Would Jed Clampett Prosper in 2030 America?

I have decided that today’s post will be less serious and more fun that my previous posts to this blog. I realize that I may still bore some of you to tears, but such is the natural effect of enduring three years of law school and nearly five years as a practicing lawyer.  We’re not a very exciting bunch, folks!  Nevertheless, what follows is my futile attempt to entertain my readers a little while also posing a serious question:

From the category of art imitating life, I was on my way into work yesterday morning when I heard on the radio that Forbes had released its annual list of the fifteen wealthiest fictional characters.  This peaked my curiosity, so when I arrived at work I went to http://www.forbes.com/ to find the story, which can be accessed via the following hyperlinks: http://www.forbes.com/sites/davidewalt/2012/04/20/2012-forbes-fictional-15/ (Print Article) or http://www.forbes.com/special-report/2012/fictional-15-12/jed-clampett.html (Character Bios).  One thing that struck me about the Fictional Fifteen was that four of the characters who made the list for 2012 have some connection to the energy and/or mining and/or natural resources and/or extractive industries.  Flintheart Goldheart, Scrooge McDuck’s arch nemesis in Disney cartoons, made his fortune in the cut-throat diamond mining industry and comes in at #2 on the list.  Carlisle Cullen, the patriarchal vampire in Twilight and #3 on the list, made his fortune in, well, being alive a really long time.  But his wealth is primarily attributed to the savvy investments made during his 371 years on earth.  The 2011 version of the “Fictional Fifteen” reveals that among Mr. Cullen’s primary investments are oil, steel, and gold (http://www.forbes.com/2010/04/13/richest-fictional-characters-opinions-wealth_slide_2.html).  Appearing at #13 on the 2012 list is C. Montgomery Burns, owner of the nuclear power plant on the Simpsons who once blocked the sun in Springfield to increase electricity consumption (Let’s all take a moment to be thankful that Mr. Burns isn’t the CEO of AEP!). 

Jed Clampett, who is the wealthiest energy tycoon on the 2012 list at #4, is synonymous with “Big Oil.”  We all know the story from the Ballad of Jed Clampett:

Come and listen to a story 'bout a man named Jed

Poor mountaineer barely kept his family fed
Then one day he was shooting for some food,
And up through the ground come a bubbling crude
(Oil that is, black gold, Texas tea)

After Mr. Clampett struck oil on his property in the Ozark Mountains while hunting in the early 1960s, the OK Oil Company paid him a fortune to acquire drilling rights on his property.  He subsequently moved to Beverly Hills and has amassed a fortune of $9.8 Billion according to Forbes, primarily from his oil company, Clampett Oil.  Mr. Clampett might have been higher on the 2012 Fictional Fifteen had it not been for a disaster, reported by Forbes, in which one of his oil tankers accidentally spilled 20,000 barrels of crude oil into the Gulf of Alaska.  This mishap no doubt made his fictional lawyer Ben Matlock ridiculously wealthy, but it surely also negatively affected the price of Clampett Oil stock. 

On a more serious note, Forbes’ Fictional Fifteen begs an increasingly important question in the energy industry.  Would Jed Clampett prosper in the America of, say, 2030?  Remember that The Beverly Hillbillies was set in the 1960s, in the middle of Big Oil's rise to the top and at a time when it really had no challengers and everyone was driving a gas-guzzling car.  Although the oil and gas industry seems to be flourishing at the moment, particularly with drilling in the Marcellus and other shale formations, there is no doubt that America’s energy policy has become decidedly “pro-green” and “anti-fossil fuels.”  New restrictive regulations are seemingly being promulgated every day, which many would say negatively affect the coal, oil, and gas industries.  Huge investments and immense effort have been put into finding alternative, renewable sources of energy that are perceived to be cleaner technologies than fossil fuels.  (Coincidentally, Forbes reports that Thurston Howell of Gilligan fame, who according to Forbes makes his money from developing green technologies such as bicycle-powered washing machines and coconut cell phones, increased his company’s profits by 7%, but dropped off the list of this year’s Fantastic Fifteen, due to bank fraud, after making the 2011 list at #9.). 

