Columbus Business First is reporting that more than 1,000 drilling permits have been issued in the Utica Shale in Ohio. "Through Dec. 7, ODNR had issued 1,015 permits for horizontal wells in the Utica since December 2009. Of that total, 551 were approved this year, surpassing the 525 permits for the year the agency projected back in May. It issued 376 in 2012. *** 'In general, 1,000 permits is a milestone,' said Shawn Bennett, a director with Energy in Depth Ohio, an oil and gas education and advocacy group. 'It shows the resource is here and companies are allocating the investments to develop it.'."
We thought you might be interested in these articles on recent successes in the Utica (both from the Akron Beacon Journal):
- Belmont County well producing 30.3 million cubic feet of natural gas. "The Irons 1-H well, drilled in Belmont County’s Washington Township, is producing in excess of 30.3 million cubic feet of natural gas per day, Gulfport officials said Tuesday in a third-quarter earnings call with analysts."
- Chesapeake Energy reports natural gas production is starting to climb in Ohio’s Utica shale. "Natural gas production in the Utica shale grew 91 percent from the second quarter of 2013 to the third quarter, the company said Wednesday in a third-quarter earnings and production call with analysts. *** The company’s Utica wells are averaging 164 million cubic feet of natural gas equivalent per day, the company said."
Columbus Business First has a good article on Marcellus production: "The Marcellus is far and away the biggest natural gas producer among the top six shale plays, dwarfing production totals from the much ballyhooed Eagle Ford and Bakken plays in Texas and North Dakota, respectively. To put things in perspective, Associated Press reported that if the Marcellus region were a country, its natural gas production would rank third in the world after Russia and the rest of the United States."
The Energy Information Administration (EIA) has an interesting post on drilling rig activities in Pennsylvania and West Virginia: "Drilling continues to shift out of the dry region of northeast Pennsylvania, where most natural gas production in the Appalachian Basin's Marcellus Shale play has occurred. *** As part of this shift, drilling activity has increasingly moved from northern Pennsylvania to southwest Pennsylvania and West Virginia—or from dry to more liquids-rich parts of the Appalachian Basin (see chart below). Increases have also occurred in the number of oil-directed rigs in this region, particularly in the Utica Shale formation."
The WSJ is reporting on a new analysis from Bentek Energy: "Massive shale-driven production growth in the U.S. Northeast and soaring demand from the Southeast will turn the nation's traditional south-to-north and west-to-east pipeline natural gas flows and price spreads upside down, according to Bentek Energy(R), the natural gas and oil analytics unit of Platts, a leading global energy and commodities information provider." More? "The 114-page report released at Houston Platts Commodity Week, an annual energy and biofuels outlook event, says that more than one-third of the U.S. natural gas production increase from 2013 to 2023 -- or 9.1 billion cubic feet per day (Bcf/d) -- is expected to come from the Utica and Marcellus shale formations in the northeastern U.S., while nearly half of U.S. demand growth, or 9.4 Bcf/d, is expected to occur in the Southeast over the same period."
The Akron Beacon Journal is reporting that the Utica and Marcellus are poised to benefit local utilities and consumers: "The two shales are capable of producing enough natural gas to power electric-producing power plants now fueled with coal and other large customers, [Justin Carlson of Bentek Energy] told 250 people on Tuesday at the Think About Energy Summit sponsored by America’s Natural Gas Alliance, a national trade group." More? "The Utica-Marcellus region is now the third-largest producer of natural gas in North America with 12.5 million cubic feet per day, behind only Texas and western Canada. It may soon surpass Canada and take over the No. 2 spot, he said."
The Ohio Department of Natural Resources (ODNR) is releasing the 2012 production data right now (you can watch here). Of note: Oil production last year increased by 93%, to nearly 636,000 barrels. Gas production increased by 80%, to nearly 13 Bcf.
We will update this information as soon as it becomes available.
[Update: Production data can be found here.]
The Pittsburgh Post-Gazette has an interesting article on moving natural gas liquids from Appalachia to the Gulf Coast: "Over the past year, several energy infrastructure firms have announced plans to transport Pennsylvania liquids to the petrochemical facilities and export markets available in towns near the Gulf Coast like Beaumont. Oftentimes, the deals are financed with help from joint venture partners, all trying to solve (and cash in on) Pennsylvania's energy problem. *** What's the problem? We have the goods but nowhere to take them."
Read it all.
The Proceedings of the National Academy of Sciences has published a recent study on the impacts of shale development on surface water quality in Pennsylvania. Of note: "The density of shale gas wells upstream in a monitor’s watershed has a statistically insigniﬁcant effect on Cl- concentration downstream ***." What does that mean? From a related Council on Foreign Relations article: "The team’s conclusions are fairly straightforward. They find enhanced chlorine concentrations downstream of waste water treatment facilities but not downstream of drilling sites. Chlorine is a good marker of contamination from well flowback. What the RFF analysis suggests is that leaks or spills aren’t statistically detectable, at least at the watershed level, but that impacts of poorly processed wastewater are."
