Digital Plat

Exploration and production organizations are finding new beginnings in an end-to-end digital approach.

By Brent Potts

The edict to the founders of oil exploration and production startup Assala Energy from the private equity firm backing the venture was clear and ambitious: Build and launch a viable, fully operational oil and gas company around a portfolio of brownfield oil and gas assets in Gabon, West Africa, and do it within six months, please.

 INTERSTATE PIPELINES 01 

A court's decision to vacate the Mountain Valley Pipeline nationwide permit

will have far-reaching consequences.

By Ann Navaro and Christine Wyman

On Nov. 27, 2018, the U.S. Court of Appeals for the Fourth Circuit issued a decision related to the Mountain Valley Pipeline project that could have a lasting impact on the flexibility of federal and state agencies when it comes to permitting projects under the Clean Water Act Nationwide Permit program. (Sierra Club v. U.S. Army Corps of Engineers, 909 F.3d 635 [4th Cir. 2018]) 

The Mountain Valley Pipeline project is a 304-mile natural gas pipeline proposed to run through West Virginia and Virginia. Earlier this year, the Corps had reinstated its verification that the pipeline met the requirements of Nationwide Permit 12 – a general permit that authorizes certain discharges associated with the construction of linear energy infrastructure. Unlike many decisions where the issue is the Corps’ own process in promulgating the Nationwide Permit in the first instance, or the Corps’ assessment of whether a specific project falls within the federal parameters of the nationwide permit, this matter turned on whether the Corps properly incorporated the state’s conditions into its verification and whether the state itself followed its own process. 

In order to use a nationwide permit promulgated by the Corps, a project proponent must provide the federal permitting agency a Section 401 water quality certification from the state – or other permitting agency with jurisdiction over the water – in which the regulated discharge originates, unless the federal permitting agency determines that the certification requirement has been waived. The state certification and its conditions then become part of the federal nationwide permit. With respect to nationwide permit 12, the state of West Virginia had issued a general certification that imposed, after public notice and comment, certain special conditions on projects seeking authorization under Nationwide Permit 12 beyond what the Corps required. Two of these special conditions were at issue in this case:

  • Special Condition A, which required an individual state water quality certification for certain projects including those involving construction of pipelines equal to or greater than 36 inches in diameter or if crossing waters regulated under Section 10 of the Rivers and Harbors Act; and
  • Special Condition C, which requires that individual stream crossings be completed in a continuous manner within 72 hours in certain conditions. 

Pursuant to these special conditions, in order to seek authorization under Nationwide Permit 12, Mountain Valley Pipeline was expected to obtain an individual water quality certification and to complete stream crossings within 72 hours. However, following a series of challenges to West Virginia’s individual water quality certification for the pipeline, West Virginia purported to “waive” its requirement that the pipeline obtain an individual water quality certification. In addition, in its reinstatement of its verification that the pipeline met the requirements of Nationwide Permit 12, the Corps replaced the 72-hour requirement found in Special Condition C with an alternate condition that the Corps found to be more protective of water quality with the apparent concurrence of the state. 

No Authorization

Petitioners challenged the Corp’s replacement of the special condition and the state’s purported waiver of the individual water quality certification. The Fourth Circuit vacated the Corps’ verification in its entirety, leaving the pipeline with no authorization under the Clean Water Act. Specifically, the Fourth Circuit held that the Corps’ verification violated Section 401(d) of the Clean Water Act because Section 401 unambiguously requires the Corps to incorporate the state’s certification with its special conditions in the federal verification without modification. In addition, the court held that Section 401(a)(1) does not allow a state to act under Section 401 – including waiving conditions in its certification of a nationwide permit – without public notice and comment, meaning that the pipeline remained subject to the condition requiring that it apply for an individual state water quality certification and, therefore, the Corps’ own verification was invalid. 

In reaching these conclusions, the court noted that “the Corps’ interpretation would radically empower it to unilaterally set aside state certification conditions as well as undermine the system of cooperative federalism upon which the Clean Water Act is premised.” (Sierra Club, 909 F.3d at 648) With respect to the state’s action purporting to waive its special condition, the circuit explained that “[a]llowing West Virginia to revoke, on a case-specific basis, conditions imposed in its certification of a nationwide permit would impermissibly allow the state to circumvent [the CWA’s] explicit requirement that state permit certifications satisfy notice requirements.” 

