Energy & Environmental Law Blog : Energy & Environmental Lawyer & Attorney : Vorys, Sater, Seymour and Pease Law Firm : Oil, Gas & Green Technology

Recently, an appellate court in Pennsylvania affirmed, on mandamus, the ability of oil and gas producers to record blanket lease assignments.  See Chesapeake Appalachia, LLC v. Golden, Case No. 883 C.D. 2011 (Jan. 27, 2012).  From the decision (among other things):  "Next, the Recorder asserts that Chesapeake is not entitled to mandamus relief because it has available the alternative, adequate remedy of recording individual lease assignments.  However, it goes without saying that filing single lease assignments is not an adequate remedy for a company that has the right to file multiple lease assignments and chooses to do so, but is illegally thwarted in that right."

Apparently, it needed to be said.  Nice.

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That's the title to an article in BusinessWeek looking at past claims of economic collapse due to exhausted natural resources.  A sample:  "Start with oil. In 1971, the Limits to Growth team forecast that the world’s supply would run out 10 years from today. And yet according to renowned oil analyst Daniel Yergin, technology advances and new discoveries have allowed oil reserves worldwide to keep growing. For every barrel of oil produced in the world from 2007 to 2009, 1.6 barrels of new reserves were added. The World Energy Council reports that global proven recoverable reserves of natural gas liquids and crude oil amounted to 1.2 trillion barrels in 2010. That’s enough to last another 38 years at current usage. Add in shale oil, and that’s an additional 4.8 trillion barrels, or a century and a half’s worth of supply at present usage rates. Tar sands, including some huge Canadian deposits, add perhaps 6 trillion barrels more."

Read the whole thing.

[Update:  (Yes, that was quick ...)  For a similar article written by Peter Orszag, see here.]

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Ohio EPA has issued its final air pollution shale oil and gas well-site general permit.  "This general permit covers all operations involved in an oil and gas well site during the production phase of the well. This includes glycol dehydration units, natural gas and diesel engines, storage tanks, flares, and ancillary equipment."  You can view it and supporting documentation here.

Note:  Ohio EPA's Assistant Chief of Permitting wants to remind you that "if you previously submitted a letter stating that you were going to put a well into production and planned to apply for the general permit when it becomes available, now is the time for you to submit your application."

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The WSJ is reporting that the Energy Information Administration (EIA) will soon confirm that oil production in the United States is surging, largely due to increases in shale production:  "The forecast will include new production data from developing oil fields, including the Bakken shale area in North Dakota, which could hold as much of 4.3 billion barrels of recoverable oil. North Dakota's output of oil and related liquids topped 500,000 barrels per day in November, meaning that the state pumped more oil than Ecuador. In fact, U.S. oil production grew faster than in any other country over the last three years and will continue to surge as drillers move away from natural gas due to a growing gas glut, experts say. The glut has sent natural-gas prices to a 10-year low."

Nice.  (Note:  Subscription may be required.)

[Update:  And from the EIA's AEO2012 Early Release:  "Domestic crude oil production is expected to grow by more than 20 percent over the coming decade: Domestic crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in 2010. Over the next 10 years, continued development of tight oil combined with the development of offshore Gulf of Mexico resources are projected to push domestic crude oil production to 6.7 million barrels per day in 2020, a level not seen since 1994."  (Emphasis is ours.)]

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4Hoteliers has an interesting take on the impact of Marcellus drilling in Pennsylvania:  "The 4,374 square-mile region comprising four northeastern Pennsylvania counties—Bradford, Lycoming, Susquehanna and Tioga—experienced a hotel industry RevPAR growth of 37 percent from 2007 to 2010, and grew another 22.2 percent through August of 2011.  That’s not a misprint; rather, this remarkable growth is largely attributable to the exploitation of an old resource through the birth of a new industry: natural gas extraction from the Marcellus Shale."

Read the whole thing.

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The Columbus Dispatch is reporting that Governor Kasich wants to impose new impact fees and severance taxes on operators seeking to develop the Utica shale in Ohio:  "Ohio’s oil and gas industry would pay an 'impact fee' for deep-shale wells to cover the cost of infrastructure damage caused by oil and gas extraction, part of a package of taxes and fees for the industry that Gov. John Kasich soon will propose."

A word of caution:  Brings to mind one of Aesop's Fables ...

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The Marietta Times has an interesting article on the job creation potential of the Utica Shale in Ohio.  For example:  "Kvamme [president and interim chief investment officer with JobsOhio] noted chemical industries like local polymer plants will benefit from low energy costs but also from easy access to 'feedstock' gases like ethane, butane, propane and methane used in product processing.  He said the cheaper fuel and access to the feedstock gases could also help bring more companies into the area and that there have already been talks with a large steel company and other manufacturers."

Just thought you might like to know.

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We've reported previously on the Draft Supplemental Generic Environmental Impact Statement (SGEIS) issued by New York (see here, e.g.).  The NYT is reporting that more than 20,000 comments have been received regarding that draft:  "After taking over 20,000 public comments, more than on any issue they have ever faced, New York environmental officials are getting ready for the final phase of work on their proposal to allow hydrofracking of natural gas in the state."  How many are "form" comments sent in by multiple parties ...

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Bloomberg is reporting that a Youngstown steel mill is re-opening its doors due to increased demand for pipe used in the development of shale resources here in the northeast:  "The factory for Vallourec SA’s V&M Star will have 350 workers and produce seamless pipes used in hydraulic fracturing, also known as fracking. It’s part of a development that an oil and gas industry study calculates will mean more than 200,000 jobs and $22 billion in economic output in Ohio by 2015 -- and which has neighboring states looking to get in on the action."

Congratulations!

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That's the name of a new article in City Journal reporting on shale development in New York.  A sample:  "With more and more producers in the business, the price of natural gas has dropped steadily, and the U.S. has become the world’s leading producer of natural gas. A new age of clean, cheap shale-gas energy is about to begin—except, perhaps, in New York State, where influential environmental groups seem to be winning their struggle against shale. *** Perhaps what motivates the environmentalists’ attack on shale gas is worry about the survival of their movement. The green movement gave up on hydrocarbons years ago: it has already announced the arrival of “peak oil,” and the imminent demise of petroleum power—despite many recent discoveries of large oil and gas fields around the world—is a fundamental article of green faith. Environmentalists see shale gas as a relapse, a return to destructive habits, an end run around their self-appointed role as judge and jury for energy policy in America."

You might enjoy it ...

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Despite low natural gas prices, the Zanesville Times-Reporter observes that Utica development in Ohio should continue:  "[T]he Utica Shale, a rock formation thousands of feet below the eastern half of the state, is home to not only trillions of cubic feet of natural gas, but billions of barrels of oil and natural gas liquids. The latter is what attracted investment and will keep money flowing into Ohio, said Tim Rezvan, vice president of senior energy analyst at Sterne Agee."

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Ohio remains in the running for a natural gas processing plant that Shell plans on constructing in the northeast, according to this report in the Cleveland Plain Dealer:  "Shell Chemical is finalizing plans for a $2 billion complex that is expected to create hundreds of jobs and pull other industries and manufacturers into its orbit. Shell has said only that it plans to build in either West Virginia, Pennsylvania or Ohio, three states that overlay ancient shale beds rich in natural gas."

The site announcement is expected to come in February.  Wish Ohio good luck!

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The West Virginia Department of Environmental Protection is gearing up to meet new Marcellus demands on the agency, according to this article in the Charleston Gazette:  "But the boom in the natural gas industry, Huffman said, it's hard for DEP to compete with private sector jobs that can be two or three times as much. Currently, state oil and gas inspectors make and average of $32,000 a year and their supervisors an average of $38,000, Huffman said. The legislation sets a minimum inspector's salary of $35,000 a year and a floor for oil and gas supervising staff of $40,000 annually."

Interesting.  We'll be seeing the same here in Ohio soon.