The Canton Repository is reporting on new maps generated by the Ohio Division of Geological Survey suggesting that the Utica shale may extend further west than previously contemplated: "Drilling opportunities in Ohio’s Utica shale might extend farther west, according to revised maps posted by the Ohio Department of Natural Resources. *** ODNR geologists posted new maps on the agency’s website last week after reviewing information from 100 new locations. *** The revised map supports earlier speculation that eastern Ohio — including Stark, Carroll and Tuscarawas counties — should be a hot spot for oil and liquid natural-gas production. But it extends potential production farther west and south."
If you are interested, take a look at the related map too.
Even the NYT has recognized the potential of Ohio development: "Petroleum from this region once supplied John D. Rockefeller’s Standard Oil refineries in Cleveland, 70 miles to the north. More than 6,500 conventional oil and gas wells have been drilled here in Stark County over the decades, according to state records; most no longer yield enough fuel to market. But natural gas buried in shale thousands of feet below the surface is attracting more than $1 billion in private investment and rapidly reviving the area as an energy producer."
Very interesting. Read the whole thing.
We thought you might be interested in these two articles from Columbus Business First:
New Pipeline: "Two pipeline companies from the Southwest have formed a joint venture to build a transportation system to move natural gas liquids from shale plays in Ohio, West Virginia and Pennsylvania to processing and storage facilities in Louisiana."
Youngstown Economic Comeback: "Youngstown is attracting manufacturers to service the Utica shale play. It has an emerging tech scene led by a downtown business incubator launching software companies, and steel-making is re-emerging."
Ohio EPA has made draft model general permits for Oil and Gas Well Site Production Operations and Unpaved Roadways and Parking Areas available for public comment: "The Ohio EPA, Division of Air Pollution Control (DAPC) is soliciting comments from interested parties concerning proposed changes to Model General Permits and a new Permit-By-Rule to address operations at oil and gas well sites. These changes are designed to (1) incorporate changes associated with the recently issued New Source Performance Standards (NSPS), Subpart OOOO, for Crude Oil and Natural Gas Production, Transmission, and Distribution, (2) split the single oil and gas well site operations general permit into two separate general permits, (3) revise the unpaved roadway general permit to eliminate unnecessary monitoring, record keeping, and reporting, and (4) to propose a new Permit-by-rule for flowback operations."
Comments are due March 22, 2013.
The Canton Repository is reporting that the Ohio Department of Job and Family Services has started issuing quarterly reports on the impact of shale development on the Ohio economy. From the first report: "Employment rose 17 percent in core shale industries — pipeline construction and well drilling — between early 2011 and early 2012. Meanwhile, employment in ancillary industries — freight trucking, environmental consulting — increased 3.1 percent." More? "Average salary in core shale industries was $73,934 per year, while ancillary industries average $58,765 annually."
The Toledo Blade has an interesting article on how development of the Marcellus and Utica shales might help maintain - and impact - Amish traditions: "The Masts and many of their neighbors are Amish, part of a community that’s lived in white homes along New Wilmington’s back roads for decades. They shun technology and embrace a family-based, agrarian lifestyle, even though many can’t afford to farm anymore and instead support their families with construction businesses and shops run out of their homes. *** A new source of money, however, has come to the Amish of western Pennsylvania and eastern Ohio. *** They own some of the most coveted land in the nation, and rapid-fire leasing by gas companies is creating millionaires — and disturbing communities worried about greed and envy."
Columbus Business First has an interesting article on the sales tax increases seen in eastern Ohio: "Cash registers are ringing in Utica shale play country, contributing to double-digit increases in sales tax revenue in the seven counties in eastern Ohio that top the state in the number of Utica shale drilling permits, according to a new analysis by Energy in Depth Ohio, an oil and gas trade group. *** Sales tax revenue in 2012 was up by as much as a third in one county compared with the prior year and more than 10 percent in the other six."
Our inaugural issue of the Ohio Oil and Gas newsletter offers, among other things, a brief review of oil and gas development over the course of 2012. The newsletter will provide a monthly report on activity in the Utica and Point Pleasant Shales. Click here to read the newsletter. If you would like to begin receiving the newsletter, please sign-up here.
The Newark Advocate has an interesting report on the investments the E&P industry has made - and plans on making - in the Utica: "Billions of dollars will pour into Ohio’s Utica Shale this year. How much of that eventually will be recovered from the shale in the form of lucrative hydrocarbons remains a mystery, one that might not be solved this year. *** More than $1.2 billion so far has been budgeted for drilling costs in Ohio this year, according to forecasts by several of the companies that have received permits to drill here."
Read the whole thing.
Forbes has an interesting article on the opportunities offered by domestic unconventional resource development: "The commencement of the crude oil and natural gas revolution can be boiled down to one simple equation: Abundant resources + cost effective extraction = high production levels of unconventional oil and gas. The net effect is a reshaping of the U.S. energy industry and our economy. Additionally, the country’s increased reliance on natural gas (displacing coal) has already benefited the environment, and will continue to do so in the future. Carbon emissions hit a 20-year low (in the first quarter 2012 according to EIA) and some industry observers believe that the U.S. could meet the Kyoto agreement standards by 2020 (even though the U.S. did not sign it)."