Assuming this decision stands, the upshot is that both the Corps and the states (at least within the Fourth Circuit) will have less flexibility in how projects are permitted when a state has issued a general water quality certification with specific conditions. The Corps will need to require that the terms of such certifications are strictly followed in order to make decisions that comply with the Clean Water Act.

Ann Navarro is an environment and natural resources partner in Bracewell LLP’s Environmental Strategies Group. Christine Wyman is senior counsel in Bracewell’s Policy Resolutions Group. 

 

in the cloud

Strange oil-and-gas bedfellows? No, just sound digital strategy.

By Brent Potts

Five years ago, had the CIO of a major oil and gas company been bold enough – or maybe “bold” isn’t the appropriate adjective – to propose working with some of their closest competitors to develop common software solutions, and to house those solutions in a public cloud environment, he or she may well have met with a perplexed silence, if not derisive laughter.

Looking back, however, that CIO may well have gotten the last laugh. The oil and gas business has come a long way in five years, to the point where today seven competing production companies, including some of the industry’s biggest global names, have spent roughly the last 18 months doing what until recently would have been unthinkable, almost heretical. They have been collaborating as part of a consortium to develop parameters for market-standard upstream digital solutions housed in the – wait for it – public cloud. In this context, market-standard means taking “parity processes” – common business processes where customization and competitive differentiation aren’t considered necessary or cost-effective – and developing cloud-based solutions with standard configurations and public interfaces that can be shared by multiple companies.

The goal for the consortium, which includes BP, Devon Energy, Apache, ConocoPhillips, Chevron, Equinor (formerly Statoil) and Shell, with development help from SAP and Accenture, is to operate more efficiently and innovate more effectively by jointly developing market-standard cloud-based SaaS (software as a service) and PaaS (platform as a service) solutions to manage certain workflows and processes. In doing so, they seek to eliminate the pricey, proprietary and highly siloed solutions on which so many in the industry have relied for so long.

What’s more, these companies want to take their peers along for the ride. 

“For us it’s important that as an industry we define the right sort of [digital] processes and standards for oil and gas,” explains Dan Smith, build and test manager for BP in Houston. “We want to collaborate with other operators and other industry players to do that definition. At end of the day this is about removing complexity from our landscape.”

The consortium’s ongoing work provides yet another indication that the oil and gas industry has shed its competitive blinders and evolved beyond the cautious, proprietary-over-public technological mindset that was once its hallmark. Slowly but surely, that mindset has yielded to a new open-mindedness, whereby companies are realizing the merits of cooperating with their peers to standardize and automate certain operational aspects of their business, based on the belief that doing so actually will strengthen their overall competitive position.

“When you have automated processes in place, you can focus on the higher-value work,” Shell CIO Jay Crotts explains.

Key Value Points

The rationale for embracing market standard digital solutions housed in the public cloud is rooted in several key value points.

1. Relying on market-standard digital solutions means not having to reinvent the wheel at every turn to develop and maintain costly proprietary apps, processes and platforms. The goal here is to reduce business and IT lifecycle costs by capitalizing on market economies of scale.

As part of its digital strategy, Shell is following an 85/15 rule, whereby 85 percent of the business processes on which it relies are points of parity that can be handled with market-standard, multi-tenant solutions housed in the cloud, and the remaining 15 percent are proprietary solutions. That 15 percent is the “special sauce”: custom digital processes and solutions the company can leverage to differentiate, extend and transform its brand and its business.

2. Moving key business processes to the public cloud and embracing SaaS and PaaS solutions make for a more intelligent enterprise, one that is more capable of leveraging its data to optimize the value of its field assets.

Here consortium members are looking to realize significant gains in operational efficiency by replacing aging, siloed, on-premises legacy systems with standardized, scalable enterprise-wide solutions. From internet of things sensor-equipped equipment in the field to data-driven, machine learning and analytics tools, to an enterprise-wide digital core that integrates them all, the latest breed of cloud-based digital solutions enables oil and gas companies to simplify and optimize processes, and to collect, analyze and strategically act upon data from across the enterprise, in real time. That’s the essence of an intelligent enterprise.