It seems that a war is currently being waged over what technologies will power America into its future.  Will it be Mr. Burns’ nuclear power? Will it be Mr. Howell’s green technologies?  Or will it be Mr. Clampett’s “Big Oil”?  Only time will tell what the future holds for the coal, oil, and gas industries, but this author’s opinion is that there is no reason why America cannot develop a balanced energy policy that utilizes both domestic sources of energy like coal, oil, and clean-burning natural gas along with renewable and green sources of energy to achieve both energy independence and a cleaner environment.    

The full list of Forbes’ Fictional Fifteen is reproduced below with the character’s net worth, primary sources of revenue, and the fictional work from which they were created:

Character                            Net Worth              Primary Revenue Source          Fictional Work

1. Smaug                                 $62B                   Marauding                           “The Hobbit”

2.  Flintheart Glomgold          $51.9B                 Mining, Theft                      “Scrooge McDuck”

3.  Carlisle Cullen                    $36.3B               Investments                         “Twilight”

4.  Jed Clampett                      $9.8B                  Oil and Gas                         “Beverly Hillbillies”

5.  Tony Stark                         $9.3B                  Defense                               “Ironman”

6.  Richie Rich                       $8.9B                  Conglomerates                    “Ritchie Rich”

7.  Charles Foster Kane           $8.3B                  Media                                  “Citizen Kane”

8.  Bruce Wayne                     $6.9B                  Defense                               “Batman”

9.  Forrest Gump                     $5.7B                  Apple Inc.                           “Forrest Gump”

10.  Mr. Monopoly                  $2.5B                 Real Estate                           “Monopoly”

11. Lisbeth                               $2.4B                Computer Hacking               “Girl With   Salander                                                                                                          Dragon Tattoo”

12.  Tywin Lannister               $2.1B                  Inheritance                          “Game of Thrones”

13.  C. Montgomery Burns      $1.3B                   Energy                                 “Simpsons”

14.  Robert Crawley               $1.1B                  Inheritance/                           “Downton Abbey”

                                                                            Marriage

15.  Jo Bennett                        $1.0B                  Electronics/                          “The Office”

                                                                            Inheritance

Federal Government Gets into the Business of Regulating "Fracked" Natural Gas Wells with New Source Performance Standards

As I am sure most people with an interest in the oil and gas industry already know, on April 17, 2012 the United States Environmental Protection Agency (“EPA”) issued the final version of its Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants.  The new regulations are the result of a review performed pursuant to Section 111(b) of the Clean Air Act, which requires the EPA to review its new source performance standards every eight years.  The regulations mark the entry of the EPA into the arena of regulating natural gas fracking operations, an industry currently primarily regulated by the states.  The regulations will no doubt increase criticisms from critics in energy-producing states who have already argued that President Obama’s energy policy as implemented by the EPA is killing coal industry jobs by implementing new, tougher regulations on emissions from coal-fired power plants. 

The new regulations have been finalized by the EPA and sent for publication in the Federal Register (the Federal Register can be accessed at https://www.federalregister.gov/.)  They will become effective sixty (60) days after their publication.  The new regulations apply to fracking operations at nearly all stages of production and transportation.  They will regulate emissions of volatile organic compounds (“VOC”) from gas wells, centrifugal compressors, reciprocating compressors, pneumatic controllers, storage vessels, and leaking components at onshore natural gas processing plants.  They will also regulate sulfur dioxide (S02) emissions from onshore natural gas processing plants.  In addition, the regulations take aim at the emission of so-called greenhouse gases during well completion, such as methane and carbon dioxide.