Read it all.
The Akron Beacon Journal also has a good article on midstream activities in Ohio: "Seven processing-separation plants for natural gas plus liquids and four pipeline networks are under construction in eastern Ohio. Their price tag, in excess of $7.2 billion, does not include interim facilities also starting to pop up in Ohio. *** In addition to the new plants, eastern Ohio is expected to see an additional $5 billion in new pipeline projects in the next few years because the state’s existing network is too old and too small to handle the volume of gas and liquids that energy companies are tapping."
The Cleveland Plain Dealer has an interesting article on a $1 billion processing plant is being built in Kensington, Ohio: "The first of several large natural gas processing plants in eastern Ohio -- crucial to getting the gas cleaned up and moved into commercial pipelines -- is on schedule to open in May. *** The facility will be connected through a 24-inch high-pressure pipeline to a sister plant about 40 miles south in Leesville in Harrison County. *** The two plants will be able to process 800 million cubic feet of natural gas a day and will employ about 60 people, said Smith, whose company does business under the name Momentum."
Read it all (it's short).
Forbes has an interesting article on the possibilities for near-term natural gas production: "Until recently, it has been hard to get a good view of the supply side dynamics. This is largely because the shale phenomenon is so new that things have taken a while to sort out and for equilibriums to become established. We are now beginning to get a clearer picture.*** In the near term, production figures will continue to rise, even as rig counts start to fall. Bentek, an analyst focusing in this area, predicts that Marcellus production will increase by 78% by 2015. The main reason for the increased production is simple: more than 1000 wills [i.e., wells] drilled over the past year and half have not yet been brought on line. That’s almost a third of the 2,879 wells currently completed in PA."
The Washington Post has a good article on shale development leading to a domestic industrial revival: "The shale gas revolution is firing up an old-fashioned American industrial revival, breathing life into businesses such as petrochemicals and glass, steel and toys. *** These companies all rely heavily on natural gas. And across the country, companies like them are crediting the sudden abundance of cheap natural gas for revving up their U.S. operations. Thanks to new applications of drilling technology to unlock natural gas trapped in shale rock, the nation’s output has surged and energy experts almost unanimously forecast that prices will remain low or moderate for a generation."
Very interesting. Read it all. Really.
State Impact is reporting that U.S. EPA has issued two draft permits for wastewater injection wells in Pennsylvania: "The Environmental Protection Agency has issued draft permits for fracking wastewater disposal wells in both Elk and Clearfield counties. The state has only five permitted and operating underground injection disposal wells that take wastewater from oil and gas production. The EPA has issued final permits for two injection wells in Warren County, but they’re under appeal by residents. With the Marcellus Shale drilling boom, the gas industry needs more options to dispose of their waste water. But plans for the wells in Warren, and Clearfield counties have met substantial opposition from residents."
The Wheeling Intelligencer has an article about the growth in Cadiz, Ohio, attributable to oil and gas shale development in the region: "Teresa Posada said when she and her family arrived from the Chicago area earlier this year, Main Street in Cadiz looked 'a little sleepy.' *** Now it is hard to find a parking space along the route, as the village is bustling with activity because of the Utica Shale natural gas rush sweeping across eastern Ohio."
Read it all.
The WSJ has an interesting article on the beneficial impact hydraulic fracturing is having the economies of the "Rust Belt" states: "It isn't just Beaver County reaping the benefits of cheap gas. Plunging prices have turned the U.S. into one of the most profitable places in the world to make chemicals and fertilizer, industries that use gas as both a feedstock and an energy source. And they have slashed costs for makers of energy-intensive products such as aluminum, steel and glass. *** In the rundown former steel towns along the Ohio River, natural gas is spurring hopes of an industrial renaissance. Steel mills once lined the Ohio River here, but little of the industry survives. The proposed site of the Shell facility holds one of the few big factories still operating, an 80-year-old zinc plant slated for closure next year."
Read the whole thing.
[Note: May be subscription only.]
The Washington Post is reporting on two financial studies that conclude that the Marcellus is the place to be for natural gas development in the U.S.: "There’s been plenty of debate over the Marcellus Shale natural gas field, but new research adds a twist that could impact political and environmental battles. Two independent financial firms say the Marcellus isn’t just the biggest natural gas field in the country — it’s the cheapest place for energy companies to drill. *** One of the reports adds that the Marcellus reserves that lie below parts of Pennsylvania, West Virginia, Ohio and New York are far larger than recent government estimates, while another said the powerful combination of resource, cost and location is altering natural gas prices and market trends across the nation." (Emphasis is ours.)
Read it all.
Crain's Cleveland Business has an interesting commentary on the downstream benefits of Utica development in Ohio. A sample: "Purchased raw materials (feed stock) and purchased energy (gas & electricity) are two of the largest cost items for chemical companies, and low-priced, locally sourced natural gas addresses both of those factors. Natural gas liquids (ethane, propane and butane) are crucial feed stocks for high value added products of the chemical industry. As a result, U.S. manufacturing and the chemical industry were hit hard by high natural gas prices between 2004 and 2008. Prices started to fall dramatically as supplies from shale formations began to be realized and understood. Now, low-priced natural gas and ethane from natural gas liquids (NGLs) have the potential to significantly improve the global competiveness of Ohio's chemical companies. The growing supply is also helping to keep Ohio's energy costs among the most competitive in the country."
