than 75% of the oil and gas production from the Gulf of Mexico, while LOOP is the only port in the U.S. capable of offloading the deepest draft tankers.  First, the Department of Homeland Security (DHS) added Port Fourchon and LOOP to the list of ports eligible for federal security grants under the Port Security Grant Program, which provides funding to improve protection of critical infrastructure against terrorism.  Click here for an overview of the 2007 DHS Infrastructure Protection Program.  Second, the State of Louisiana accepted a bid to elevate Louisiana Highway 1, which is the only highway leading to Port Fourchon and LOOP, to 22 feet above ground.  The roadway is a critical lifeline that carries nearly 1000 trucks per day transporting goods and workers to Port Fourchon, and from there to exploration and production operations in the Gulf.  The elevation project will protect this corridor from flooding and erosion.  For more on this project, click here. 

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