This winter may mark the height of demonstrations against hydraulic fracturing, if only for the convenience of numerous 2013 kick-off speeches from elected officials across the country.

As governors use their State of the State addresses to set policy agendas for the year, residents gather outside to put their own priorities forward. Today in Michigan, activists are making their way to Lansing for a cold protest outside tonight's address from Gov. Rick Snyder (R). Organizers are pushing for an all-out ban on hydraulic fracturing.

Fracking is a well stimulation process that blasts sand, water and chemicals deep underground to loosen up trapped oil and gas, especially in shale formations. Michigan policymakers are learning to manage growing interest in the state's Antrim Shale, just as other states assess their own resources and adjust regulations.

And activists worried about environmental protection and landowner rights are jumping on every chance -- lease sales, votes in legislatures, administrative hearings -- to make sure they are being heard. A statewide address is one of those prime opportunities, one organizer said.

"I know a lot of people pay attention to what the governor is saying at the State of the State," said LuAnne Kozma, a founder of the grass-roots group Ban Michigan Fracking. "It's just a time that is a good time for the people of the state to gather in Lansing and make others aware of pressing issues that are important to everyone statewide.

"Fracking is one of those issues -- a lot of people don't know about it yet," she added.

In New York, nearly everyone knows about fracking. Environmentalists in the Empire State have been engaged in the most high-profile anti-fracking effort to date, pulling in celebrities like Yoko Ono, Sean Lennon and Mark Ruffalo, as the state draws out its decision on whether to lift its current moratorium on the unconventional drilling process.

Activists were out in force at Democratic Gov. Andrew Cuomo's State of the State address last week. Though the governor sidestepped the issue in his speech, hundreds of demonstrators lined the halls of an Albany convention center to pressure Cuomo to throw out the state's ongoing fracking review process and start over.

Nationally, the environmental group Food and Water Watch has launched a campaign targeting governors with presidential aspirations who lead states where the fracking debate is playing out. Cuomo is on the list, plus New Jersey's Chris Christie (R), Maryland's Martin O'Malley (D) and Colorado's John Hickenlooper (D).

"We need to make it clear, if they support fracking now, their decision will come back to haunt them in 2016," the group says.

Shale drilling issues are likely to crop up in protests outside state addresses in Pennsylvania and Ohio, too, home to the Marcellus and Utica shales. Oil and gas development is already moving swiftly in those states, so demonstrations may be smaller and more specific, focusing on issues such as severance taxes and wastewater injection wells. Those speeches are scheduled for early February.

In Michigan, Kozma said she couldn't predict how many demonstrators would show up for the governor's speech tonight, but she said residents from all over the state were planning to attend. The Lansing forecast for the evening is snowy with temperatures below freezing.

The American Petroleum Institute is rolling out a media campaign to boost the refining industry's position in policy debates.

Among the campaign's top priorities are repeal of the federal renewable fuel standard, approval of the Keystone XL pipeline and expansion of liquefied natural gas exports, API representatives said yesterday. Called "Investing in America's Future," the campaign will include TV, print, radio and online ads inside the Beltway and across the country.

An initial television ad, which launched this week nationwide, promotes domestic refining's capacity and the "billions of investments" the industry has made to provide Americans the fuels needed to power businesses and heat homes.

API did not give a cost figure for the new advertising, but Cindy Schild, refining senior manager, said the group has an "all hands on deck" approach to the campaign.

"We are devoting a significant amount of resources," Schild said. The campaign "is focused on the benefits that we can provide to our communities, for American lives. ... Maintaining a strong domestic refining industry is really critical to our national and economic security."

A major goal of the campaign, the oil industry group said, will be to repeal the renewable fuel standard, which mandates that certain levels of traditional ethanol and advanced biofuels be blended into the nation's motor fuel supply each year.

"We are encouraging Congress to take it up this year," said Patrick Kelly, API's downstream senior policy adviser. "Essentially, what we would like to see is a complete repeal of the RFS. It's not specific provisions of the RFS we're looking to repeal. It is the entire program."

Also on the agenda, Schild said, is opening up access to Canada's oil sands and the Upper Plains states through TransCanada Corp.'s Keystone XL pipeline, which would run from Canada to refineries along the Gulf of Mexico.

