American Oil and Gas Reporter - October 2020 - 87

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variably will prompt one of the largest
winter draws in a decade.
Weather remains a variable, as always,
but "risks are skewed to the upside," the
report points out, adding that large inventory withdrawals can be expected
even under normal weather conditions
with historic average temperature patterns.
Figure 1 shows Morgan Stanley's estimated storage levels through 2021.
"Assuming normal 10-year weather,
we expect tight end-March inventories of
~1.2 Tcf (35% below the five-year normal
of 1.8 Tcf), with a mounting deficit thereafter," the analysts write. "Colder-thannormal weather could lead to the lowest
U.S. gas inventory levels on record, and a
material price rally to $5/MMBtu, or
higher, and average in the mid-$4/MMBtu
range for full-year 2021."
Drilling deeper into the forecast, Morgan Stanley lays out three alternate scenarios for gas demand and pricing this
winter: a base case, a bear case and a
bull case. The base case projects a fullyear average price of $3.25/MMBtu in
2021 and assumes a repeat of the 10year average of 3,709 gas weighted heating
degree days (GWHDDs) from Nov. 1
through March 30. That would result in
tight end-of-March inventories of 1.2 Tcf,
which would be 35% below the five-year
average and represent a net wintertime
inventory draw of some 2.7 Tcf.
In the full-year $4.50/MMBtu average
price bull case, November-to-March
GWHDDs are one standard deviation
colder than the 10-year normal, or 4,173.
Assuming no additional supply response
or gas-to-coal switching, this would shrink
end-of-March inventories to just over 200
Bcf, representing a net wintertime inventory
draw of 3.7 Tcf. "Higher prices would
likely lead to additional gas-to-coal switching (relative to our base case) before these
extreme low levels were reached," the
Morgan Stanley analysts note. "An average
winter price of $5.00/MMBtu and fullyear average of $4.50 would be needed to
refill inventories."
The bear case calls for full-year prices
averaging $2.50/MMBtu premised on temperatures averaging one standard deviation
warmer than the 10-year normal, leaving
end-of-March inventories at 2.0 Tcf.
In a separate report, Morgan Stanley
says the rapidly rebalancing U.S. gas market
and the shift higher in long-term strip
prices are leading to a "tactically more
constructive" view of natural gas producing
companies, particularly mid-cap Marcellus
and Utica shale independents. "As tailwinds
build for potentially the tightest winter gas
market of the past decade, near-term risk
for equities now appears skewed to the
upside," the report concludes.
❒

BLM Updating Rules About
Measuring Oil; Gas Security
WASHINGTON-The U.S. Bureau of
Land Management has proposed revisions
to its 2016 regulations governing oversight
of oil and gas production and reporting.
On July 29, BLM released proposed
modifications to three final rules published
on Nov. 17, 2016, pertaining to onshore
oil and gas operations on federal and
Indian oil and gas leases:
· Site security (81 FR 81365);
· Measuring crude oil production (81
FR 81462); and
· Measuring natural gas production
(81 FR 81516).
According to the proposed revisions,
which
may
be
accessed
at
https://www.blm.gov/download/file/fid/40514, the oil and gas industry, and others, have raised a number of issues and
concerns related to the 2016 rules, which
became effective on Jan. 17, 2017. BLM
says it has attempted to address some of
those concerns through administrative
policy directives, but "can address other

provisions only . . . through a rulemaking action."
Accordingly, BLM says it is proposing
to modify certain provisions of 43 CFR
Subparts 3170, 3173, 3174 and 3175 to
"remove or revise requirements . . . found
to be unnecessarily burdensome, unclear,
inconsistent or otherwise problematic."
"The proposed rule also would adopt
updated industry standards, where appropriate, and provide for the use of
emerging measurement technologies,"
the agency says, adding that the updates
are consistent with President Trump's
March 2017 Executive Order 13783,
"Promoting Energy Independence and
Economic Growth."
The goal of the proposed revisions,
according to BLM Deputy Director for
Policy and Programs William Perry Pendley, "is to ensure maximum accountability
and efficiency, while making sure operators are able to develop America's
energy resources on public lands." ❒

Services Propose Definition
For 'Habitat' In ESA Contexts
WASHINGTON-The U.S. Fish &
Wildlife and National Marine Fisheries
services have released a proposed regulatory definition of "habitat" under the
Endangered Species Act to accommodate
a 2018 U.S. Supreme Court ruling that
land must be habitat for a species before
it can be designated as critical habitat.
In their July 31 announcement, USFWS
and NMFS note that while the ESA defines
critical habitat and establishes separate
criteria depending on whether the area is
within or outside the geographical area
occupied by a species at the time of listing,
it does not-nor has either service ever-
defined the broader term, "habitat."
In November 2018 in Weyerhauser Co.
v. U.S. Fish and Wildlife Service, FWS
cites, the Supreme Court stated, "Section
4(a)(3)(A)(i) does not authorize the secretary
to designate (an) area as critical habitat
unless it also is habitat for the species."
"The court's ruling provides the Trump
administration and Interior Secretary (David)
Berhnardt the opportunity to create a new
definition that will help ensure that all
areas considered for critical habitat first
and foremost meet the definition of habitat,"

says USFWS Director Aurelia Skipwith.
The proposed rule, which may be
viewed at www.fws.gov/endangered/esalibrary/pdf/proposed-definition-of-habitat-web-version.pdf, seeks comments
on a preferred and alternative definition
of habitat:
· "The physical places that individuals
of a species depend on to carry out one
or more life processes. Habitat includes
areas with existing attributes that have
the capacity to support individuals of the
species (Preferred).
· "The physical places that individuals
of a species use to carry out one or more
life processes. Habitat includes areas
where individuals of the species do not
presently exist, but have the capacity to
support such individuals, only where the
necessary attributes to support the species
presently exist (Alternative)."
The key difference in the two definitions, the services point out, is whether
"depend on" in the first sentence sufficiently differentiates areas that may be
considered habitat, or whether "use" better
describes the relationship between a
species and its habitat.
❒
OCTOBER 2020 87

file:///C:/Users/lulu1/Downloads/Draft%20Proposed%20Rule%20O&G%20Site%20Security%20Measurement%207.29.20.pdf https://www.blm.gov/download/file/fid/-40514 https://www.fws.gov/endangered/esa-library/pdf/proposed-definition-of-habi-tat-web-version.pdf https://www.fws.gov/endangered/esa-library/pdf/proposed-definition-of-habi-tat-web-version.pdf https://www.blm.gov/download/file/fid/-40514

American Oil and Gas Reporter - October 2020

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