Perhaps the most high profile portion of the new regulations is the requirement for natural gas producers to capture VOCs, methane, carbon dioxide, and other alleged pollutants released during a three to ten day period during well completion called flowback.  Most of these substances are currently vented into the atmosphere or burned off during a process called flaring.  When the new regulations go into effect, companies will not be permitted to vent the VOCs and gases released during flowback, but rather will have to capture them with “green completion” a/k/a “reduced emission completion” (“REC”) technologies or burn them off by flaring.  Beginning in 2015, companies will also have to abandon flaring and implement only REC technologies to capture the VOCs and gases.  The positive aspect that REC technologies offer to natural gas producers is that the captured methane can be separated from the other components released during flowback and sold on the market.  The EPA has argued that profits from selling the captured methane that ordinarily would have been lost into the atmosphere will save the industry money and reduce the cost of compliance. 

The final version of the new regulations was arrived at after a comment period during which the EPA received thousands of comments on the proposed regulations.  The oil and natural gas industry did gain some important concessions during the comment period.  First, the original version of the proposed regulations would have immediately implemented REC-only capturing of the VOCs and gases released during flowback, whereas the final version of the regulations postpone the full implementation of the regulations and will allow flaring until 2015.  Additionally, the original proposed regulations would have applied to all hydraulically fractured natural gas wells, regardless of whether they were new or old.  The final version of the regulations applies only to wells drilled after the regulations take effect. 

The final rule signed by Lisa Jackson of the EPA can be found at http://www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf.  The rule is not official, however, until it is published in the Federal Register, such that the document contained at the above-referenced hyperlink should not be relied upon to ensure compliance.

Yes (West) Virginia, There is a Shale Drilling Boom and it Currently Resides in Your Northern Counties

For some time now we have been hearing about a Marcellus Shale drilling boom in West Virginia.  There has been buzz about the tremendous reserve of natural gas thought to be contained in the Marcellus Shale that lies under most of the State.  We have heard buzz about the possibility of attracting an ethane cracker plant and what that might mean for the re-birth of the manufacturing industry in West Virginia.  Additionally, one of the hottest topics of debate during the 2011 regular legislative session was the need for permanent regulations addressing Marcellus Shale drilling in order to provide some certainty and predictability for the industry and protections for surface owners.  This debate continued to rage after a proposed Marcellus bill died in the 2011 regular session when the House of Delegates failed to put it to a vote.  (http://wvgazette.com/News/201103121278).  A regulatory bill was eventually passed, however, in a special legislative session that occurred in December of 2011(http://www.youtube.com/watch?v=wb4AEO1O2cg). 

Were it not for the debate in the legislature, the intense media coverage, and the various presentations in and around Charleston, however, those of us living in Charleston and points south would hardly notice any real "boom" in Marcellus Shale drilling in West Virginia.  But a recent trip to Morgantown for a couple days of depositions last week convinced me that a Marcellus Shale boom is alive and well in West Virginia and resides primarily in the northern counties. 

The first evidence I encountered of the increased drilling activity and the economic impact it is likely having come when I attempted to book a hotel for two nights in Morgantown, a Wednesday and a Thursday.  My past experience has been that hotel rooms in Morgantown are widely available for week nights such that booking a room on short notice is typically no problem, particularly this time of the year when WVU's football and basketball seasons have ended and before any commencement activities are taking place.  When I foolishly waited until Wednesday morning to book my room, however, I quickly realized this might no longer be the case.  I called just about every reputable hotel in Morgantown - Fairfield Inn, Spring Hill Suites, Hilton Garden Inn, Waterfront Place, Holiday Inn, Hotel Morgan, and others - and none of them had any rooms available.  The Holiday Inn reservation agent informed me that it had a few rooms available in Fairmont, but admitted that the price would be increased by nearly $30 due to the increased demand (no doubt a hard lesson in economics for me)!  Fortunately, I was finally able to get the last room available at Eurosuites.  In addition to my troubles getting a hotel room, I later overheard several other lawyers involved in the deposition complaining of the same troubles. 