The campaign will "push the benefits of Keystone, as well as Canadian oil, and what it can do for U.S. consumers, North American energy security, as well as benefits to our U.S. refineries," Schild said. "We certainly have been touting those benefits, the jobs potential and being able to bring Canadian oil, as well as the domestic production we're increasing, down to the Gulf."

Increasing the production of oil in the United States and Canada will help U.S. refineries maintain global competitiveness in the face of new production popping up in China, Schild added.

"These tremendous world-class refineries are being built in countries like Asia and China. They're able to produce fuel that meets our U.S. specifications," she said. "This wasn't the case 10, 15 years ago."

The campaign will also partly focus on expanding U.S. exports of liquefied natural gas, through actions like building new terminals along the coast. The increased production of natural gas in recent years in the United States has put exports into the spotlight.

Several groups last week announced they were forming a coalition to broadly oppose natural gas exports, saying that gas would better serve the United States by being used at home (EnergyWire, Jan. 11). In the call yesterday, Schild touted the benefits of exports, which she said included job creation and reducing the trade deficit.

President Obama "has a goal to increase our exports in the next several years," Schild said, "and LNG is a great way to put a dent in that equation."

A top oil and gas regulator in Texas wants to make it easier for his staffers to carry guns.

Texas Railroad Commission Chairman Barry Smitherman announced plans yesterday to have the agency offer concealed handgun training for any interested employees. Smitherman is working with the National Rifle Association to make courses available for agency staff to obtain concealed handgun licenses.

"Employees have expressed an interest in this training, and I want to make sure our employees have access to this type of training which is allowed under the law," the chairman said in a statement. "We hope other state agencies also will use this course as a model for their employees."

The training would be available to everyone in the agency, from the executive level in Austin to field inspectors at various remote locations. Commission spokeswoman Ramona Nye said that she was not aware of any human threats to oil and gas inspectors in the field but that they sometimes come across wild animals.

Smitherman said he also wants his staff to be prepared for worst-case scenarios.

"Also, in light of recent shooting tragedies around the country, I want to ensure that our employees have an opportunity to learn how to protect themselves if faced with similar situations," he said in a statement.

Smitherman promoted a policy change a year ago that allowed commission employees with permits to carry their guns on state property and in state vehicles. He emphasized at the time that "this is not the Wild West" and that protecting employees' Second Amendment rights was the agency's responsibility.

HOUSTON -- Oil and gas industry authorities in Ecuador plan to launch a new sale of exploration rights on a fresh tract of land, and will be touring the world starting this month to sell companies on the opportunity.

Yesterday, the Hydrocarbons Secretariat of Ecuador, known by its Spanish acronym SHE, announced a global round of meetings with interested energy industry insiders to tout 13 prospective, potentially oil-rich blocks in a region near the border with Peru.

In a release, Wilson Pástor, Ecuador's minister for nonrenewable resources, called the tour the beginning of "a new era of exploration in Ecuador."

Officials at the Houston office of the energy industry consultancy IHS said they would host a "roadshow" to highlight the blocks that will be put up for lease, along with the terms of the sale and details on how new drilling would proceed in Ecuador. IHS is host of the annual CERA Week conference held here every March, which is considered one of the largest energy conferences in the world.

The first meeting is scheduled for Bogota, Colombia, on Jan. 30. Neighboring Colombia's oil and gas industry is being revived as rural violence from drug trafficking and an insurgency subside. Having the first meeting in Bogota may be a sign that Ecuador is interested in investment from Colombia, despite past tension between the two governments.

Houston will host the second meeting between oil and gas executives and Ecuadorian officials Feb. 4. Other meetings will be held in Paris, Beijing and Singapore through March.

IHS said the blocks may contain as much as 100 million barrels of oil. Though they've been relatively unexplored to date, the firm says two-dimensional seismic imaging data have been taken for eight of the 13 blocks the government wants to offer for lease.

IHS spokeswoman Melissa Manning said she was unaware whether the proposed exploration area encompassed any national parks or other sensitive areas. Maps show a national park in Ecuador's southeast corner, but not the famously untouched yet oil-rich Yasuni National Park, which lies in the northeast.