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The Columbus Dispatch is reporting on a new Spectra Energy Corp. pipeline intended to connect Ohio resources to Spectra’s Texas Eastern pipeline system, which runs from Texas to New York.  "The Texas Eastern pipeline already goes through Ohio from east to west. This new addition will create a connection between the pipeline and the northeastern Ohio counties that are expected to have the most shale-gas resources, though the specific path is still being determined, said Wendy Olson, spokeswoman for Houston-based Spectra."

For more, see here (Spectra press release).

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The WSJ has an interesting article on the opportunities for natural gas liquids production from the country's shale resources:  "The boom has turned into a potential profit center for oil-and-gas producers, as well as for the pipeline companies that transport the fuel. Demand for ethane grew to about 933,000 barrels a day during the first half of 2011, up from 812,000 barrels a day in 2009, according to Bentek Energy. But like the other fuels extracted from remote shale deposits, the biggest problem is how to get it to facilities that can process it."  (Note:  Subscription may be required.)

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The Intelligencer has an interesting article on the natural gas processing plant being built by Dominion Transmission in Marshall County, West Virginia:  "Dominion Transmission's natural gas processing facility is the largest piece yet of what local officials hope will be an industrial rebirth for the Ohio Valley. The crown jewel of that rebirth would be an ethane cracker facility along the Ohio River, a multi-billion dollar project that remains in the works as 2012 looms."

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The WSJ is reporting that Governor Earl Ray Tomblin is prepared to sign a new rule package governing Marcellus drilling in West Virginia:  "Large-scale drilling for natural gas in West Virginia's Marcellus shale deposit will require $10,000 and $5,000 permit fees, buffer zones around wells and advance notices to property owners and the public, under a broad regulatory package the Legislature approved Wednesday.  *** Gov. Earl Ray Tomblin heralded the measure at a packed Capitol news conference shortly after the House of Delegates passed it 92-5 and the Senate then voted unanimously to send it to his desk, ending a four-day special session."

For a copy of the legislation, see here.

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The Houston Chronicle is reporting:  "A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a new industry study released Tuesday."  From the President and CEO of ANGA (America's Natural Gas Alliance), which commissioned the study:  "At a time when our nation's economy is still suffering from a downturn and jobs are top-of-mind for many Americans, the impact of shale gas on employment is invaluable. Last year, shale plays supported 600,000 jobs, and by 2035, the study projects that shale gas will support more than 1.6 million jobs."

For a copy of the study (including video statements by local business owners), see here.

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MedPage Today has an interesting article on the claimed health impacts of increased Marcellus exploration in Pennsylvania.  The take-away conclusions:  "A few people have had clearly documented health problems related to the Marcellus gas boom, but these were occupational exposures in rig workers.  Some aspects of gas drilling and production release toxins into the environment, but the level of exposure to the public is uncertain and no links to specific instances of disease have been confirmed, and may never be."  (Emphasis is ours.)  And regarding groundwater contamination due to frac operations in particular:  "But in that scenario the fracking chemicals would presumably be highly diluted. Rob Jackson, PhD, of Duke University, said preliminary results from a study he and his colleagues conducted in northeastern Pennsylvania showed no evidence of fracking fluids or brine in well water sampled from more than 200 sites."  (Emphasis is also ours.)

Read the whole thing.

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The Intelligencer has another interesting article looking at the fee legislation proposed in West Virginia.  "Now, the fee is $650, but would increase to $10,000 for the first well and $5,000 for each additional well on the drilling pad, if the legislation is ultimately signed into law by Gov. Earl Ray Tomblin."  The bargaining chip?  Well, at least for one legislator - it looks like hiring more WV organized labor:  "State Sen. Orphy Klempa is prepared to push for a higher natural gas severance tax if drilling companies do not prove to him that they plan to hire more West Virginia workers.  *** Klempa, D-Ohio, is affiliated with organized labor as co-chairman of Project BEST. He is a member of the Legislature's Joint Select Committee on Marcellus Shale, which passed a bill for the full Legislature's consideration that, among many changes, would increase the permit fee to drill a Marcellus well in West Virginia substantially."

Come to Ohio!

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Columbus Business First has an interesting article on a Federal Reserve report on the Midwest that finds (among other things):  "Expanding activity in the pursuit of oil and natural gas in Ohio’s underground shale fields. Production in wells that already have been drilled in the state has been 'good,' according to the report."

Read the whole thing (it's short, but with links to core documents).

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The WSJ has a good article on job growth in Ohio due to the anticipated growth in Ohio's E&P industry.  It begins:  "A rare sight in hard-luck Youngstown, a new industrial plant, has generated hope that a surge in oil and natural gas drilling across a multistate region might jump-start a revival in Rust Belt manufacturing."

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The Washington Examiner is reporting that the lease auction for the Wayne National Forest in Ohio has been canceled:  "President Obama's United States Department of Agriculture has delayed shale gas drilling in Ohio for up to six months by cancelling a mineral lease auction for Wayne National Forest (WNF). The move was taken in deference to environmentalists, on the pretext of studying the effects of hydraulic fracturing."

For a copy of the announcement, see here.

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The Delaware River Basin Commission (DRBC) has issued revised draft regulations regarding the construction and operation of natural gas development projects (for previous entries, see here and here, e.g.).  According to the WSJ:  "Energy companies collectively would be permitted to drill a maximum of 300 natural gas wells after receiving initial approval to explore the Delaware River basin under draft rules released Tuesday by the agency that monitors the drinking-water supply of 15 million people."  (Emphasis is ours.)  (Subscription may be required.)

A hearing to consider the rules has been scheduled for November 21, 2011.  For more, including a copy of the revised regulations, see here.

[Update:  The hearing has been postponed because a couple of the commissioners opposed the proposal.  See here. (Moved up.)]

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Frequent readers of this blog know that we follow closely E&P developments in Ohio and around the country.  Linked here are a couple of articles we wrote for the November / December 2011 Ohio Lawyer:

The current focus in Ohio is on a formation known as the Utica Shale. Geologists believe that the Utica, which ranges from 6,000-9,000 feet in depth, may have served as the source of much of Ohio’s historical production. Operators are looking at the Utica because of the possibility that it may contain not only natural gas but also crude oil and natural gas liquids (NGLs). The added value of crude oil and NGLs improves the overall economic value of the operations. These additional revenue streams are significant in today’s environment of relatively low natural gas prices and the substantial costs involved in drilling a horizontal well—ranging from $2-$10 million a well.

We hope you find them both interesting and useful.

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The Houston Chronicle is reporting on the hiring challenges faced by the oil and gas industry, fueled by increased shale development in the U.S.:  "While the job picture remains stagnant nationwide, the boom in domestic shale drilling has pushed hiring to a feverish pace in North American oil fields. *** A staffing crunch has caused the industry's salaries to surge and recruiters to embrace new tactics in search of the narrow pool of candidates who have the skills to work and manage the technical and gritty world of oil field services."

Read it all.

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The Buffalo News has an article pointing out the opposing views of environmentalists and New York landowners over the development of the landowners' mineral interests:  "'The extreme environmentalists have misinformed and panicked people,' said Dan Fitzsimmons, president of the Joint Landowners Coalition of New York, which represents people who have leased their lands to gas companies for potential drilling. *** Still, the environmentalists have one other argument on their side: fear of the unknown."

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The Pittsburgh Post-Gazette is reporting that a Pennsylvania Senate committee has re-inserted into pending legislation a substantial annual fee on natural gas producers:  "The new impact fee proposal would assess an initial base cost of $50,000 per well, which would decrease annually until years 11 through 20 that a well is producing, with a cost then of $10,000 per well. That price tag would increase if natural gas prices rise."

Come to Ohio!

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This article in The Intelligencer looks at the prospects for Ohio refineries:  "Marathon now refines 78,000 barrels of oil per day at the Canton plant. Khiery [sic] said the company gets 61 percent of its oil for refining from domestic sources such as Light Louisiana Sweet crude, 10 percent from Canada and 29 percent from 'other foreign sources.' *** Marathon spokesman Jamal Kheiry said the company sees promise in the Utica Shale's oil reserves once they become commercially viable."

Interesting.

