The Shale Daily Update – 7.7.2020

Dominion and Duke cancelled plans to complete the $8 billion Atlantic Coast Pipeline project. It would have carried natural gas across the Appalachian Mts.
Double exposure of USA. flag with industrial building

What You Should Know About Oil and Gas Today

The Big Story

Monday was a no good, terrible, very bad day for the midstream sector of the domestic oil and gas industry. As we talked about in yesterday’s update, Dominion and Duke Energy announced over the weekend that they have cancelled plans to complete the $8 billion Atlantic Coast Pipeline project. The pipeline would have carried natural gas produced in the Marcellus Shale region across the Appalachian Mountains to markets a long the East coast of the U.S.

That was early in the morning. Later in the day, a pair of federal court decisions dramatically impacted two other major pipeline projects.

First, an Obama-appointed federal judge, James Boasberg, ordered Energy Transfer to shut down its Dakota Access pipeline over specious plaintiff claims that the multiple environmental impact studies conducted by the Army Corps of Engineers during both the Obama and Trump administrations are somehow insufficient. If upheld on appeal, Boasberg’s order would require this major artery for Bakken Shale crude to be shut down pending yet another review by the Corps, which could last more than a year.

Energy Transfer will no doubt appeal and likely be able to at least continue operating the Dakota Access like while the Corps is undertaking its new review. But this case just demonstrates how difficult it can be to operate in the midstream business in this age of forum shopping in the U.S. federal court system.

Shortly after the Dakota Access decision came down, the U.S. Supreme Court refused to reverse a ruling by another Obama appointee, district judge Brian Morris in Montana, that halts the construction of the long-delayed northern leg of the Keystone XL pipeline on the grounds that the Corps improperly issued a water crossing permit for that project.

Thus, “environmentalist” groups continue to win decisions that harm the environment and put people in danger. The shutting down of the Atlantic Coast Pipeline means that markets that would have otherwise had their electricity supplied by clean natural gas will continue to operate coal-fired plants. The shutting down of the Dakota Access Pipeline means the Bakken region would see a massive increase in the transport of crude oil by rail, which is far less safe and more polluting than moving the crude in a pipeline. And the delay in the Keystone XL line means that millions of barrels of Canadian heavy crude that would have been refined in cleaner and better-regulated U.S. refineries will now be shipped to markets in China and other countries whose environmental standards are far lower.

Some environmentalists.

Let’s go to other stories…

Not all the pipeline-related news is negative, though. The Houston Chronicle’s Sergio Chapa reports this morning about a new Permian-to-Mexico pipeline that will create new markets for Permian Basin natural gas:The Villa de Reyes-Aguascalientes-Guadalajara Pipeline can receive nearly 1 billion cubic feet of natural gas per day from the Waha Hub in the Permian Basin. The gas will be used by power plants and industrial consumers.

The busy Mr. Chapa also has a report today about new East Texas drilling plans by Jerry Jones-controlled Comstock Resources. Comstock filed for four new drilling permits targeting the Haynesville formation in Harrison County.

After predicting a fairly quick recovery to 2019 demand levels several weeks ago, Rystad Energy is now revising its forecast for crude demand going forward. Anticipating new restrictions on travel and businesses, Rystad now projects a slower recovery that could last throughout 2021.

A new report from the Petroleum Equipment and Services Association indicates that the oilfield service sector has now lost 84,000 jobs in the current bust. The report relies on official U.S. Labor Department data for its findings.

Opinionist Chris Tomlinson took a drive through the Permian Basin and decided that wind and solar are “eclipsing” the oil and gas industry there. Because science.

That’s all for today.

 

 

 

 

 

 

 

 

 

 

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