Western Energy Blog

Kurdistan Regional Government Presses Ahead with Own Oil and Gas Law

Filling the vacuum created by the failure of the Iraqi federal government to pass a comprehensive oil and gas law, the Kurdistan Regional Government (KRG) has passed its own oil and gas law.  The law appears to fill the gap created by the lack of a federal law and ambiguities within the Iraqi Constitution concerning the role of federal and regional governments in the area of oil and gas operations (for more on this, see my article below).

The Law appears to grant 17% of oil and gas revenues arising from production in the KRG administered areas of Iraq to the KRG with some being allotted to the federal government. 

Regarding the specific terms of the KRG Law, more details will be presented on this blog as they become available.  This will include a link to the English text of the Law as effective.

For the international prospector eying investments in Iraqi Kurdistan, concerns regarding legal stability will remain.  Specifically, there is still the prospect of this KRG law forming a flashpoint in a legal dispute (or worse) with the Federal Iraqi Government.  Indeed, it was conflict between the KRG regionalist position and the federalist position asserted by Sunni and some Shi'i members of the Iraqi parliament that has hitherto delayed the passage of federal legislation (note: this is a bit of over simplification as there are many different reasons why the oil and gas law failed to pass earlier this year).  Nonetheless, the new KRG law may act to marginally increase the interest of foreign oil companies in Kurdistan.  Indeed, even in the absence of the KRG Law, some companies went ahead and entered into agreements with the KRG. 

BLM issues new rules for drilling permits

In the Salt Lake Tribune yesterday:

[T]he order, which goes into effect May 7, changes how the agency tracks applications to drill, known as APDs.
[...]
BLM must have visited the proposed drilling site with the energy developer and other federal agencies such as the U.S. Forest Service and the federal Fish and Wildlife Service, if necessary. After that visit, the BLM can start work under the National Environmental Policy Act to ensure wildlife, water and cultural protections are enforced without unrealistic deadline pressure.
[...]
The order also deals with split estates... land owners will be allowed to participate in onsite inspection meetings, and drillers may be required to put up larger bonds than previously required to rectify damage caused by drilling or impoundment of by-product saline water.

New Mexico Passes New Surface Rights Law

In the Denver Post yesterday (Mar. 9, 2007):

New Mexico has a new law that requires the oil and gas industry to give notice, as well as clean up afterward and pay up if there's damage.
[...]
"We consider it to be the strongest landowner bill in the country," said Gwen Lachelt, director of the Oil and Gas Accountability Project, a Colorado-based advocacy organization for landowners that participated in the negotiations.

Supreme Court Caps Punitive Damages in Philip Morris USA v. Mayola Williams (Feb. 20, 2006)

More later.  For now see the related Wall Street Journal article. 

BDS International - an Important New Colorado Preemption Case

An important new Colorado Supreme Court case expands the scope of local regulation of oil and gas drilling projects.  In BDS International, the Colorado Supreme Court held that a "full evidentiary hearing" when it is all but clear that a local regulation affecting oil and gas drilling isn't preempted by the state. Board of County Commissioners of Gunnison County v. BDS International, LLC, 2006 WL 3627604 (Colo. App. Dec. 16, 2006). This "full evidentiary hearing" would investigate how the local regulations operate and whether this operation would "materially impede or destroy the state interest."

Under BDS Int'l, in most instances a special use permit applicant cannot rely on their own understanding of the scope of state and local laws and regulations in determining an "operational conflict" and thus preemption of an asserted local law.  [I]in determining whether the County Regulations are in operational conflict with state statute or regulation, [the court] will construe the County Regulations, if possible, so as to harmonize them with the applicable state statutes or regulations. Where no possible construction of the County Regulations may be harmonized with the state regulatory scheme, we must conclude that a particular regulation is invalid."

The bottom line for oil and gas companies: a "full evidentiary hearing" becomes all but necessary in asserting state preemption against a local regulation.  More broadly, this means more litigation risk and unnecessary compliance costs.

Gov. Palin (Alaska) to Introduce Bill to Incentivize North Slope Gas Pipeline

The proposed legislation would replace the Stranded Gas Act.  In its place, the Gov. Palin plan would provide energy companies "inducement incentives" if they meet "project criteria."  These include (quoting from the Anchorage Daily News)

• Providing for a minimum of five off-take points in Alaska. This means gas can be withdrawn from the line to power homes and businesses statewide.

• Committing to a local project headquarters in Alaska. The means establishing hiring halls across the state, to give Alaskans access to the thousands of new pipeline jobs.

• Pledging to expand the pipeline project when new gas is available. This can accommodate untapped fields; for now there are about 35 trillion cubic feet of proven natural gas reserves.