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The Ground Water Protection Council (GWPC) has issued a report on agency groundwater investigation findings in two states, Ohio and Texas.  It has interesting things to say regarding alleged groundwater contamination from well stimulation activities.  From the Executive Summary, for example:

Neither state has documented a single occurrence of groundwater pollution during the site preparation or well stimulation phase of operations. Despite this, Ohio has implemented more detailed notification, inspection, record keeping, and reporting requirements in response to the national debate on the process of hydraulic fracturing. Texas is currently placing summary data online for new completions, has implemented new disposal well requirements in the Barnett Shale play, and recently enacted statutes requiring public disclosure of hydraulic fracturing chemicals.  (Emphasis is ours.)

For a copy of the report, see here (generally) and here (a copy of the report).

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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.

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The Akron Beacon Journal has an interesting article on the potential for Ohio's E&P industry:  "A state official estimated Tuesday that as much as 5 billion barrels of oil and 15 trillion cubic feet of natural gas could be underground in eastern Ohio. *** The oil and natural gas is in the Utica shale that is 100 to 300 feet thick under the eastern half of the state, said Lawrence Wickstrom, state geologist and head of the Ohio Department of Natural Resource’s Division of Geological Survey.  *** And this, he said, is 'a very conservative estimate' of the Utica potential. No dollar figure was attached to the numbers, but others have said the Utica shale will produce tens of billions of dollars in Ohio."

Read the whole thing.

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We've noted previously the problems North Dakota was having finding trained workers - a problem other states wish they had (see here, e.g.).  Both the WSJ and the Philadelphia Inquirer have similar articles mentioning the need in other areas with active production (see here and here).  From the Inquirer:  "Run - don't walk, run - to Marcellus Shale natural gas drilling areas if you are a welder or pipe fitter or engineer or a company that can deliver such people to companies already operating in the fields."

Energy = Jobs.

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With all of the claims regarding freshwater impacts from shale drilling, we thought you might find this of interest (from Essential Public Radio 90.5):  "Tests of water wells near gas drilling sites generally didn't find detrimental changes in water quality, according to a new report issued by The Center for Rural Pennsylvania at Penn State University. However, scientists said more research is needed on the sources of methane in water wells. ***  According to the report, many of the problems had existed before drilling even started. About 40 percent of the wells failed at least one water quality test before gas drilling started. Most of the failing grades were due to higher than accepted levels of coliform bacteria and turbidity, or cloudiness. Some wells also showed methane before drilling."  (Emphasis is ours.)

Not a surprise for many in PA who have been following this issue ...

For a copy of the study itself, see here.

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We thought some of you (particularly in PA) might be interested in this:  "Since Oct. 11, the existing 60,000 Mcf-per-day capacity line has collected gas from Citrus Energy Appalachia, LLC, wells in Wyoming County, connecting them to the Tennessee Gas Pipeline in Susquehanna County. The proposed 30-mile addition would extend the line from Washington Twp. in Wyoming County to Luzerne County, where it will connect with Transcontinental Gas Pipeline. UGI Energy expects the extension to move between 200,000 to 500,000 Mcf per day of gas by 2013, serving Citrus and other producers, UGI Energy spokesman Peter Terranova said."  (From the Scranton Times Tribune.)

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The Star Telegram has an interesting article on rig counts:  "Those 'oily' plays are sending the U.S. and Texas drilling rig counts soaring. Oil production nationally and in the Lone Star State is increasing, a phenomenon that many industry veterans thought they might never again see after a steep decline in oil output that has been nearly 40 years in the making.  *** Amid the new craze for crude, the Barnett Shale rig count plummeted to 53 active rigs Oct. 14, the fewest since June 11, 2004, according to information compiled by RigData."

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The WSJ has an interesting article on how shale operations are impacting the industry:  "Shale discoveries have reinvigorated U.S. oil and gas production that just half a dozen years ago was widely seen as in terminal decline. Today, there is a glut of cheap natural gas, and domestic oil production is rising for the first time in decades. Shale development is even spreading to other countries, such as Poland and Argentina."

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Marshall University has made a comparison of taxes imposed on the natural gas industry in West Virginia and other Appalachian Basin states:  "The study’s authors, a team led by MU Vice President for Business and Economic Research Calvin Kent, looked at real and personal property taxes, severance taxes, corporate income taxes and sales and use taxes as well as permits, bonds and other environmental taxes or fees."  (From WOWK.)  The conclusion - ... not favorable for West Virginia ...

For a copy of the study itself, see here.

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You may be interested in this article from the WSJ:  "May snapped up the opportunity through his local community college, Zane State, to take a two-week, 80-hour shale exploration certification course developed by the private company Retrain America. When he graduated, he'd interviewed for three jobs and taken a position cementing wells for Halliburton that will pay $60,000 to $70,000 a year."  (Emphasis is ours.)

Very nice.

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Ohio EPA has published for comment its draft air pollution oil and gas well site general permit (see here for copies of the terms and qualifying criteria documents).  It is intended to cover the equipment used during the production phase of a Marcellus or Utica/Point Pleasant shale well - drilling and completion activities are currently exempt (according to Ohio EPA).

Comments are due by November 28, 2011.

Note:  Ohio EPA has also notified producers making inquiries about air permits about an additional permitting option associated with Ohio's air pollution control program - stating, "Because Ohio EPA has only recently determined that an air permit is necessary and believes that the final general permit will be available before any case-by-case permit could be issued, Ohio EPA is exercising its discretion not to penalize a company for failing to obtain an air permit before installing an oil and gas well as long as the company applies for the general permit within thirty (30) days of the general permit becoming available."

They have asked for notification and even prepared a sample letter to use.  Nice.

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We've noted previously the NYT's "environmental reporting" on the E&P industry (see here and here, e.g.).  Now, a different strategy:  "But the boom — brought on by an advanced drilling technique called hydraulic fracturing, known as fracking — has brought problems too. While the gas companies have created numerous high-paying drilling jobs, many residents lack the skills for them. Some people’s drinking water has been contaminated. Narrow country roads are crumbling under the weight of heavy trucks. With housing scarce and expensive, more residents are becoming homeless. Local services and infrastructure are strained."

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Yesterday, we noted for you several recent articles regarding local production in the Basin.  We thought, therefore, we would note a couple for you on production outside the Basin - and in particular in North Dakota:

• North Dakota Likely to Overtake California Oil Production.  "North Dakota will likely leapfrog California and may even overtake Alaska in the next year—far outpacing earlier industry predictions—to become one of the nation's three biggest oil-producing states, a government regulator said." (From San Jose Mercury News.)
• Oil Boom Too Much of a Good Thing?  "New drilling technology has freed up vast reserves of oil in the Williston Basin of western North Dakota, fueling an economic bonanza that has become a flat-out gold rush. As the rest of the country desperately tries to skirt a double-dip recession, North Dakota boasts a $1 billion budget surplus and the nation's lowest unemployment rate. ***. Schools are rushing to hire more teachers. Towns are adding more cops. ***  But so many workers have flooded the oil patch that many long-time residents and officials are beginning to complain about something most places in the country could barely comprehend: Too much prosperity; too much rapid growth."  (From the Star Tribune.)

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We thought you might be interested in the following articles on local production here in the Basin:

• PA Infrastructure Incentives.  "Gov. Tom Corbett says Pennsylvania's natural gas infrastructure needs a boost if the demand for the fuel is going to grow."
• PA Marcellus Gas Case Heads to High Court:  "A case raising doubts about whether Pennsylvania's booming natural gas industry has the right to extract the methane from the thick shale more than a mile beneath countless properties is being appealed to the state's high court."  (From Forbes.)
• Steel Industry Benefits from Local Drilling.  "A natural gas drilling boom in Pennsylvania is helping the economies of Rust Belt cities long accustomed to bad news. Drilling requires steel — lots of it — and that has manufacturers expanding and hiring new workers."  (From NPR.)
• Land Rush a Boon for Eastern Ohio.  "While drilling in the Utica is in its infancy, the land rush has been an economic boon. Mary Catherine Nixon is the recorder in Ohio's Belmont County, just 10 miles from Wheeling, W.Va. On a given day, Nixon says she's collecting $1,400 in copying fees alone from the two to three dozen mineral rights researchers who have camped out in her offices for months."  (From NPR.)