Given that I knew this type of demand for hotel rooms in Morgantown this time of the year to be unusual, I asked the booking agents at several of the hotels what kind of special event was responsible for this sharp increase in demand.  They all confessed that they were aware of no such events.  When I arrived at the Eurosuites on Wednesday night and then the next morning at the Fairfield Inn where the depositions were taking place, it was clear to me why there were no hotel rooms available:  the parking lots contained a considerable number of vehicles emblazoned with the names of oil and gas companies.

Beyond the increase in demand for hotel rooms, the Marcellus Shale boom in the northern counties was evident by the visible drilling-related activities taking place.  Beginning from around the Jane Lew exit on Interstate 79 I started to see a large number of oil and gas vehicles traveling the interstate.  There were countless sand trucks, pumper trucks, water trucks, wastewater trucks, trucks hauling excavation equipment, trucks hauling drilling equipment, and passenger vehicles bearing the names of several oil and gas exploration, drilling, construction, and consulting companies.  Additionally, when I stopped for lunch in Fairmont on my way home Friday afternoon, I observed a constant stream of oil and gas vehicles pass by.  Interestingly, one of the larger vehicles carrying an oversized load had a State Police escort.

Finally, the Marcellus Shale boom was evident in the construction activities I witnessed in the hills along the interstate north of Jane Lew.  There were several areas where pipeline contractors were digging trenches for the construction and placement of natural gas pipelines.  There were also several areas where it was evident that pipelines had been freshly constructed and covered over. 

There is no doubt that substantial drilling activities are taking place in northern West Virginia.  Based upon my experience last week, it is further evident that the increase in drilling activities is likely leading to considerable positive economic impacts.  Hopefully, it is just a matter of time before the boom and its apparent economic impacts make their way south!

Small Spill of Drilling Mud Leads to Prompt Response by EQT

The Dominion Post, a newspaper out of Morgantown, West Virginia, reported this morning that Equitrans, a subsidiary of Pittsburgh, Pennsylvania based EQT (formerly Equitable Gas Company), spilled approximately 500 gallons of drilling mud into Garrison Fork Creek in Greene County, Pennsylvania between noon and 1 p.m. Wednesday.  While Garrison Fork does not cross into West Virginia, it is a headwater tributary of Dunkard Creek, which meanders back and forth between the West Virginia and Pennsylvania borders.  The spill had nothing to do with the actual drilling of a natural gas well.  Rather, the spill occurred as the result of an "inadvertent return" of drilling mud while drilling for a pipeline underneath the creek. While it is reportedly unknown what caused the inadvertent return, they sometimes occur when the drilling mud bubbles up through a natural fissure in the ground.   


The spill apparently occurred in the course of horizontal directional drilling for an interstate pipeline that will run between Pennsylvania and West Virginia.  According to the Dominion Post article, this particular kind of drilling is expensive, but is more environmentally safe than other forms of drilling.  The process apparently causes no environmental issues 99% of the time.  The purpose of the drilling mud in the process is to keep the drilling hole lubricated and to contain the drill cuttings.  The mud contains small amounts of bentonite clay, which is reportedly also used as an alternative medicine to treat gas and constipation, as well as a colon cleanser.  It appears that the spill was minor and does not pose a significant risk. 


According to the Dominion Post, Equitrans immediately stopped drilling, notified the Pennsylvania Department of Environmental Protection ("DEP"), and began cleaning up and containing the spill.  This incident appears to be an example of an oil and gas company using a relatively environmentally safe, even though more expensive, process and taking immediate action to clean up and contain a rare accidental spill.  Accidents will inevitably happen in drilling for and transporting natural gas, just as they do in any industry.  But the public should be comforted in knowing that, at least in this case, the company was using an environmentally safer process at the expense of additional profits, and took prompt action to remediate the effects of an unexpected accident.