IHS says the 13 blocks Ecuador's ministry will offer to sales of exploration rights are each around 247 square kilometers. At each meeting, Ecuadorian government representatives will be on hand to talk about the resource potential of the blocks, as well as "details regarding available data, data packages, legal terms, social work program requirements and submission requirements."

To prepare for its new focus on U.S. oil, ConocoPhillips isn't just selling off parts of its foreign businesses -- it's also selling certain U.S. assets.

The Houston-based supermajor yesterday sold decades-old oil properties in North Dakota and Montana for $1.05 billion. Its business partner was Plano, Texas-based Denbury Resources Inc., which specializes in a method that pulls oil from fields that seem spent.

For ConocoPhillips, the deal is the latest in a torrent of divestitures meant to fuel its new emphasis on North America. The company had aimed for $8 billion to $10 billion of asset sales in 2012, but yesterday's deal brought the total to roughly $12 billion, analysts at Barclays Capital Inc. said.

Late last year, ConocoPhillips unloaded its Algerian and Nigerian divisions. The company has needed the cash to help fund a planned $15.8 billion capital spending plan for 2013, a program that will focus on oil- and natural-gas-liquids-heavy plays in the United States (EnergyWire, Dec. 21, 2012).

ConocoPhillips said the Denbury deal will allow it to concentrate its North Dakota and Montana investments on the Bakken Shale, a fast-growing unconventional oil play.

Oil and gas market observers expect brisk deal activity this year, given the unusual brew of commodity prices and financial pressures in the energy world.

While some energy producers have battled to switch from gas to oil and liquids, others have stayed put in gas -- sometimes for better, sometimes for worse. Companies have also pleaded with investors for patience, as many undertook costly investments in 2012 to beef up oil production with few immediate results.

Meanwhile, those with huge cash arsenals -- international supermajors, state-owned oil companies and Wall Street giants -- have been lurking, hoping for bargain prices on natural gas and other assets they expect to gain value in the long run.

For Denbury, the ConocoPhillips deal fits into an unusual strategy. Denbury specializes in enhanced oil recovery: injecting CO2 to tease oil out of old conventional reservoirs.

Late last year, it actually sold some of the most sought-after assets in the energy world -- oil fields in the Bakken -- to Exxon Mobil, raising $1.3 billion (EnergyWire, Oct. 1, 2012).

Denbury said it used $1.05 billion from that deal to buy the ConocoPhillips properties. The move will help Denbury defer more than $400 million in taxes that it would have otherwise paid on the Exxon Mobil transaction.

Through the deal with ConocoPhillips, which is expected to close near the end of the first quarter of this year, Denbury has expanded its holdings in the Cedar Creek Anticline, a carbonate reservoir that straddles the Montana-North Dakota border. Oil and gas drilling there dates back to the 1950s.

Some of the conventional-style oil is still there in Denbury's newest properties, spokesman Ernesto Alegria said. The company will produce some of it before turning to enhanced oil recovery. He said it's common for the company to acquire fields that have been producing oil for 50 years or more.

In this region, Denbury obtains much of its CO2 from human sources, such as processing plants in Wyoming. Some environmentalists have hoped that a scaling up of this method could make meaningful cuts in greenhouse gas emissions.

Brad Crabtree, policy director at the Great Plains Institute, said the Denbury deal bodes well for a larger network of CO2 pipelines.

"Now that Denbury has those assets, they'll be interested in expanding pipeline infrastructure to that region as well," he said. "It's unlikely that Conoco would have done that sort of thing."

UGI Corp. and Tenaska Resources, an affiliate of the Omaha, Neb.-based independent power generator, are teaming up to do more natural gas drilling in north-central Pennsylvania.

Under the deal announced yesterday, Tenaska will drill for gas in Potter County, Pa., northwest of Williamsport. Valley Forge, Pa.-based UGI will build and operate about 20 miles of gas-gathering pipelines and processing facilities to accommodate the gas production.

The companies plan on spending about $65 million over the course of a decade to develop the shale gas-bearing acreage. UGI purchased a minority interest in Tenaska acreage in Tioga County, just to the east of Potter, along the Pennsylvania-New York border.