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The WSJ has an interesting article on Dominion Resources, Inc.'s efforts to export LNG from its Cove Point facility:  "The terminal, Dominion Cove Point on the Chesapeake Bay in Lusby, Md., is well-situated to export gas from the prolific Marcellus Shale and the promising Utica Shale formations, Dominion's chairman and CEO, Thomas Farrell II, said in a statement."

[Note:  Subscription may be required.]

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Wayne National Forest auction coming to Ohio:  "The U.S. Bureau of Land Management plans to lease out 3,302 acres in the Wayne, most of it near Nelsonville in Athens County, to the highest bidders during a Dec. 7 mineral-rights auction."  (Columbus Dispatch article).  And naturally the skeptics are coming too:  "Nathan Johnson, attorney for the Buckeye Forest Council, said a drilling technique called hydraulic fracturing, or fracking, poses a threat to the forest and its wildlife."

We'll see ...

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Pennsylvania is considering some significant fees on drilling in the state according to this article in the WSJ:  "Pennsylvania Gov. Tom Corbett proposed a fee on natural-gas drilling of as much as $160,000 a well in an effort to find a middle ground between public support for assessing drillers in the booming Marcellus Shale basin and a campaign pledge not to impose taxes."  (Emphasis is ours.)  It seems as if everyone is looking for a piece of the pie these days ...

See also this article in the Philadelphia Inquirer.

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The Columbus Dispatch has a good article on the potential growth for the chemical industry in Ohio due to the Utica:  "New natural-gas discoveries in Ohio could spell more jobs in spinoff industries from large-scale industrial chemical plants that could feed and foster additional manufacturing, industry representatives say."

Nice.

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The WSJ has an interesting article on how North Dakota is ahead of the economic curve due to its energy industry:  "Mr. Hamm [founder and CEO of Continental Resources] believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: 'We can't find any unemployed people up there. The state has 18,000 unfilled jobs,' Mr. Hamm insists. 'And these are jobs that pay $60,000 to $80,000 a year.' The economy is expanding so fast that North Dakota has a housing shortage. Thanks to the oil boom—Continental pays more than $50 million in state taxes a year—the state has a budget surplus and is considering ending income and property taxes."

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The New York Department of Environmental Conservation (NYSDEC) has proposed new regulations related to the use of high-volume hydraulic fracturing as part of a State Pollutant Discharge Elimination System (SPDES) general permit.  From the NYSDEC website:

NYSDEC has made a tentative decision to issue a SPDES general permit that will authorize point source discharges from high volume hydraulic fracturing (HVHF) operations to, in or over waters of the State. The SPDES general permit requires a Notice of Intent submittal to NYSDEC in order to discharge under this general permit. Permittees must develop a comprehensive Stormwater Pollution Prevention Plan (SWPPP) and implement control measures that minimize the discharge of pollutants to waters of the State. The NYSDEC reserves the right to require any applicant seeking coverage under this General Permit to apply for an individual SPDES permit. The General Permit has five year permit.

Public comments are due December 12, 2011.

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We've noted previously a U.S. EPA rulemaking proposal designed to to reduce air emissions from oil and gas operations.  Here is an article from Forbes.com on the public hearing recently held in Texas on the issue:  "The agency is proposing standards to curb hydraulic fracturing, or 'fracking,' by requiring operators to capture and sell natural gas that now escapes into the air. Thursday's EPA hearing was held in a region with a vast area of urban drilling atop the natural gas-rich Barnett Shale. The EPA's proposal would apply new pollution control standards to about 25,000 gas wells that are hydraulically fractured each year. *** While industry representatives touted the jobs and prosperity that drilling brings, critics argued it's not worth the environmental risk of toxic spills, scattered drill site explosions, tainted drinking water and polluted air."

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At the end of September, Ohio Governor John R. Kasich held an Ohio Energy Summit to lay the foundation for a comprehensive state Energy and Economic Development Policy.  Since that time, there have been a number of related articles that you might find of interest:

• Oil and gas energy's pay day: $500 billion (the Times-Reporter);
• Drillers snapping up rights leases in Ohio (part of a three-day series run by the Columbus Dispatch);
• Buckeye Oil Billions Will Unleash an Ohio Manufacturing Tech Boom (Forbes).  The article here begins well:  "A prediction. The Ohio Valley is on track to become a hotbed of innovation. And one which will almost certainly focus on 21st century manufacturing. The catalyst for this seemingly counter-intuitive claim? Money. Black gold. Ohio is about to be awash in both."  Let's hope the author is right!

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The Ohio Oil & Gas Energy Education Program (OOGEEP) released its second economic impact study this past week:  "According to the study, Ohio's natural gas and crude oil industry could help create and support more than 200,000 Ohio-based jobs from the leasing, royalties, exploration, drilling, production and pipeline construction activities for the Utica shale reserve. The state could experience an overall wage and personal-income boost of $12 billion by 2015 from industry spending."  (From the press release.)  Nice.

For a copy of the study, see here.

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We reported yesterday on several of the amendments approved by West Virginia's Joint Select Committee on Marcellus Shale (see here).  Forbes is reporting that the committee has also made some decisions regarding permit fees:  "Natural gas operators would pay $10,000 to drill a well in West Virginia's share of the Marcellus shale field, and $5,000 for each additional well at the initial site, under a proposal adopted Wednesday by a special legislative committee."

Not so in Ohio!

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While not new to the industry as a whole, the WSJ is reporting on recent attempts to enact local bans on oil and gas development in Pennsylvania:  "Challengers to natural gas drilling are taking a new approach in Pennsylvania, putting the rights of energy companies to drill in the massive Marcellus Shale basin on the ballot in what are believed to be the nation's first voter initiatives seeking to ban such activity."

Fortunately, Ohio law largely preempts these initiatives.

[Note:  Subscription may be required.]

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The New York Department of Environmental Conservation (NY DEC) has finally released a revised Draft Supplemental Generic Environmental Impact Statement (SGEIS) for public review.  Interestingly, the NYT introduces its report on the document as follows:  "Natural gas drilling using a controversial technique known as hydraulic fracturing could create up to 37,000 jobs and generate from $31 million to $185 million a year in added state income taxes for New York at the peak level of well development."

For more, including a copy of the report itself, see here.

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We've reported previously on the Delaware River Basin Commission's (DRBC's) oil and gas rulemaking (see here and here, e.g.).  The Philadelphia Inquirer is reporting that the rule package will be considered in October:  "The Delaware River Basin Commission, which has not allowed natural-gas drilling in eastern Pennsylvania counties within the basin, announced Tuesday that it would not act on its proposed drilling regulations at its Sept. 21 meeting, as one commission member had demanded."

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Last week, the Marcellus Shale Coalition hosted its inaugural "Shale Gas Insight" conference at the Pennsylvania Convention Center.  From the Houston Chronicle:  "A who's who of Pennsylvania's emergent natural gas industry will meet in Philadelphia this week to talk about a shale gas boom that supporters say has boosted domestic energy supplies while creating tens of thousands of jobs. Drilling opponents, meanwhile, are planning a rival event to spotlight what they contend is the environmental and public health toll."

For more, see here (Philadelphia Inquirer); and here (Forbes).

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You may be interested to know:

• Director of Ohio's Department of Natural Resources, David Mustine, has stepped down to become General Manager for Energy for JobsOhio, the state’s new private, nonprofit development corporation.  For more, see here (ODNR News Release).  Assistant Director, Scott Zody, will serve as interim director of the state agency.

• Two bills have been introduced in the Ohio Senate to (i) impose a moratorium on fracing until U.S. EPA finishes its hydraulic fracturing study (SB 213); and (ii) regulate the fluids used in the frac process, including disclosure (SB 212).  There is little likelihood that this legislation will be adopted.  Nonetheless, it was only a matter of time before something like these would be introduced ...