For a related article, see here from the Houston Chronicle.
The State Journal is reporting on a new report issued by the U.S. Geological Survey: "The Utica Shale contains about 38 trillion cubic feet of undiscovered, technically recoverable natural gas, according to the first assessment of this unconventional natural gas accumulation released Oct. 4 by the U. S. Geological Survey. *** The Utica Shale has a mean of 940 million barrels of unconventional oil resources and a mean of 9 million barrels of unconventional natural gas liquids."
For a copy of the related press release and report itself, see here.
We thought you might find this interesting. From the Canton Repository: "A temporary cement plant will be constructed in the first phase of Baker Hughes Oilfield Operations’ Utica shale regional hub at the Northeast Ohio Commerce Park. *** Beyond that, the company’s intentions are unknown, but one local official with an understanding of the company’s plans believes it is not a matter of if, but when, the Houston-based oil and gas service provider embarks on the $64 million facility it once intended to construct."
No, not the popular television show on A&E. Rather, the issue of whether natural gas storage companies also own the right to develop the Utica shale underlying the associated properties. From the Youngstown Business Journal: "The main legal question before courts in northeastern Ohio is whether those who own land within a designated storage field also own the mineral rights, Arnold says. *** During the 1940s and ‘50s, energy companies negotiated many leases with landowners that specifically awarded these companies the rights to storage, Arnold says. However, drilling companies exploring the Clinton formation would often cut into the storage field and extract gas from the reserve. *** After that, the language in these leases was changed to include not only storage rights, but also mineral and production rights of any potential drilling on or even near the land, Arnold notes."
The WSJ has an interesting, but brief, article on infrastructure development in Ohio. It starts: "Residents in Ohio and parts of Pennsylvania are about to experience the same natural gas boom that hit West Virginia, with private equity investors committing hundreds of millions of dollars to build out midstream infrastructure around the Utica Shale formation."
[Note: Subscription may be required.]
A recent Duke study seeks to support the possibility of fluid migration impacting drinking water supplies: "The report by researchers at Duke University, published yesterday in the Proceedings of the National Academy of Sciences, said a chemical analysis of 426 shallow groundwater samples found matches with brine found in rock more than one mile (1.2 kilometers) deep, suggesting paths that would let gas or water flow up after drilling." (from Bloomberg News, for example). But read a little further into the article: "Terry Engelder, a professor of geosciences at Pennsylvania State University who studies geological formations in the region, reviewed the Duke paper and recommended against publication in the journal, he said. *** 'The science on this paper is solid,' he said in an interview. 'It’s the leap of faith they take in their interpretation and to focus everybody’s attention on the Marcellus' gas drilling. *** It’s not clear how long it took for the brine to migrate into groundwater, and it could take thousands of years, he said. And once fracking takes place, gas and water will flow into the well and not up through any fissures that may exist. 'The natural flow would be into the well bore,” Engelder said." (Emphasis is ours.)
For a copy of the study, see here. From the paper itself: "The occurrences of saline water do not correlate with the location of shale-gas wells and are consistent with reported data before rapid shale-gas development in the region." (Emphasis is ours.) Interesting ...
Ohio Governor, John Kasich, issued an executive order yesterday authorizing the Division of Oil and Gas Resources Management (Division) to amend its wastewater injection well permitting and operating rules by filing certain amendments electronically with the Secretary of State, Director of the Legislative Services Commission, and the Joint Committee on Agency Rules Review (JCARR). See here (Executive Order 2012-09K). For a copy of the amendments, see here.
U.S. EPA's Environmental Appeals Board (EAB) recently found that the agency had failed to conduct a sufficient review of two wastewater disposal well permit applications. From the syllabus of In Re: Bear Lake Properties, LLC (UIC Appeal No. 11-03) (Jun. 28, 2012): "The Region had a responsibility to ensure that accurate data as to drinking water wells within the area of review of the proposed injection wells were identified and considered. The record does not support a finding that the Region satisfied its responsibility in this regard. In particular, the Region failed to clearly articulate its regulatory obligations or compile a record sufficient to assure the public that the Region relied on accurate and appropriate data in satisfying its obligations. The permit is therefore remanded." (Emphasis is ours.)
For a copy of the decision, see here.
The Marietta Times is reporting that the mayor of Marietta, Ohio, is looking into converting the city's vehicles to compressed natural gas (CNG): "The projected natural gas boom through the fracking industry could drastically lower the cost to fuel the fleet of vehicles used in the city of Marietta, said Marietta Mayor Joe Matthews. *** A gallon of regular, unleaded gasoline in Marietta was $3.39 on Monday, and for a gallon of natural gas it was $2.25 per gallon at the nearest CNG refueling station in Zanesville. In Newark, natural gas was $1.80 per gallon."
