Supreme Court of Ohio Accepts Appeal in Two DMA Cases

As a follow-up to our post from June, the Supreme Court of Ohio accepted the appeal in Swartz v. Householder and Shannon v. Householder, two related cases involving the 1989 version and the 2006 version of the Ohio Dormant Mineral Act (DMA).

The Court will consider the following issues:

(1)  whether the 1989 DMA is applicable after the effective date of the 2006 DMA;

(2)  whether, under the 1989 DMA, the surface owner must have taken some action in order to establish abandonment prior to the effective date of the 2006 DMA; and

(3)  whether the 2006 DMA operatives retrospectively and applies to severed mineral interests created before its effective date.

Both cases are held pending the Supreme Court of Ohio’s decision in Walker v. Shondrick-Nau, which concerns the same issues.

Shale Boom Not Slowing Down Despite Price Slump

From Bloomberg: "The U.S. shale boom does not appear to be slowing in response to the oil-price slump, with the country’s output of petroleum liquids rising above 12 million barrels a day for the first time, according to the International Energy Agency. U.S. production of crude oil, condensate and natural gas liquids climbed to 12.2 million barrels a day last month, the Paris-based energy adviser said today in its monthly oil market report. That indicates many producers are able to continue pumping in the short term even after West Texas Intermediate, the regional benchmark, fell 12 percent last month, the IEA said. Production growth shows few signs of abating,” the agency said. “Efficiency gains in light, tight oil production have been constant, and price pressures would only provide more impetus for producers to cut costs further.”

 

Utica Shale Helps Family Save Their Farm

From the Akron Beacon Journal:

Utica Shale saved the farm.

In early 2010, Ballard Jenkins and his wife, Sharon, were preparing to sell the family’s 233 acres in Carroll County’s Washington Township and 70 cows at auction to pay off creditors. It was a tough time to be a dairy farmer.

“We were dying a little day by day,” he said.

Then landmen came into Ohio, bringing with them sweet financial offers for leasing mineral rights. They represented drilling companies in search of natural gas and oil deep underground in the Utica Shale formation. What transpired dramatically changed eastern Ohio — to the benefit of the Jenkinses and, with some exceptions, many others as well.

The Jenkins family sold its dairy cows, but the farm auction was postponed to see what a shale deal might provide.

Their first offer included a one-time signing bonus of $100 per acre. Said 68-year-old Ballard Jenkins: “That got my attention.” An offer of $250 an acre was “world-changing money.”

When the offer jumped to $1,200 an acre, Jenkins, for one, did not believe it. It seemed too good to be true.

The Jenkinses became part of a landowners’ group that in 2011 negotiated a $40 million agreement on 12,000 acres with Pennsylvania-based Rex Energy Corp. The landowners got a one-time signing bonus of $3,500 per acre. They are getting royalties of 20 percent on natural gas and liquids that wells produce.

“It’s like a fairy tale come true,” Jenkins said.

Read the full article here.

WV: Gastar Wins Bid to Drill Under Ohio River

Gastar Exploration is the winning bidder for the right to develop the Marcellus and Utica formations under the Ohio River in West Virginia.

The Intelligencer / Wheeling News-Register reports:

Because his company spent more than $500 million while successfully fracking 64 Marcellus and Utica shale wells in Marshall County, Mike McCown believes Gastar Exploration can extract natural gas from beneath the Ohio River.

On Friday, McCown, chief operating officer for Gastar, and West Virginia Deputy Secretary of Commerce Joshua Jarrell said the Houston, Texas-based firm is the highest bidder for a 232-acre tract underlying the river at the border of Marshall and Wetzel counties.

"We are still negotiating the final contract," Jarrell said. "We have identified Gastar as the successful bidder, but we are still working out the lease."

The financial terms for Gastar's bid call for the company to pay the state $3,500 per acre with 20 percent worth of production royalties. This means the company will pay West Virginia $812,000 for the drilling rights, while the royalties would go to the state once gas starts pumping.

"We drill under streams, valleys and houses routinely," McCown said when asked about environmental concerns associated with the project. "This is a great opportunity for us and for the state."

 Read the full article here.

Natural Gas-Fired Power Plant Slated for Middletown, Ohio

Plans to construct a natural gas-fired power plant in Middletown, Ohio are underway. The Dayton Daily News reports: 

Plans to build a natural gas-fired power plant in Middletown have so far faced no public opposition and developers say they’re on schedule to start construction of the more than $500 million project next year pending regulatory approvals.

NTE Energy LLC of St. Augustine, Fla., publicly announced in January of this year plans to build a power plant in Middletown that burns natural gas to generate electricity. The company must still obtain necessary government permits and certifications, and a pair of public hearings held this week in Middletown is another hurdle crossed in the process.

If everything moves forward, plans are to start construction midway through 2015 and open in 2018, producing more than 500 megawatts of electric power year-round

Read the full story here.