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The U.S. Geological Survey recently released an updated survey on recoverable reserves in the Marcellus.  From The Hill:  "According to the updated USGS mean estimate, the area contains 84 trillion cubic feet of technically recoverable natural gas and 3.4 billion barrels of natural gas liquids.  *** The new estimate for the Marcellus Shale — which includes portions of New York, West Virginia and other states — is far higher than the 2002 survey, when the mean estimate was 2 trillion cubic feet of natural gas and 10 million barrels of natural gas liquids."  However, according to Bloomberg:  "The U.S. will slash its estimate of undiscovered Marcellus Shale natural gas by as much as 80 percent after a updated assessment by government geologists."

You can find a copy of the updated survey here.

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We thought you might be interested in these items on regulatory initiatives addressing Marcellus development in West Virginia:

• From the Houston Chronicle:  "Another factor that could help lawmakers: the emergency Marcellus rules ordered earlier by acting Gov. Earl Ray Tomblin. The Department of Environmental Protection could issue them as soon as this week, according to state officials and stakeholders. *** These rules are expected to cover several key areas. One involves permits for the horizontal drilling method that often accompanies Marcellus development. Another is oversight of the large volumes of water withdrawn from area supplies, and of the chemicals mixed with that water before it is pumped underground to break up the shale and release the gas. Environmental groups remain concerned about this hydraulic fracturing process, also known as fracking, and the large pools of tainted water left over afterward."

• From the West Virginia Department of Environmental Protection:  "The West Virginia Department of Environmental Protection, *** filed an emergency rule today with the Secretary of State’s Office to increase the DEP’s regulatory oversight of horizontal well development in the state. *** The rule, which adds new permit application requirements for operators drilling horizontal gas wells, as well as new operational rules to protect the state’s water quality and quantity, will become effective after approval by the Secretary of State and remain in effect for 15 months."  You can find a copy of the rule here.

Interesting.

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We reported previously on a Cornell study claiming that natural gas development will likely contribute more to global warming than burning coal (see here).  The Patriot-News is now reporting on the conclusions reached by scientists at Carnegie Mellon University:  "The peer-reviewed study published Aug. 5 in 'Environmental Research Letters' appears to be a direct refutation of an April study from researchers Robert Howarth and Anthony Ingraffea at Cornell University that indicated that shale gas was worse for global warming than coal."  Looking specifically at Marcellus shale development, it finds that "Marcellus gas is essentially no different than conventional natural gas, the study found, and 20-50 percent cleaner than coal for producing electricity."

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The WSJ is reporting that New York State's Attorney General has issued subpoenas to several producers seeking valuation information:  "New York state's Attorney General recently issued subpoenas to several energy companies requesting details of how they value their natural gas discoveries, the latest evidence of increasing regulatory scrutiny of gas drillers."  Does this increase or decrease the likelihood that producers will want to enter New York, if and when the moratorium on hydraulic fracturing ends?

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The Times Leader is reporting on a recent industry win overturning Morgantown's ban on Marcellus shale drilling.  "On Friday, Monongalia County Circuit Court Judge Susan Tucker delivered a victory to Charleston-based Northeast Natural Energy in its legal battle with the city of Morgantown. *** Northeast is drilling wells above the Monongahela River about a mile from a city drinking water intake. Citing concern over its water supply and the lack of tough state regulations, the City Council passed an ordinance in June to ban deep horizontal drilling and hydraulic fracturing within city limits and up to a mile beyond.*** Tucker sided with Northeast, declaring the state has sole regulatory authority over oil and gas operations."  Nice.

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On July 21, 2011, Citizens For Pennsylvania’s Future (“CPF”) filed a lawsuit against Ultra Resources, Inc. (“Ultra”) in the United States District Court for the Middle District of Pennsylvania alleging that Ultra violated the Clean Air Act ("CAA") by not applying for and obtaining the proper permit to construct and operate its natural gas wells, pipelines, compressor stations and associated equipment in Tioga County and Potter County, Pennsylvania.  The central issue is whether all of Ultra's equipment involved in its natural gas production operations should be aggregated for air permitting purposes, which would impose significantly more stringent permitting, recordkeeping and reporting requirements on Ultra.

We will monitor the suit and keep you posted.

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Mandatory pooling is back on the table for consideration in Pennsylvania - at least in part.  "[T]he Marcellus Shale Advisory Commission has revived a debate over whether to allow areas of Pennsylvania rich with natural gas to be gathered into large land 'pools,' even against property owners' wishes."  (From the Pittsburgh Post-Gazette.)  The new proposal appears to have a strange twist, though:  "Only drilling companies would be forced to allow pooling, not property owners who haven't signed leases."

Better than nothing?

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The Philadelphia Inquirer is reporting that Dominion Resources is building a $500 million natural gas processing plant in West Virginia:  "The Richmond, Va., energy company announced Thursday that it would construct a processing and fractionation plant along the Ohio River in Natrium, W. Va., that would separate propane, butane, and ethane from gas extracted from the Marcellus Shale formation and, increasingly, the deeper Utica Shale."

For a copy of the press release, see here.

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The Pennsylvania Patriot-News has an interesting article on Europe's interest in the Marcellus:  "Ever since New York state declared a moratorium on drilling for natural gas in the Marcellus Shale, the conventional wisdom has been it was watching Pennsylvania and learning from us.  It turns out other eyes are watching us as well. *** Markus Wailand, a film producer from Vienna, recently spent 10 days interviewing people involved with Marcellus drilling in Pennsylvania for what he called Austria’s version of '60 Minutes.'"

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That aphorism comes to mind when considering U.S. EPA's new proposal to reduce air emissions from oil and gas operations. From its press release: "Today’s proposal would cut smog-forming volatile organic compound (VOC) emissions from several types of processes and equipment used in the oil and gas industry, including a 95 percent reduction in VOCs emitted during the completion of new and modified hydraulically fractured wells."  But - it really helps industry make money:  "EPA’s analysis of the proposed changes, which also include requirements for storage tanks and other equipment, show they are highly cost-effective, with a net savings to the industry of tens of millions of dollars annually from the value of natural gas that would no longer escape to the air."  Really!  Thank goodness they're looking out for at your pocketbook.  (Emphasis is ours.)

You can find a copy of the rule package here.

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The PA Marcellus Shale Advisory Commission has issued its final report on natural gas drilling in the state.  According to the press release, it contains 96 policy recommendations that include increasing setback distances, making more information available to the public, imposing tougher civil and criminal penalties for violations of law, and at the same time assisting local companies do business with the natural gas industry.

You can find a copy of the report here.

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The Philadelphia Inquirer is reporting on the possibilities a shale gas revolution can bring to the state:  For example, "Power plants could consume more gas to produce electricity, displacing coal. Natural gas vehicles might replace some diesel and gasoline transport. A few entrepreneurs are even talking about shipping liquefied gas to overseas markets."

Read it all.  Interesting.

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This has got to hurt.  After all of the efforts by one of its reporters to mischaracterize hydraulic fracturing as an environmental disaster, the NYT is reporting that New York State's Governor Cuomo plans to lift the state's moratorium on the use of that process to develop its shale resources:  "The Cuomo administration is seeking to lift what has been, in effect, a moratorium on hydraulic fracturing, a controversial technology used to extract natural gas from shale, state environmental regulators said Thursday."

Ouch.

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We noted previously the NYT's attempt to impede domestic drilling through a series of articles on the "environmental dangers" presented by hydraulic fracturing (see here), and the failings of those articles (see here).  Well, having fallen short at its attempted environmental scaremongering, the "Paper of Record" appears to be at it again with a series of articles attacking the economics of shale development in the United States:  "But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells."  See here.

The author appears to have missed the mark yet another time, however, relying on years-old, outdated communications and analyses while ignoring more recent data.  As John Hanger, former Secretary of Pennsylvania's Department of Environmental Protection, states in an excellent take down of this new attack:  "Reader beware. This reporter puts sensationalism ahead of fairness or truth. Pennsylvania's drinking waters are not poisoned with radionuclides, as substantial testing has verified, and the reading public should drink from this journalistic cup with great caution."