IHS Global Insight has issued a new study on shale development. From its press release: "The new report, The Economic and Employment Contributions of Unconventional Gas Development in State Economies, examines unconventional gas activity – a growing subset of the total natural gas industry. The report found substantial growth in jobs and economic activity in unconventional plays over the past decade. The report is a companion to an IHS Global Insight study on shale gas economic and employment contribution released in December."
From the report details:
For a copy of the report, see here.
Ohio isn't the only state hiring new inspectors as a result of the increased activity in the oil and gas sector. The State Journal is reporting that West Virginia is doing the same thing: "The state Department of Environmental Protection this week issued a news release saying it is seeking applicants to become inspectors with the Office of Oil and Gas. Inspectors would be based out of the northern part of the state. *** The need for more inspectors stems from the December passage of the Horizontal Well Act, which relates drilling for natural gas in the Marcellus shale."
Not just increasing private sector jobs, but lowering government unemployment as well ...
The NYT (yes ... the NYT) has a good article on the wealth landowners are experiencing in eastern Ohio due to increased oil and gas leasing activity: "The energy boom has swept into the rural counties of the upper Ohio River Valley, producing a torrent of investment in mineral leasing that is jolting the economies of small towns and swelling the bank accounts of some working-class families."
Read it all.
Governor John R. Kasich signed into law yesterday Sub. S.B. 315, making substantial revisions to Ohio's oil and gas exploration and midstream programs (e.g., new frac fluid disclosure requirements, water sourcing disclosures, pipeline safety obligations). "Gov. John Kasich came to Akron on Monday to sign Senate Bill 315, sweeping energy legislation that includes tough rules on drilling for natural gas and oil in Ohio." (Akron Beacon Journal article.) You can find a copy of the legislation here.
The Ohio Division of Oil and Gas Resources Management has published for comment draft rules revising its underground injection control (UIC) well program. See here. Comments are due June 18, 2012. On a related note, we anticipate that new UIC permits will begin to issue in the next couple of weeks (for those outside of Ohio, there has been a moratorium of sorts placed on those applications for some time now).
That's the opinion of some industry experts, according to this article in the Seattle Times. "Like a runner who's gotten a big head start in a race, Pennsylvania may be set to dominate natural gas production in the Marcellus Shale region for many years, experts say." Overall, pretty interesting.
This article from the Times Tribune illustrates the impact of local supplies: "To meet increasing demand, a major project to bring gas from the Marcellus Shale to the Wilkes-Barre/Scranton market is in the pipeline. *** UGI Energy Services is seeing more conversions to natural gas by homeowners and businesses taking advantage of prices lower than oil and electric heat. *** As a result, UGI has opted to construct a 28- to 30-mile pipeline to connect gas wells in Wyoming County and the interstate Tennessee Pipeline in Susquehanna County to an existing UGI Utilities distribution point just outside Wilkes-Barre."
The Ohio General Assembly has been busy this past week. Two pieces of legislation you might be interested in:
- Am. H.B. 473 - Designed to implement the Great Lakes Compact, HB 473 establishes permitting requirements for withdrawals and consumptive uses in the Lake Erie watershed that meet certain thresholds (e.g., 2.5 million gallons per day from a recognized navigation channel averaged over a 90-day period). While there are some exemptions, our industry is not generally exempt from this program. You can find a copy here. (Note - It includes amendments to R.C. 1501.30 et seq., regarding other diversions and consumptive uses that you should review as well.)
- Sub. S. B. 315 - SB 315 contains significant changes to Ohio's oil and gas conservation program. Among other things, it contains substantial disclosure requirements relating to hydraulic fracturing fluids, identification requirements regarding water sourcing and volumes used in production operations, and certain changes to Ohio's underground injection control program (i.e., Ohio's UIC brine disposal program). You can find a copy here.
The Plain Dealer has an article on an issue faced by some landowners in Ohio - the fact that their property is being used for natural gas storage purposes, preventing other development of the energy resources: "An invisible line traces a 25,000-acre oval in the hills of Columbiana County that separates the haves from the have-nots. *** Outside the line are instantly wealthy corn, soybean and dairy farmers. Inside are folks waiting for their windfall. *** Dozens of the landowners are blocked from cashing in on energy-rich shale below their property because of an underground gas storage field between the more than mile-deep shale and their pastures."
Lawsuits to follow.
The University of Buffalo's Shale Resources and Society Institute has released a new study finding that Pennsylvania's regulatory oversight of E&P operations has been effective: "'This study presents a compelling case that state oversight of oil and gas regulation has been effective,' says lead author Considine. 'While prior research has anecdotally reviewed state regulations, now we have comprehensive data that demonstrates, without ambiguity, that state regulation coupled with improvements in industry practices result in a low risk of an environmental event occurring in shale development, and the risks continue to diminish year after year.'"
The study is entitled, “Environmental Impacts During Shale Gas Drilling: Causes, Impacts and Remedies," and can be found here.