The Marcellus Shale project breathes a little more life into a shale basin that has been hit particularly hard by sustained low natural gas prices. Millions of acres are leased for development, but rig counts have declined in the Marcellus gas region stretching across Pennsylvania, New York, eastern Ohio and West Virginia. The price for gas has remained under $4 per million British thermal units for much of the past year, forcing producers to shift their drilling to areas rich in gas liquids or oil.

Pittsburgh-based Consol Energy Inc. is also digging in its heels to do more Marcellus drilling and increasing its search for gas liquids that can be sold at a higher price.

Consol said Monday it would invest up to $935 million on gas operations in 2013, about $160 million of which is to maintain production. About $600 million of the total gas spending will go toward developing its existing Marcellus Shale assets. Consol has long been a coal producer in Ohio and Pennsylvania but started producing in the Marcellus and Utica gas formations several years ago through acquisitions and joint ventures.

Consol's costs and benefits from its joint venture with Noble Energy hinge in part on the gas price rising above $4 per MMBtu for three consecutive months. In a statement Monday, ahead of its Jan. 31 fourth-quarter earnings report, Consol said it remains "focused and disciplined to drill our higher rate of return projects." Further, it hopes to benefit from the flexibility to drill other acreage positions depending on the price and contract terms.

Consol said it expects to drill 126 horizontal wells in the Marcellus Basin, including 90 wells in regions rich in gas liquids like ethane, used for chemical production. The company's investment in "dry" gas wells for producing natural gas for the power sector could change, said the company, "in light of the commodity price curve."

Next door, in the deeper Utica Shale formation in Ohio, Consol has a partnership with Hess Corp. Consol said it expects to invest $122 million, with $90 million allocated toward the costs of drilling 27 wells. Hess will bear the brunt of the drilling costs, but production will be split under the deal.

Hawaii could benefit from importing liquefied natural gas so long as it secures a good, gas-price-linked supply deal and carefully navigates the regulatory and logistical obstacles of infrastructure build-out, according to a consultancy's new report.

The study, by international firm FGE-Facts Global Energy for the University of Hawaii's Hawaii Natural Energy Institute, illustrates that the American archipelago is much like any other importer when it comes to managing the risks and rewards of potential LNG imports.

"The potential of LNG to cut fuel costs in Hawaii is enormous [and] LNG could play an important role in allowing renewables to be accommodated in Hawaii's energy system," the report says.

But the study warns that fuel cost savings for the state -- which it says could be as great as 47 percent, depending on natural gas sourcing -- are highly dependent on volatile world oil and gas prices.

"Small levels of savings could be wiped out by relatively small movements in oil or gas prices," the report says. "For that reason, we believe that large-scale LNG imports for Hawaii should only be pursued if the expected percentage savings are quite substantial."

"Large-scale" imports is a relative term. The study is based in part on a proposal by the Hawaiian gas utility to build regasification infrastructure for LNG carriers far smaller than the tankers that would service export terminals proposed for construction along the Gulf Coast and elsewhere on the mainland.

The Hawaiian model would initially rely on containers that can be carried either on ships or, singly, on trucks. As the state's infrastructure gradually evolved, it would move to larger tankers or LNG barges (EnergyWire, Nov. 30, 2012).

Hawaii's LNG container shipping would not rely on the massive liquefaction facilities contemplated as part of large export terminals but could be filled up from smaller sites like those that liquefy natural gas for use as a trucking fuel.

Still, the infrastructure needed in Hawaii to regasify the fuel and distribute it would require "at least hundreds of millions of dollars." The report puts that estimate in perspective alongside the more than $6 billion that the state is estimated to spend yearly on oil.

Complications of a small-scale project

While its relatively small-scale need makes LNG a complicated proposition for Hawaii, other issues are important to consider as well, the report says.

Currently, the state has two refineries that turn crude oil into useful products. The refining capacities of the two facilities exceed the state's needs, but they are currently able to dictate market prices. Still, it is an open question how long the refineries will continue to operate, especially given an aggressive state renewable energy commitment that would cut oil use and damage the already-weak economics of the plants by 2030 if energy targets are met.

"The concept sometimes proposed that a private, unregulated supplier should build LNG import facilities, and provide the LNG, would perpetuate the [duopoly] problem the utilities have faced for decades," the report warns.