For more, see here (Energy in Depth) and here (Forbes.com:  "Most of this argument is absurd on its face.").

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The Daily Journal is reporting that the city of Morgantown, WV, has banned the use of hydraulic fracturing within the city and a one-mile radius:  "City officials say a ban on horizontal drilling and fracturing is necessary in and near city limits because of the proximity to large infrastructure."

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We thought you might be interested in a couple of articles:  First, one on how Ohio oil and gas development is already having a positive impact on the local economy (from the Canton Repository).  Second, one on a Quinnipiac University poll finding that 63 percent of Pennsylvania voters are for allowing Marcellus Shale development because of the economic benefits (from the Philadelphia Inquirer).

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That's the title to an article in the WSJ:  "The shale drilling boom now underway in Texas, Louisiana, Pennsylvania, Oklahoma and other states is already creating jobs, slashing natural-gas prices, and spurring billions of dollars of investment in new production capacity for critical commodities like steel and petrochemicals. Better yet, it's spurring a huge increase in domestic oil production, which has been falling steadily since the 1970s."

More energy production is better for all of us.

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We thought you might be interested in the most recent monthly natural gas production data from the Energy Information Administration:

Production in the Lower 48 States shows a recovery from the weather-induced drop that was recorded during the first two months of the year. A gain of 3.8 percent or 2.49 billion cubic feet per day (Bcf/d) more than offset the previous declines. All areas in the Lower 48 posted increases except the Federal Offshore Gulf of Mexico which fell slightly, 0.4 percent or 0.02 Bcf/d. Texas contributed the largest gain at 6.1 percent or 1.23 Bcf/d; Louisiana and Other States, likewise posted gains totaling 0.65 Bcf/d as drilling activity continues in the Marcellus and Haynesville shale plays. New Mexico and Oklahoma had increases of 10.4 percent or 0.35 Bcf/d and 4.1 percent or 0.20 Bcf/d respectively.  [Emphasis is ours.]

Very interesting.  For more, see here.

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U.S. EPA has directed six natural gas producers in Pennsylvania to disclose how they intend to dispose of their drilling wastes.  "EPA’s action follows a request by PADEP asking drillers to voluntarily stop taking wastewater to Pennsylvania wastewater treatment plants by May 19. EPA wants to know where drillers are now going to dispose of their wastewater and will work with PADEP to ensure EPA has access to this information."

For a copy of the letters see here (for a sample letter and the enclosure).

It's starting to look like a frontal assault.

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A couple of items to note regarding hydraulic fracturing in the news:

• The U.S. Department of Energy has initiated its own review of hydraulic fracturing (i.e., in addition to the study being done by U.S. EPA):  "A group of highly respected experts with experience in industry, environmental groups and state regulatory agencies will form a subcommittee of the Secretary of Energy's Advisory Board to conduct the review, and will work to identify, within 90 days of beginning their work, any immediate steps that can be taken to improve the safety and environmental performance of hydraulic fracturing. They will also develop, within six months of beginning their work, consensus recommended advice to the agencies on practices for shale extraction to ensure the protection of public health and the environment."  Why?

• Researchers at Duke University have issued a study finding systematic evidence of methane contamination in areas being drilled using hydraulic fracturing, according to this report in the Philadelphia Inquirer.  Interestingly, it found no chemical contamination:  "We found no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids."  For a copy of the report, see here.

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The San Francisco Chronicle is reporting that Chevron has agreed to purchase additional Marcellus assets in Pennsylvania from Chief Oil & Gas LLC and Tug Hill Inc.  "The transaction is expected to close by the end of June and will give the company access to about 5 trillion cubic feet of gas in the area, the company said. In February, Chevron completed its $3.58 billion purchase of Atlas Energy Inc., a Moon Township, Pa., owner of 622,000 acres in the Marcellus Shale."

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The Pennsylvania Department of Environmental Protection (DEP) has asked Marcellus producers to stop disposing of their wastewater streams at the remaining treatment facilities in the state:  "At the direction of Governor Tom Corbett, acting Department of Environmental Protection Secretary Michael Krancer today called on all Marcellus Shale natural gas drilling operators to cease by May 19 delivering wastewater from shale gas extraction to 15 facilities that currently accept it under special provisions of last year’s Total Dissolved Solids (TDS) regulations."

Well ...

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New York's Attorney General has told the U.S. Army Corps of Engineers and other federal agencies that he will sue if they fail to conduct a full review of proposed hydraulic fracturing regulations in the Delaware River Basin.  "'Both the law and common sense dictate that the federal government must fully assess the impact of its actions before opening the door to gas fracking in New York,' said Attorney General Schneiderman. 'New Yorkers are correctly concerned about fracking's potential dangers to their environment, health and communities, and I will use the full authority of my office, including aggressive legal action, to ensure the federal government is forced to address those concerns.'"  (See here for more.)

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"Billions in Potential Value" is how this article from centralohio.com describes the possible resource recovery from the Utica Shale in Ohio.  "In a presentation to the Ohio Oil and Gas Association last month, Larry Wickstrom, the state's geologist, estimated producers could recover as much as 15.7 trillion cubic feet of natural gas and 5.5 billion barrels of oil from Ohio's share of the Utica Shale."  And that's a conservative estimate.

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Yes, it may be hard to believe your eyes, but look here (in the NYT):  "The country has been handed an incredible gift with the Marcellus Shale. With an estimated 500 trillion cubic feet of reserves, it is widely believed to be the second-largest natural gas field ever discovered. Which means that those of you who live near this tremendous resource have two choices. You can play the Not-In-My-Backyard card, employing environmental scare tactics to fight attempts to drill for that gas. *** Or you can embrace the idea that America needs the Marcellus Shale, accept the inconvenience that the drilling will bring, but insist that it be done properly."

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U.S. EPA does intend to regulate natural gas drilling in the United States.  According to this article at nasdaq.com:  "The Environmental Protection Agency has the authority to regulate natural gas drilling and is committed to doing so, EPA Deputy Administrator Robert Perciasepe told a Senate committee Tuesday."  How?  Through the Clean Water Act.

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The Oklahoman is reporting on a new national registry for frac fluid constituents:  "The searchable site allows visitors to look up the chemicals used on wells in their area, while offering a wealth of information about the process industry officials say has been instrumental in triggering a revolution in oil and gas production."  For the site itself, go here.  Very cool.

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A new study has been in the news lately claiming that natural gas likely will contribute more to global warming than burning coal because it is vented to the atmosphere in far larger quantities than previously thought (see, e.g., this article in the NYT).  The problems with the study appear to be numerous, however, including the inappropriate use of "lost-and-unaccounted for" data from Texas and long-range transmission pipeline data from Russia; the misuse of a warming factor 45% higher than the one used, for example, by the UN's Intergovernmental Panel on Climate Change (IPCC); and the use of a 20-year limited time frame to study the effects of methane in the atmosphere rather than the commonly used 100-year time frame.  See here.

Apparently others have noticed the issues - see here (Council on Foreign Relations).

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Marcellus a non-issue for western New York?  That's the topic of discussion in this article from the Buffalo News:  "That’s because, even though the Marcellus runs through most of Western New York, the dark shale here doesn’t hold nearly the promise for drillers that it does along a swath that stretches from roughly the southeastern corner of Allegany County eastward to Delaware and Sullivan counties."

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The National Journal has an interesting article observing that plaintiffs lawyers are looking for work in the Marcellus Shale:  "The sound of drills piercing the Marcellus Shale formation has pricked up the ears of attorneys whose practices range from tax and regulatory to land use and environmental. But personal injury lawyers and class action attorneys have also taken notice of what some believe is an environmental disaster in waiting because of a lack of state government oversight and a natural gas industry rushing to get a piece of the shale."

You knew it was coming ...

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The Philadelphia Inquirer has a couple of articles to note:

• Pa.'s Natural Gas Rush, and
• Shale-gas regulation near river divides Pa.

You might take a look.