CNG Fueling Station Opens in Findlay, Ohio

From Business Wire: "IGS CNG Services and Speedway LLC (Speedway) announced the opening of their compressed natural gas (CNG) fueling station in Findlay, Ohio. It is located at Speedway’s existing station at 3730 Speedway Drive, at the State Route 99 exit (exit #161) off of I-75.At the station, there are two fuel lanes, with one solely dedicated to CNG. The partnership between IGS CNG Services and Speedway services a growing number of businesses that have converted their fleet to natural gas and are looking for easy access to CNG stations while traveling through the region."

Nice.

Marcellus Shale Created 45,0000 Construction Jobs According to New Study

A new study commissioned by the Oil and Natural Gas Industry Labor-Management Committee found that the Marcellus shale play created over 45,000 construction jobs between 2008 through the first half of 2014. The study concludes that:

A preliminary examination of employment data in states related to the Marcellus Shale Play (i.e., Maryland, Virginia, Pennsylvania, Ohio and West Virginia) reveals that natural gas exploration has been a strong engine of job growth. From 2008 to the first half of 2014, over 72 million hours of direct and indirect construction labor has been worked on natural gas and oil projects related to the Marcellus Shale. These hours translate to 36,321 actual construction workers (based on a standard 2,000 hours of work) and engaged in oil and gas work that would not have occurred “but for” natural gas exploration in the Marcellus Shale geological footprint. It is important to note however, that based on a more realistic denominator of 1,600 annual hours of work, the number of actual construction workers is 45,402.

Read the full study here.

EIA: 1.5 Bcf of Gas to be Produced from Utica Shale in November

From Columbus Business First: "The U.S. Energy Information Administration expects 1.53 billion cubic feet of natural gas to be pumped from the Utica shale play in November, it said Tuesday in its monthly report."

Read the EIA report here.

PA: Brine Is Not For Drinking

The Columbus Dispatch is reporting that wastewater produced in Pennsylvania might be radioactive:  "Millions of barrels of wastewater trucked into Ohio from shale-gas wells in Pennsylvania might be highly radioactive, according to a government study."  Fortunately, it's being disposed of through injection wells to formations thousands of feet below the surface.  "Michael Snee, the Ohio Department of Health’s radiation-protection chief, said that’s the safest place for brine.'Injection wells are almost the perfect solution for that disposal issue,' Snee said."

Whew ...

Prices Driving Oil and Gas Development

The Pittsburgh Post-Gazette has an interesting article on how development is moving west from Pennsylvania to Ohio.  It starts:  "If you're looking for a shale success story, look no farther than Lisbon, a small town that's hit it big. *** Local roads have been transformed from gravel to asphalt. There's talk of widening Lincoln Way, the main thoroughfare, to four lanes. And three new restaurants have opened -- including The Shale Bar and Grille, a nod to the industry that's making all this possible. *** It's everything the proponents of natural gas development have promised Pennsylvania. There's only one problem: Lisbon is in Ohio."

A problem?  Not really.  The explanation:  "But as a glut of natural gas drives prices down, drillers are increasingly willing to shoulder the cost of processing wet gas in exchange for the valuable liquid hydrocarbons that come with it, including ethane, propane and butane."

Read the whole thing.

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Ohio: New Industry Severance Tax?

The Columbus Dispatch is reporting that the Kasich Administration may be contemplating new taxes on the energy industry in Ohio to fund tax breaks for others:  "Sources tell The Dispatch that the Kasich administration, in its negotiations with oil and gas producers to revise the state’s severance tax to include natural-gas liquids, has discussed using the cash to implement an across-the-board income-tax cut."

Reminds of the Golden Goose fable.  The President of Ohio's Oil and Gas Association had a good reply:  "'There’s an old adage in life: If you want less of something, then you tax it,' said Jerry James, president of the Oil and Gas Association and president of Artex Oil Co. in Marietta."

[Update:  For more, see here - "Oil and natural-gas drillers in Ohio (STOOH1) would pay a severance tax as high as 4 percent to fund income- tax cuts under a plan Governor John Kasich will unveil next week, according to an administration proposal obtained by Bloomberg News."(Bloomberg).]

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Ohio Economic Impact Study

The Ohio Chamber of Commerce has released an economic impact study for shale development in Ohio (see here).  From the report's executive summary:

Interesting.

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Wastewater Disposal - Ohio

We've noted before that Ohio will not allow POTWs to be used for the disposal of wastewater (see here, e.g.).  You might be interested to know that Ohio EPA has asked the Environmental Appeals Review Commission to vacate as unlawful the permits issued to the city of Warren, Ohio, and Patriot Water Treatment, LLC, to allow such disposal:

Revised Code 1509.22(C) specifically states that brine may only be disposed of by one of the following three methods:  (1) underground injection; (2) surface application on roads for dust control and ice; or (3) any other method approved by the Chief of the Division of Oil and Gas Resources Management ***.  Disposal of brine wastewater through a wastewater treatment plant and discharge to waters of the state is not an authorized method of disposal under R.C. 1509.22(C), unless and until the Chief *** approves this technology.  At this time, no such approval has been given.  (Emphasis in original.)

For the filing, see here.

New Marcellus Shale Estimate

This is a large increase:  A Penn State University geoscientist estimates that there may be more than  360 Tcf of natural gas recoverable in the Marcellus Shale.  This is seven times greater than his earlier estimate.