When It Rains, Litigation Pours: Oil and Gas Firms and Their Contractors at Risk for Future Flooding Lawsuits in Connection with Well Pad Construction and Preparation

A fellow West Virginia lawyer representing a coal operator in flood litigation ongoing in southern West Virginia once quipped to me that as long as coal was mined in West Virginia and God kept making it rain, he would never be unemployed.  With the recent boom in oil and gas exploration of the Marcellus Shale formation in West Virginia, lawyers representing the oil and gas industry may be able to make a similar claim.

Anyone who has lived in West Virginia for any period of time knows all too well that the State has a love-hate relationship with energy production.  On the one hand, most West Virginians appreciate that the energy industry, primarily coal mining, creates a large number of well-paying jobs in rural parts of the State where decent jobs are a commodity as precious as gold.  On the other hand, some believe that energy production damages land and property, negatively alters the topography of the State, and has adverse health consequences for residents.  Many of these alleged negative consequences have been litigated in the courts, including a series of recent lawsuits arising from several instances of widespread flooding in southern West Virginia.

Perhaps one of the largest flooding events in recent state history occurred in July of 2001 when floodwaters swept through my home county of McDowell, as well as several other southern West Virginia counties.  Radar estimates of between four and six inches of rain were recorded over parts of a six county area on July 8, 2001.  A report commissioned by the West Virginia Division of forestry (http://www.wvforestry.com/Forests%20and%20Floods.pdf) cites a rain gage in Mullens, West Virginia that recorded 5.7 inches of rain that day.  Two subsequent rain events of July 26^th and July 29^th further increased the flooding.  When all was said and done, the 2001 flood was catastrophic, causing hundreds of millions of dollars in damage and spawning a massive lawsuit primarily targeting large landowners and the timbering and coal industries.  Despite the three unusually large rain events, the lawsuits argued that the activities of the coal and timber industries altered the topography of several watersheds in such a way that they were no longer able to properly drain run-off from the storms. 

Several large-scale flooding events have occurred since the July 2001 floods, which have spawned similar lawsuits.  The most recent large-scale flooding event to result in litigation occurred in Mingo County in May of 2009.  Meteorological data collected by one of the Defendants in the Mingo County litigation allegedly revealed that over seven inches of rain had fallen in parts of Mingo County the week of the May 2009 floods, with over four and one-half inches falling from late in the night on May 8 to the early morning hours of May 9.  (http://dailymail.com/News/201106280826).  Nevertheless, hundreds of Plaintiffs filed lawsuits claiming that the floods were caused by alterations in the topography primarily in connection with highway construction (with incidental coal removal) and coal mining.  While the coal mining/highway construction Defendants were the primary targets, one gas company was named as a Defendant in connection with several traditional gas wells. The Mingo County litigation is still ongoing.

Construction and preparation of Marcellus Shale drill pads, which typically contain multiple well heads, involves large scale excavation and forest clearing.  First, an area of up to several acres must be cleared, leveled, and graded for the actual well pad.  Access roads and pipeline rights-of-way must also be cleared, leveled, and graded.  Massive wastewater impoundments must also be excavated.  Additionally, the production and marketing of natural gas and Natural Gas Liquids (NGLs) involves the construction of other ancillary facilities in the mountains, such as compressor stations, that will often involve the same types of activities.  When (not if) a large rain event causes flooding in a West Virginia watershed where oil and gas exploration of the Marcellus Shale is on-going, these activities are almost sure to make primary, deep pocket targets of the involved oil and gas firms, engineering and geological consulting firms, construction contractors, pipeline contractors, and any others who have any involvement in the design, preparation, construction, or reclamation of Marcellus Shale drilling sites in the affected watersheds.  Accordingly, these firms would be well advised to strictly adhere to their duties under state, local, and federal permits, particularly those involving the control or discharge of wastewater or storm water run-off.  It may also behoove these firms to work together to implement a “good neighbor” policy designed to quickly respond to complaints and offer, within reason, prompt assistance to remedy the concerns of nearby landowners.