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The WSJ has a good article on the potential of shale gas.  "What has become known as the "unconventional-natural-gas revolution" has turned a shortage into a large surplus and transformed the natural-gas business, which supplies almost a quarter of America's total energy. This revolution has arrived, moreover, at a moment when rising oil prices, sparked by turmoil in the Middle East, and the nuclear crisis in Japan have raised anxieties about energy security. Government and producers alike have turned their attention back to domestic resources."

Read it.

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From CNBC:  "Energy Output From Shale Rock Could Match 20th Century Oil Boom."  Best line - "You can't leave 160 billion barrels in the ground."

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The Intelligencer has an article on the possible drilling in Ohio:  "'The economies around us are benefiting from drilling. You see it in Pennsylvania, it's real; you see it in West Virginia, it's real. Now it's here, and we have to grasp the opportunity,' said state Sen. Wilson, D-Columbiana. 'I think this is the biggest opportunity for job growth for eastern Ohio we have seen in a generation.'"

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The Plain Dealer has an interesting article on the potential for Ohio oil and gas resources and proposed legislation for drilling on state lands.  "Ohio's new governor proposed leasing park land in his biennial budget and both the Ohio House and Senate have bills in the hopper that could authorize the state Department of Natural Resources to do so."

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The Register-Herald is reporting that a task force consisting of members from the Bipartisan Policy Center and the American Clean Skies Foundation recently issued a report on the benefits of domestic natural gas production, but recognizing the need for reasonable regulation.

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The Pittsburgh Post-Gazette has an interesting article on the start of the Marcellus shale boom.  "But a convergence of Wall Street interests, corporate money and academia helped transform Marcellus almost overnight from rock to rock star, spurring predictions of a natural gas bounty in the U.S. and unleashing a massive land rush across the commonwealth."  Nice.

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The Houston Chronicle is reporting that the Haynesville Shale has become the largest producing natural gas shale formation in the country.  "The U.S. Energy Information Administration said the Louisiana find, which experts say could have up to 39 trillion cubic feet of natural gas, overtook Barnett's volumes by mid-February even after the Texas site recovered from freezing weather."

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The Dayton Daily News has an interesting article on potential development in Ohio.  "The major new target is what geologists call the Utica Shale, a deep rock formation beneath eight states with untapped potential here. Speculation runs high that it could amount to a major deposit."

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We noted earlier the articles recently published by the NYT regarding shale development, including the claim that it involved the discharge of radioactive wastewater in PA (see here).  Well, you would think they would have waited for the facts - right after those articles came out, the PA Department of Environmental Protection announced the results of in-stream monitoring that was done months earlier:  "DEP Announces Testing for Radioactivity of River Water Downstream of Marcellus Water Treatment Plants Shows Water Is Safe."  (See here.)  More:  "“We deal in facts based on sound science,' said DEP acting Secretary Michael Krancer. 'Here are the facts: all samples were at or below background levels of radioactivity; and all samples showed levels below the federal drinking water standard for Radium 226 and 228.'”

For a more in-depth take down of the NYT articles, see the posts from former PA DEP Secretary, John Hanger (here).

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The Texas Commission on Environmental Quality (TCEQ) has issued tougher air emissions regulations for producers, effective April 1, 2011, for Barnett Shale areas, according to this article in the Houston Chronicle.  "TCEQ commissioners voted Wednesday to beef up air emission limits on toxic chemicals associated with natural gas drilling and required producers to do expanded testing of their drilling sites."

For a copy of the rules and related materials, see here (Rule Project No. 2010-018-106-PR).

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The WSJ has a short article on possible legislative changes for West Virginia producers:  "One pending bill proposes rules meant to address these various concerns. Crafted by a House-Senate interim committee that studied the issue over the past year, it also proposes hefty hikes for drillers."  Those proposed hikes include a $15,000 drilling permit fee!

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The Delaware River Basin Commission (DRBC) has published draft natural gas development regulations (see here).  From the DRBC's Fact Sheet:  "[T]his Article requires that water used for natural gas development projects must come from water sources that have been approved by the Commission for use for natural gas development. ***. A streamlined approval process is provided that encourages the use of existing Commission-approved water sources to minimize the need to construct and operate new water sources."

From a quick look, it appears as if the DRBC is looking to limit development through, among other things, significant bond requirements and permit fees.

Comments are due:  March 16, 2011.

[Update:  Public hearings have been scheduled for middle/late February (moved up).]

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The Houston Chronicle is reporting on the opportunities presented by the Eagle Ford shale in S. Texas:  "That's the site of the Eagle Ford shale formation, a vast underground network of dense rock layers, discovered only recently and now thought to be one of the nation's biggest oil and gas fields."

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The Intelligencer has an interesting article highlighting in summary form some of the financial data related to lease transactions over the past year in West Virginia.  For example:  "Lease revenue payments have ranged from as low as $5 per acre to about $4,000 per acre over the past year with production royalty payments ranging from 12.5 percent to 18.75 percent. Many residents leased their gas rights in 2010, which led the Sunday News-Register to begin publishing weekly oil and gas lease transactions each Monday."

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U.S. EPA has announced that it will be holding four workshops in February and March, 2011, to discuss a number of topics related to its Hydraulic Fracturing Study, including well construction and operation and water resource management.  It is currently soliciting subject-matter experts to participate as presenters and provide technical knowledge during the discussions.  Applications to serve as an expert will be taken until January 3, 2011, at http://hfworkshop.cadmusweb.com.

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The Energy Information Administration (EIA) recently published the following reports that you may find of interest:

Short-Term Energy Outlook (December 2010):  "The Henry Hub spot price averaged $3.71 per million Btu (MMBtu) during November, an increase of about 28 cents from October's price of $3.43 per MMBtu (Henry Hub Natural Gas Price Chart). Over the winter heating season, the projected monthly average spot price peaks at $4.29 per MMBtu in January 2011, before dropping back down to close to $4.00 per MMBtu in June 2011. This month's Outlook slightly raises the average 2011 Henry Hub spot price to $4.33 per MMBtu from last month's forecast of $4.31 per MMBtu."

Annual Energy Outlook 2011 (Early Release):  "The technically recoverable unproved shale gas resource is 827 trillion cubic feet (as of January 1, 2009) in the AEO2011 Reference case, 480 trillion cubic feet larger than in the Annual Energy Outlook 2010 (AEO2010) Reference case, reflecting additional information that has become available with more drilling activity in new and existing shale plays. The larger resource leads to about double the shale gas production and over 20 percent higher total lower 48 natural gas production in 2035, with lower natural gas prices, than was projected in the AEO2010 Reference case."

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The NYT is reporting that New York Governor David Paterson has vetoed the proposed legislative moratorium on the use of hydraulic fracturing to develop the state's mineral resources.  But the article goes on:  "Instead, he [i.e., Gov. Paterson] issued an executive order instituting a longer moratorium that extended until July 1, 2011, but that more narrowly defined the types of drilling to be restricted."  A copy of the Executive Order can be found here once it is posted (it has not been at the time of this writing).

Whether producers will exercise force majeure provisions in their leases remains an open question.

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A moratorium on new drilling permits relying on hydraulic fracturing to stimulate the well has passed the NY State Assembly and awaits Governor Paterson's signature, according to this article in the NYT.  "The State Assembly voted 93 to 43 on Monday night to block new permits for the drilling practice, known as hydraulic fracturing, until May 15. The purpose would be to give the state more time to address safety and environmental worries, especially concerns that the drilling could contaminate groundwater supplies."

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The Philadelphia Inquirer has an interesting article illustrating another mechanism activists are using to attack shale development - pressuring customers to use alternative sources of supply.  "Philadelphia Gas Works is not currently buying natural gas that comes from Pennsylvania's Marcellus Shale, but a PGW executive suggested Tuesday that a proposal to ban future purchases might put the utility at odds with regulators."  (Emphasis ours.)

That proposal came from anti-drilling activists, according to the article.