Noting that the gas utility's LNG conversion proposal is the only fully public plan on the table, the report says other entities have considered building an import terminal as well. "Whatever the ownership structure and business model selected, cooperation between Hawaii end-users ... is essential for the project to succeed," the report says.

Another issue it flags is that of over-reliance on a single LNG tanker. While the state's needs could be met by one vessel making trips to and from the West Coast or elsewhere, the report says, that would expose the state to risk if it were lost at sea. Since such a vessel would likely need to be custom made to comply with the Jones Act, a shipping law requiring that trips between U.S. ports be made by U.S.-built ships, Hawaiian buyers would be better served by having a "fleet" of at least two ships, the report said.

But the most important issue for the state's market is the one faced by potential buyers anywhere in the world -- whether it can tap into natural gas at low, mainland U.S. prices.

Buying LNG at Gulf Coast or West Coast gas-linked prices could save the state between 31 percent and 47 percent on fuel costs, the study found, while buying from Alaska, Canada or Australia, at oil-linked prices, could lead to higher payments or savings of up to 16 percent -- a threshold that the authors said may not justify the risks involved.

If potential buyers can come up with a sound plan, the report says, buyers will need to move quickly and aggressively to secure the best deal before export projects are finalized. "LNG is not a grocery store," the report said. "The best long-term contracts will never be found by putting the process out to general bid. ... LNG is not sold based on 'sticker prices.'"

Click here for the FGE-Facts Global Energy study.

The dump trucks rolled in on Jan. 18, 2011 -- unexpected and as yet unapproved by the state.

Inhabitants of tiny Sunbury, Pa., say they witnessed 27 trucks pass through a small residential street that day. They contained foul liquids and "smelled like a combination of diesel fuel and dirt," according to witness and resident Cora Campbell.

The trucks were hauling waste amassed by hydraulic fracturing, or "fracking," in the nearby Marcellus Shale that sweeps through much of the eastern United States. Fracking involves shooting water, sand and chemicals down well bores at high pressure to access previously unattainable deposits of shale oil or natural gas. The process has drawn criticism for its negative environmental impacts.

The carriers ultimately unloaded at a once-abandoned industrial site near the Susquehanna River that had been transformed into a waste transfer station.

State regulators from the Department of Environmental Protection (DEP) and local environmental activists pressured the owner of the site, logistics firm Moran Industries, to reveal what was happening and how it could move such quantities of fracking waste without environmental permits.

Later it was unveiled that the company could exploit a loophole opened by its subsidiary's contract with an interstate railroad, agreed on three months after the waste transfer station came online. The deal made Moran Industries exempt from Pennsylvania's permitting laws.

The scrutiny also revealed a string of connections between Moran Industries owner John Moran Jr. and Pennsylvania Gov. Tom Corbett (R). Moran had donated $100,000 to Corbett's gubernatorial campaign and gave $2,400 to Corbett for personal travel. He hosted the governor and his wife on a yacht off Rhode Island in 2011 on a trip that didn't come to light until last fall, after an amendment to an earlier Corbett ethics-disclosure form. The trips came at a time when the DEP had the power to make or break the new waste transfer facility that had opened so suddenly in Sunbury.

"The broader issue is that during the period when Moran was traveling with the governor, his company had much to gain from favorable interpretation from the DEP of this facility," said Mark Szybist, a Wilkes-Barre, Pa.-based lawyer for the environmental group PennFuture who has closely followed the story.

Corbett and his aides have vigorously denied that Moran influenced his policies or actions. A DEP spokesman also denied any pressure from or contact with the governor's office about the Sunbury operations. The DEP finally approved of Moran Industries' acting without a permit on March 16 of last year -- about 14 months after the site began processing waste (Will Bunch, Philadelphia Inquirer, Jan. 15). -- BS

Intensified sanctions are curbing Iranian exports of liquefied petroleum gas just as U.S. LPG sales are on the rise.

Last year, Iran sold 18 percent less LPG, while U.S. exports climbed by 27 percent, according to the Energy Department and Oslo, Norway-based ship broker Joachim Grieg & Co. LPG is a byproduct of natural-gas output used in petrochemicals and cooking. It can also be refined from crude oil.