The Chicago Tribune has an article reporting on recent test results showing that groundwater contamination claims are linked to shallow, naturally occurring methane and not the producer's operations: "The analysis, a form of chemical fingerprinting, studies stable isotopes in the methane for signs of its origin.The procedure has become a frequent tool for regulators and companies seeking to distinguish between deep gas harvested by drillers, shallow gas caused by the breakdown of organic material and gas trapped in middle rock layers closer to the surface than the mile-deep Marcellus. *** Susan Oliver, a spokeswoman for WPX, said in an email that 'the characteristics of the methane in the three water wells match the characteristics of the shallow methane that has been in Franklin Forks and the Salt Springs area for many decades. The results do not match the chemical footprint of the natural gas coming from the Marcellus Shale.'"
Don't expect that to end the issue, though ...
Delaware Online is reporting on a recent study concluding that producers in Pennsylvania generated $3.5 billion in gross revenues last year. The interesting part for residents is buried in later paragraphs, however: "Patrick Creighton, a spokesman for the Marcellus Shale Coalition *** estimated that it costs the industry about $5 million to bring a well into production. With about 2,200 active wells in the state, that comes to $11 billion in additional investments, mostly over the last four years. [Moreover,] *** Creighton said the minimum royalty in Pennsylvania is 12.5 percent of well revenues, meaning property owners here were paid more than $400 million last year." And - "Gheit [an analyst with Oppenheimer & Co.] said the real value of shale gas is that the lower energy cost is making American industry more competitive around the world. That opens doors for long-term investments, such as Shell Oil’s plan to build a huge petrochemical plant in western Pennsylvania."
Should be viewed as good, if not great, news, right?
Crain's Cleveland Business has an interesting article on the impact shale development has had on one Pennsylvania county: "Unemployment is nearly two points lower than the national average. Population didn’t fall during the last decade; it increased. Major national and international businesses have moved in, hiring mostly from the local labor market." More? "In 2011, the county enjoyed a 4.3% increase in employment growth, the third-highest in the country, according to the U.S. Bureau of Labor Statistics. The unemployment rate stands at 6.6%, well below the national average of 8.3%, and a full percentage point lower than Pennsylvania’s 7.6%."
Read the whole thing.
The Columbus Dispatch has an interesting article on the evolving shale play in Ohio: "Ohio geologists continue to redraw the maps highlighting where the Utica shale is expected to yield the most oil and gas across the state. *** The newest map by the Ohio Geological Survey excludes some areas that had been in “play” and includes others that had been left out of the 'fracking' boom." Graphically:
Read it all.
Last week Williams Partners announced that it had agreed to acquire significant gathering assets in the Marcellus. "Williams Partners L.P. today announced it has agreed to acquire Caiman Energy's wholly owned subsidiary, Caiman Eastern Midstream LLC, for approximately $2.5 billion. The acquisition will provide Williams Partners with a significant footprint and growth potential in the natural gas liquids-rich portion of the Marcellus Shale." More: "Caiman's existing physical assets include a gathering system, two processing facilities and a fractionator. Expansions to the gathering system, processing facilities and fractionator are currently under construction. An ethane pipeline is also planned."
The Colorado School of Public Health has issued a new study concluding that air emissions from hydraulic fracturing operations "may contribute to acute and chronic health problems for those living near natural gas drilling sites." (Emphasis is ours.) (Press Release). But before you believe everything you hear, be sure to pay attention to the follow-up analysis: "[I]f you look past the ominous headlines that the study launch generated and examine the range of strange assumptions that form the basis for the report, the conclusions are not only rendered fairly predictable, but also unquestionably flawed." (Energy-in-Depth) (noting both the inflated drilling and completion times used in the study and the out-of-date regulatory program relied upon).
The Patriot-News is reporting that U.S. EPA sampling in Dimock, Pennsylvania shows no contamination from oil and gas development: "Federal environmental regulators say well water testing at 11 homes in a northeastern Pennsylvania village did not turn up elevated levels of contamination from gas drilling." The report makes an interesting juxtaposition: "A handful of residents are suing Cabot Oil & Gas Corp., saying the Houston-based driller contaminated their wells with potentially explosive methane gas and with drilling chemicals. *** Many other Dimock residents assert the water is clean."
Governor Kasich proposed tax and fee increases for producers in Ohio last Wednesday during the start of the Ohio Oil and Gas Association's winter meeting. Among other items, the Governor's plan includes a 4% severance tax on oil and natural gas liquids and a substantial impact fee. The industry's response was not enthusiastic: "'Though we generally support an income-tax decrease, we do not support asking one industry to disproportionately fund it,' the [Ohio Oil and Gas Association] said in a statement. 'We also believe that Ohioans who have struggled during the economic downturn would prefer to have a good-paying job now, instead of a small tax break years down the road.'" (From the Dover-New Philadelphia Times). That response was mirrored by Ohio legislators.
For the Governor's reaction, see this article from the Columbus Dispatch: "Gov. John Kasich late yesterday lashed out at fellow Republicans controlling the Ohio House after learning they plan to strip out the tax provisions of his revamped state budget."
We expect this won't be the end of the issue.