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Pennsylvania is inching closer to the imposition of a severance tax.  The Pittsburgh Post-Gazette is reporting that the state House has approved a 39-cent per Mcf severance tax on production from the Marcellus Shale.  "But the bill *** still has a long way to go. The Senate, which is controlled by Republicans, says the tax is too high."

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We've been reporting on development of the Marcellus Shale for some time now in the Appalachian Basin (see here and here, e.g.).  The Columbus Dispatch has a good article on Utica Shale development in Ohio:  "Geologists say the Utica shale formation, a layer of thick black rock that lies 8,000 feet beneath most of the state, might hold enormous oil and natural-gas reserves. This promise has oil and gas companies spending a lot of money to snap up land."  More:  "Utica shale is thinner and deeper, and covers more of Ohio. That and some recent drilling successes in Canada, New York and western Pennsylvania make large Ohio deposits more likely, Engelder [a Penn State geologist] said."

Nice.

[Immediate update:  There are substantial economic benefits to this type of development, noted even by NPR in a story on PA shale activity:  "Pennsylvania's natural gas industry is rapidly expanding, and the state may be on the verge of a decades-long drilling rush. Right now, most of the jobs are going to transient out-of-state workers, but that trend is providing a boost to pockets of Pennsylvania's economy."]

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The NYT is reporting that the Delaware River Basin Commission is reconsidering the $5 million financial assurance bond required for each well.  "The bonding requirement is shaping up to be a flash point in the fight over drilling in the four-state basin. DRBC has enforced a de facto moratorium while it decides how it will protect water quality in the 13,539-square-mile basin. The primary effect has been to block Pennsylvania's gas rush as it moves into the state's eastern counties."

That certainly has an impact on whether smaller independents will be able to develop their lease interests.

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The NYT is reporting on a soon-to-be-released report from CERA (IHS Cambridge Energy Research Associates) concluding that plug-in electric vehicles may not be the panacea hoped for by the Obama administration.  One of the reasons that wind power may not be the silver bullet for reducing emissions related to these vehicles:  "Moreover, CERA believes that increasing production from large U.S. shale gas resources will restrain the cost of natural gas-fired generation, putting wind power at a continuing competitive disadvantage unless Congress puts a significant price on carbon emissions from fossil-fuel power plants -- an unlikely scenario as matters stand, Makovich said."

Of course, the article also helpfully explains that all of this can be changed if we would only artificially raise the price of our other energy resources ...

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U.S. EPA has issued a "voluntary" information request from several service companies asking for data on the chemical composition of their frac fluids.  From EPA's press release:  "EPA has requested the information be provided on a voluntary basis within 30 days, and has asked the companies to respond within seven days to inform the agency whether they will provide all of the information sought. The data being sought by the agency is similar to information that has already been provided separately to Congress by the industry. Therefore, EPA expects the companies to cooperate with these voluntary requests. If not, EPA is prepared to use its authorities to require the information needed to carry out its study."  What authorities?

For more, including a copy of the letter sent by EPA, see here.

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Last week, I had the privilege of giving a presentation on hydraulic fracturing at the Ohio State Bar Association's 25th Annual Ohio Environment, Energy and Resources Law Seminar (yes, shameless self-promotion).  I mentioned as part of the talk the benefit that shale oil production was seeing from the technologies developed to access gas in the Barnett Shale and other shale formations around the country.  As luck would have it, the Fort Worth Business Press yesterday had a related article here, observing that:  "The past decade has been all about gas, gas, gas, but new technologies developed for that commodity are turning out to be just as effective in a burgeoning rejuvenation of a more storied fuel: oil."

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The Houston Chronicle has a good article on Mitchell Energy's contribution to shale exploration.  "And now Mitchell's persistence in trying to coax energy from the common-yet-stubborn formations could be paying off for others, as shale natural gas is being embraced as a potentially huge energy source."

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That's the title to an article in the WSJ on the potential of shale gas in the U.S.  It starts:  "The biggest energy innovation of the decade is natural gas—more specifically what is called 'unconventional' natural gas. Some call it a revolution."  Very interesting, and written by two authors from IHS CERA.

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The Houston Chronicle is running a series on the growth of natural gas production from shale formations.  The first report - on the Haynesville Shale - can be found here.  A sample:

For years, companies have used hydraulic fracturing — injecting water into underground formations to break apart rocks and release more oil and gas. The Woodlands-based Mitchell Energy perfected the techniques in the Barnett shale formations in North Texas. But it wasn't until Devon Energy acquired Mitchell in 2002 that engineers added horizontal drilling — turning the drill bit at a 90-degree angle to tap into a larger section of the strata.

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The NYT is reporting that technologies developed to produce shale gas in the United States are going global.  "Italian and Norwegian oil engineers and geologists have arrived in Texas, Oklahoma and Pennsylvania to learn how to extract gas from layers of a black rock called shale."  Leading innovation again ... nice.

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The Eagle Ford shale is turning out to be one of the most sought after prospects in the United States, despite declining prices and demand, according to this article in the Houston Chronicle.  Interesting:  "Producers in the Eagle Ford can break even when natural gas is priced as low as $3.88 per million British thermal units, the [Ross Smith Energy Group] said, versus break-even prices of $5.18 in the Barnett, $3.74 in the Marcellus and $4.49 in the Haynesville."

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This article from the Houston Chronicle reports on industry opposition to increased federal oversight of hydraulic fracturing in the shales.  Turns out, there is a House Natural Resources subcommittee hearing today on U.S. shale gas production.  Interesting.

More information on the subcommittee's hearing can be found here.

[Update:  A number of reports have surfaced recently on the issue.  See, e.g., here (Dallas Morning News - noting the Ground Water Protection Council's recent report finding state regulation effective); here (WENY-TV News - reporting on Congressman Hinchey's reintroduction of legislation to repeal the exemption of hydraulic fracturing from the Safe Drinking Water Act); and here (WSJ - subscription required - discussing industry resistance to new regulations).]

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This article from the Shreveport Times discusses the continued interest in and possibilities for development of the Haynseville Shale.

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American natural gas potential heralds a shift in the nation's energy landscape, according to this article in the WSJ.  Interesting look at the potential for shale development and its impact on energy and environmental policies.

[Note:  Subscription required.]

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On December 5, 2008, CenterPoint Energy Gas Transmission filed an application with the Federal Energy Regulatory Commission (FERC) to construct and operate an expansion of its Carthage to Perryville pipeline (Line CP) in order to increase deliveries of Haynesville Shale gas supplies to the Perryville Hub.  The FERC granted that application earlier this week (see here, search for Docket No. CP09-29).

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This is interesting - "Unconventional sources of natural gas will account for more than half of North American supply by 2020, despite a current industry downturn, according to a new report by a Calgary-based energy consultant."  From this article in the NYT.  It looks like others - outside the industry - are starting to pay attention.

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According to this article in the WSJ, Alan Greenspan appeared before Congress in 2003 to testify that the U.S. needed to become a major importer of LNG to address recent price spikes in the natural gas market.  He - and others sharing this view - could not have been more wrong.   While the list of proposed LNG facilities grew to over 50, today only six have been built, and most of those are idle, indicative of more-than-sufficient natural gas supplies.

[Very interesting article.  Subscription required.]

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We've had several recent posts on the Haynesville Shale.  For more, see this article from the Shreveport Times discussing the impact the economy is having on leasing.

And for a similar article on the Barnett Shale, see here.

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This year was a good year for shale.  According to this report from the Fort Worth Business Press, the technology pioneered in North Texas’ Barnett Shale over the past several years is now being used to develop shale reservoirs in New York, Louisiana and Wyoming.

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Ever wonder how shale can be used to produce natural gas?  The Natural Gas Supply Association (NGSA) has an explanation.

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Among other things, residents are concerned about the use of local lake and ground water by drilling companies, according to this article in the Shreveport Times.  This isn't the only basin that shale production raises issues over water with local citizens.

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The Natural Gas Supply Association has calculated that 25 percent of U.S. natural gas demand could be met by shales located in Appalachia, the Barnett Permian Basin of Texas and elsewhere in the U.S.  A copy of the statement can be found here.

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