Iran is facing tougher sanctions over its controversial nuclear program, which the European Union and the United States say is aimed at attaining nuclear weapons. Tehran maintains that the program is for peaceful purposes only.

The European Union has already prohibited vessels insured in any of its 27 member states from carrying Iranian energy products. But in October, the European Union expanded those measures to include propane and butane shipments from Iran. Roughly 90 percent of the world's merchant fleet is insured in the European Union.

"In Iran you clearly see the declining trend, but don't forget the U.S. is expanding, so there's some substitution," said Steve Engelen, the Oslo-based head of research at Joachim Grieg. "More buying and selling and shifting trade tends to be positive for shipping."

The U.S. surge has driven up tanker rates for BW Group Ltd. and other ship owners. Investment bank RS Platou Markets AS estimates tanker rates will climb 6.7 percent in 2013 to an all-time high of $32,000 a day. Demand for export terminals is also expected to rise.

Hamilton, Bermuda-based BW Group runs the world's largest fleet of "very large gas carriers," with 22 vessels. Each one can carry 44,000 metric tons of cargo, or enough gas to grill about 1 trillion minute steaks. The company's $500 million 6.625 percent bond due in June 2017 climbed 22 percent in the past year to 108.50, according to Trace, the U.S. Financial Industry Regulatory Authority's reporting system.

"Given the prospects for shale oil and shale gas, U.S. LPG exports are set to continue to rise," said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo. "The overall volumes picture is positive. BW Group is sure to benefit" (Isaac Arnsdorf, Bloomberg, Jan. 14). -- BS

A drillship damaged off the coast of Alaska two weeks ago may jeopardize Royal Dutch Shell PLC's plans for additional exploration in the Arctic this year.

Shortly before New Year's Eve, the Kulluk drillship broke free from the tugboat pulling it to Seattle for maintenance and crashed into an uninhabited island near Anchorage, Alaska. The rig was stuck in the rocks for nearly a week until Shell managed to haul it to Kodiak Island's Kiliuda Bay for assessment.

According to Shell, the rig's hull did not appear to be breached, although the ship lost its electric generators and incurred water damage.

If the rig cannot be repaired before Arctic drilling season starts this summer, Shell's $4.5 billion Arctic Ocean drilling program may reach an impasse. Finding a replacement would be unlikely, as there are only three Arctic-class drilling rigs in the world.

The crash may also reflect on Shell's safety standards. The Interior Department began a high-level review of Shell's accidents in pursuing drilling in the Arctic Ocean. Environmentalists have called for a halt to issuing drilling permits in the Arctic, arguing that the area's volatile weather increases the risk of spills.

"This is a setback for Shell and raises concerns about drilling safety in harsh environment and could galvanize opposition," said Fadel Gheit, senior energy analyst at Oppenheimer & Co. "Shell and the industry must do a better job" (Lefebvre/Sider, Wall Street Journal, Jan. 14). -- BS

Oil well builder Frontier Energy Group LLC announced Monday that it had purchased business rival Canary Wellhead Equipment Inc. The move typifies recent consolidation in the domestic oil-field services sector.

The closely kept Frontier Energy did not reveal the terms of the deal, but CEO Dan Eberhart said his Denver-based company is buying privately held Canary for less than $100 million. Canary constructs parts used in oil production and offers wellhead services.

"A lot of companies have grown up with the shale revolution," Eberhart said. "What you're seeing is small to medium-size companies gobbling up mom-and-pop companies."

Acquiring Oklahoma City-based Canary could help Frontier expand its operations to promising new drilling sites in Oklahoma, Kansas and Ohio. Currently, much of Frontier's activity centers on the Bakken Shale play in North Dakota.

Experts predict consolidations will continue as the oil and natural gas boom in the United States fuels a supply glut and low prices.

"This is a period of retrenchment in the industry," said Simmons & Co. International analyst Bill Herbert. "There are too many startups. That process has run its course" (Ben Lefebvre, Wall Street Journal, Jan. 14). -- BS

Will global financial constraints cause businesses to scale back their plans for sustainable investments? During today's OnPoint, Andrew Steer, president and CEO of the World Resources Institute, discusses the impact of the financial crisis on green investments. He also explains how rising global coal demand will affect emissions reduction goals. Today's OnPoint will air at 10 a.m. EST.