[Update: From today's Dispatch: "As the debate unfolds, both sides will use examples from other states. Researchers warn that there are big challenges to comparing the vastly different approaches, and many reasons to proceed with caution in deciding how to structure a tax. *** 'It’s a bag of snakes more than a can of worms,' said David Passmore, director of the Institute for Research in Training & Development at Penn State University."]
The WSJ is reporting that Royal Dutch Shell PLC has chosen Pennsylvania as the new site for its ethane cracker: "The plant, known as an ethane cracker, will be located in a faded industrial area once busy with steel mills along the Ohio River. The plant is expected to create 10,000 construction jobs, according to a Shell estimate. A study by the American Chemistry Council said the plant would create 10,000 permanent jobs in chemical and supplier industries. Unemployment in Beaver County was 6.8%, according to the Bureau of Labor Statistics."
For a copy of the related press release from Shell, see here.
Ohio Division of Industrial Compliance Now Has Authority Over Fractionation and Processing Facilities
Governor Kasich recently issued Executive Order 2012-03K granting the Department of Commerce, Division of Industrial Compliance exclusive jurisdiction to "regulate the construction of buildings or structures within the scope of the Ohio Building Code directly related to the operation of all natural gas liquids fractionation or processing facilities in the State." To do so, he asserted that an emergency exists that necessitates the suspension of normal rule-making procedures.
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).]
The Oil & Gas Journal has an interesting article on anticipated capital spending in North America for 2012. "Capital expenditures for all oil and gas projects in North America will increase modestly this year ***. While upstream spending in 2012 will climb, the rate of growth will decelerate from a year ago. OGJ projects that total US capital spending for upstream, midstream, downstream, and corporate activities will increase by 3.5% this year to $302 billion following a 12% surge in spending during 2011. The increase in upstream spending will be heavily weighted toward the development of oil and liquids-rich shales rather than dry gas production."
[Note: Subscription required.]
The Ohio Chamber of Commerce has released an economic impact study for shale development in Ohio (see here). From the report's executive summary:
That's the question asked in this article from The Journal News. Their answer: "Most experts say no, but several said low natural-gas prices could have an effect on the pace drillers set in New York should the state allow high-volume hydrofracking."
And why is pace important? From the Times-Tribune, regarding the slow down in Pennsylvania: "'Economic activity is tied closely to rig count,' said Anthony J. Ventello, executive director of the Progress Authority, which handles economic development for Bradford and Susquehanna counties. *** 'As goes the rig count, so goes the economy,' Mr. Ventello said, noting that a rig has an economic impact not unlike that of an itinerant factory. 'As an industry, natural gas is not going away, but we are in a slowdown that will have an effect on the economy.'"
Pennsylvania counties may soon be imposing impact fees according to this report from CBS News: "After Gov. Tom Corbett signs a bill passed by state lawmakers this week, county commissioners or county council members in about 35 counties will have 60 days to decide whether to impose the 15-year impact fee on their local Marcellus Shale wells. *** If they do, they'll share 60 percent of the money with their municipalities after a cut goes to state agencies and a program to help buy natural gas-powered fleet vehicles. That could mean more than $10 million flowing later this year to each of Pennsylvania's most heavily drilled counties, including Bradford, Tioga, Washington, Lycoming, Susquehanna and Greene."
Not everyone thinks it's necessary, however: "Doug McLinko, the Republican commissioners' chairman in Bradford County, home to the most Marcellus Shale wells of any county, said he didn't like slapping the industry with a tax while natural gas prices are hovering around 10-year lows. *** McLinko said no one has shown him an impact that the industry hasn't addressed, while it's poured $400 million into new roads in the area and given charitably to community causes."
At least that's the report from the Dover-New Philadelphia Times Reporter: "Colorado-based energy company involved in the gathering, processing and transportation of natural gas has announced plans to build a processing facility in Harrison County. MarkWest Energy Partners, with corporate offices in Denver, said the plant is expected to begin initial operations in mid-2013."
This article from cleveland.com takes a brief look at the leasing activity in Ohio from inside the recorder's office. It begins: "Paul McKeegan has served two decades as Jefferson County Recorder, but nothing has prepared him for what's occurred in his Steubenville office over the past year. His once-sleepy office has become a bustling, elbow-to-elbow beehive of activity as lawyers and agents of oil and gas companies have descended in droves to study the property deeds chasing the liquid gold that runs deep underneath the soil in this eastern Ohio county."
Read the whole thing.
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.
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."
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.)]
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.
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 ...
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.
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 ...
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."
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 ...
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."
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!
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).
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.)
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."
The Sacramento Bee is reporting on a new study published by PwC addressing the potential benefits for manufacturers from U.S. shale gas development: "'An underappreciated part of the shale gas story is the substantial cost benefits that could become available to manufacturers based upon estimates of future natural gas prices as more shale gas is recovered,' said Bob McCutcheon, U.S. industrial products leader, PwC. He continued, 'In fact, the number of U.S. chemicals, metals and industrial manufacturing companies that disclosed shale gas potential and its impact so far in 2011 easily surpassed that of the last three years combined, indicating this is of growing importance in the outlook of U.S. manufacturers. The significant uptick in shale gas commentary among the manufacturing community reflects the positive influence that shale gas is having from investment, operational and demand standpoints.'"