3. They’ll be better equipped to explore and quickly scale up promising new business models, and to integrate businesses they may acquire. Exploration has taken on a new meaning for oil and gas companies as they diversify “beyond the barrel.” In late 2017, for example, Shell announced plans to develop electric vehicle fast-recharging outlets at traditional petrol filling stations in Europe. Having a digital platform capable of sourcing and modeling data from other industries is bound to help Shell and its partners develop a customer retail experience around those new EV charging outlets.

For companies in merger and acquisition mode, meanwhile, integrating two large and complex organizations becomes eminently more manageable with an industry-standard approach to digital infrastructure. Two companies’ previously disparate ecosystems, as well as their workforces, can be united seamlessly and quickly with end-to-end business processes and workforce management solutions, enabling data, learning and best practices to flow freely and securely across the newly merged enterprise.

Led by the likes of Shell, BP and the other members of the cloud consortium, energy companies are realizing that in order to innovate, differentiate and compete in certain high-value areas of the business, they must be open to cooperating with their competitors in other areas of the business. Embracing market standards and the public cloud gives them the means to do exactly that.

Sidebar:

Clarifying Cloud Types: Public vs. Private

Whereas a private cloud environment resides behind a company’s firewall, a public cloud resides outside the company’s firewall. It’s usually administered by a third party and used by multiple customers of that third party, which brings hardware and software costs down. Connections to the software and platforms housed in the public cloud are established through the public internet.

 Brent Potts is senior director of global marketing, oil and gas, at SAP. He is based in Arizona.

 

Smart

Status Quo’s Hidden Cost: Defining what an ideal well looks like and developing a plan for it

requires completion managers to become visionaries.

By C. Lloyd Brown

For years, completion engineers have trusted pressure pumping companies’ standard completion processes. It’s easy, it’s familiar and, on the surface, it looks like it gets the job done. 

     What is often overlooked is the fact that standard or cookbook completion processes are not tailored to your company’s unique reservoir characteristics and other important considerations that must be addressed to achieve long-term production and profit goals. While the standard process is good for the pumping company, the potentially negative impact it has on well performance and, ultimately, bottom-line profits, can be and often is substantial.

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Blockchain

How a move to blockchain could clean up the market for diamonds, gold

and other potential conflict minerals.

By Jennifer Scholze and Ruediger Schroedter

Despite a concerted 15-year global effort to combat the trade of conflict minerals, the murky practices around these minerals – and the extensive collateral damage those practices inflict in countries where they are mined and traded for use in jewelry, technology and other applications – persist. That in turn has cast doubt on the adequacy of the Kimberley Process, an international certification protocol established in 2003 to monitor and curb the sale of blood diamonds to fund regimes, weapons acquisition and armed conflicts.

EPC contracts

Tips and tactics for negotiating and drafting EPC contracts for power and energy projects.

By Daniel A. Kapner, Esq.

Power and energy projects involve significant, unavoidable risks that must be allocated between project participants, including complex systems and equipment, high costs, substantial time and technology. To increase the likelihood of a project’s success, it is critical that each owner and engineering, procurement and construction (EPC) contractor understand these risks and weigh the likelihood of both positive and negative outcomes.

Energy storage

Demand, technical capability and cost are converging to drive interest in energy storage.

By Joshua Belcher and Kyle Wamstad 

Energy storage is a broad concept. It includes many different technologies and proposed applications linked by a common principle: retain electricity generated for use at a later time. Common household items –your car, phone or computer – contain batteries that have performed this function for many years. However, the application of this principle to the wholesale and retail supply of electric energy has only recently gained traction. 

So, why is energy storage trending? Because there is a convergence of need, technical capability and cost.

Digital Transform

Mining’s digital transformation is driving the next generation

of operational improvements.

By Chris Livitsanis

Just as the global mining industry reaches the limitations of productivity gains through traditional means, a new wave of digital technologies is poised to transform the sector.  

As is clear from other industries, the scope of digital technologies is virtually limitless. We are now seeing this in the mining sector, from exploration and development to supply, production, distribution, sales and trading, and even mine closure.

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