Petroleum industry groups file legal challenge to RFS rule

The National Petrochemical and Refiners Association (NPRA) has filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit Court challenging portions of the EPA’s final rule for the Renewable Fuels Standard (RFS) published March 26, 2010.

“The petition NPRA filed today does not challenge the overall RFS2 program and does not call into question the important role renewable fuels play in our nation’s transportation fuel mix,” NPRA President Charles T. Drevna said. “Rather, our concern is with the unreasonable retroactive application of certain provisions of the rule and fundamental fairness in the implementation of policy.

“The Energy Independence and Security Act of 2007 required EPA to promulgate and finalize certain standards under the RFS2 program by specific dates in 2008 and 2009. The Agency, however, failed to meet those statutory deadlines. Instead, in its recently published RFS2 final rule, EPA retroactively and unlawfully imposed RFS2 compliance burdens on obligated parties, many of whom are NPRA members.

“Simply put, the fact that EPA failed to meet its statutory obligations under current energy law does not give the Agency license to impose retroactively additional compliance burdens on obligated parties. At the least, such action calls into serious question the fundamental fairness of EPA’s RFS2 rulemaking process.”

The American Petroleum Institute also filed a lawsuit with the Court of Appeals, issuing this statement:

“While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the Environmental Protection Agency’s final RFS2 rule could result in higher consumer costs. By setting retroactive requirements, refiners, and ultimately consumers, will be penalized for EPA’s inability to get this rule out on time as directed by Congress.

“We believe this rule unlawful and unfair, and we filed a petition for review in the U.S. Court of Appeals for the District of Columbia to challenge the legality of EPA’s actions. EPA made the rule effective on July 1, 2010 while setting unreasonable mandates on refiners that reach back to 2009 for bio-based diesel and to January 1 for the other advanced biofuels.

“The U.S. oil and natural gas industry is the biggest consumer of ethanol and other biofuels. Almost 80 percent of all gasoline now produced in the United States contains ethanol. API supports a realistic and workable RFS.”

California gasoline and diesel use fall in fourth quarter ‘09

The state of California’s Board of Equalization (BOE) has released gasoline and diesel consumption figures for December and the fourth quarter of 2009.

Betty T. Yee, Chairwoman of the BOE, announced that gasoline consumption declined 2.2 percent in December and declined 1.7 percent in the fourth quarter compared to the same month and quarter in 2008. Diesel consumption increased 3.7 percent in December, the first monthly increase since February 2008. Diesel consumption declined, however, 3.9 percent compared to the same period in 2008.

“The fourth quarter decline in diesel consumption is the smallest decline since early 2008, and it provides some evidence that the economy is slowly improving,” Chairwoman Yee commented.

For all of 2009, California gas consumption declined 1.5 percent, compared to a 4.1 percent decrease for all four quarters of 2008.

OPEC raises demand expectations for 2010

In its Monthly Oil Market Report, OPEC said its Reference Basket fell by $3.02 per barrel, or 4 percent, to reach $72.99 / barrel in February. The decline was mainly attributed to growing concern about the economic recovery triggered by sovereign debt issues in the Euro-zone, particularly in Greece. However, market sentiment changed recently amid more positive economic data and rising equities, which provide support for crude prices as well. Following these developments, the OPEC Reference Basket rose to $77.86 / barrel on March 8 before settling down to $77.38 on March 9.

The forecast for the world economy remains unchanged at 3.4 percent growth for 2010 following a contraction of 0.9 percent in 2009. The global economy continues to be mostly supported by the governmental-led stimulus. Concerns remain regarding the level of public debt in almost all OECD regions, record-high unemployment levels across the globe, and the ability of China to avoid an overheating economy.

World oil demand is expected to grow by 0.9 million barrels per day in 2010, following a contraction of 1.4 million barrels per day in the previous year. This represents an upward revision of 0.1 million barrels per day from the previous assessment. Oil demand has been highly dependent upon the pace of the global economic recovery. OECD demand is still expected to remain at negative growth around 0.15 million barrels per day, while non-OECD demand is projected to grow by 1.0 million barrels per day, driven by China and the Middle East region.

Chevron deploys second ultra-deepwater drillship

Chevron U.S.A. Inc., a wholly owned subsidiary of Chevron Corporation, announced that it has commenced operations on the Discoverer Inspiration, an ultra-deepwater drillship, in the U.S. Gulf of Mexico. The vessel has the capability to drill wells in 12,000 feet of water to a total depth of 40,000 feet. The state-of-the-art vessel is the second such vessel commissioned by Chevron in the last six months. Last August, Inspiration's sister ship, DiscovererClear Leader, began work for Chevron in the ultra-deep water Gulf of Mexico.

"Both these newly built vessels were designed to Chevron's specifications and will work on a strong queue of deepwater opportunities," said George Kirkland, vice chairman, Chevron. "Going beyond the limits of previous technology, Inspiration and Clear Leader provide Chevron with the most advanced offshore drilling capabilities as we explore for new sources of energy in the U.S. and globally."

The Inspiration will begin work for Chevron drilling deepwater Gulf of Mexico exploration prospects and then develop existing discoveries such as Jack, St. Malo, and Buckskin. Chevron will operate Inspiration under a five-year contract with Transocean. Chevron is one of the top lease holders and producers in the Gulf.

The new drillship's upgrades not only improve safety, reliability and efficiency, but also extend overall deepwater drilling and completion capabilities. Enhancements include an upgraded top-drive system, an expanded high-pressure mud-pump system and expanded completions capabilities. These enhancements, along with Transocean's patented dual-activity technology, allow parallel operations from a single derrick. These innovations are expected to reduce drilling costs by 5 to 15 percent over conventional single-activity rigs, depending on reservoir depth and complexity.