For a copy of the study, see here.
We've reported previously on air emissions studies done in Pennsylvania (see here, e.g.). The Pennsylvania Department of Environmental Protection (PA DEP) is now requiring certain E&P companies to submit air emissions data regarding their facilities for 2011 by March 1, 2012: "'The use of natural gas for fuel will have very beneficial impacts on air quality, and we want to ensure we are protecting the quality of Pennsylvania’s air as we access and bring to market this abundant, domestic fuel source,' DEP Secretary Mike Krancer said. *** This week, the agency is initially asking 99 operators identified as being involved in natural gas development, production, transmission, processing and related activities to respond with the necessary data." (From this press release.)
For more, see here.
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.
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.
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!
We've reported previously on the NYT's efforts to find environmental and economic issues in the oil patch (see here, e.g.). Now it seems that they want to complain about oil and gas leases: "Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print."
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).
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."
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.
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.)]
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.
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.
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."
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!
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."
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.)
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.
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.
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.
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.
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.)
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."
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.
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.)
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.
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."
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.)
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.]
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 ...
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.
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."
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."
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!
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.
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!
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.]
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.
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."
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."
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 ...
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.
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.
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."
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?
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.
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.
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?
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.
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.'"
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.
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.
Earlier this week, acting West Virginia Governor Earl Ray Tomblin issued Executive Order No. 04-11 requiring the state's Department of Environmental Protection to develop rules regulating Marcellus Shale production. "The rules will focus mostly on the 'fracking' process, in which millions of gallons of water are mixed with chemicals and pumped underground to fracture shale deposits. Among other things, the regulations will make companies that withdraw more than 210,000 gallons of water a month disclose the list of additives used in frack fluid, and file a water management plan with the DEP." - from the Charleston Gazette.
We will post a copy of the order once we obtain it.
The Wheeling Intelligencer has a free-market/regulatory success story for Ohio taxpayers (resulting in large part from cross-state regulatory program differences): "For months, Pennsylvania gas drillers tapping into the Marcellus Shale have been shipping the hydraulic fracturing, or fracking, waste to eastern Ohio. The Buckeye State is on pace to gain nearly $1 million in fees from out-of-state drillers for accepting the brine."
Of course, there are the usual statements regarding environmental fears. Still, interesting.
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.
The New York Department of Environmental Conservation (NY DEC) has released a series of documents related to its Preliminary Revised Draft Supplemental Generic Environmental Impact Statement (SGEIS) issued in September 2009. From the Executive Summary: "The final SGEIS will apply statewide, except in areas that the Department proposes should be off-limits to surface drilling for natural gas using HVHF technology. As explained below, these areas include the watersheds associated with unfiltered water supplied to the New York City and Syracuse areas pursuant to Filtration Avoidance Determinations issued by the U.S. Environmental Protection Agency ('EPA'), reforestation areas, wildlife management areas, state parks, and 'primary' aquifers as defined by State regulations, and additional setback and buffer areas."
From the related press release:
"Protecting Drinking Water
- Well water protection and other water protection: No permits would be issued for sites within 500 feet of a private water well or domestic use spring. No permits may be issued for a proposed site within 2,000 feet of a public drinking water supply well or reservoir at least until three years of experience elsewhere have been evaluated. No permits will be issued for well pads sited within a 100-year floodplain.
- Spill control: All new guidelines will require that flowback water on site must use watertight tanks within a secondary containment. No open containment may be used. A secondary containment will also be required for all fracturing additive containers, additive staging areas and flowback tanks to ensure any spills of wastewater or chemicals at the well pad do not migrate into water supplies.
- Regulating Water Withdrawals:
- New Legislation: Pursuant to the Governor's signing of DEC's Water Withdrawal legislation, which the State Legislature recently passed, a special permit will be required to withdraw large volumes of water for industrial and commercial purposes to ensure there are not adverse impacts.
- Permit Condition: All withdrawals from surface water bodies will be subject to limits to prevent impacts upon ecosystems and other water quantity requirements. Identification of the water source an applicant intends to use will be required and an annual report must be issued on the aggregate amount of water it has withdrawn or purchased."
As with everything else, it looks like the devil's in the details ...
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."
With all of the negative media regarding hydraulic fracturing, we thought you might be interested in this video from reason.tv:
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."
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."
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).
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.
According to the Hazleton Standard Speaker, "The Department of Environmental Protection is recommending a major overhaul of the state Oil and Gas Act with stronger buffer zones to keep natural gas drilling away from water sources, tougher penalties and bond requirements and a 'cradle-to-grave' manifest system to track wastewater from hydraulic fracturing, or fracking." This is from a letter to the Governor's Marcellus Shale Advisory Commission.
We reported previously on the threat made by New York State's Attorney General to sue the U.S. Army Corps of Engineers and others over their alleged failure to properly review oil and gas development regulations proposed by the Delaware River Basin Commission (see Bad Feds ...). The Hill is reporting that New York has made good on that threat: "New York Attorney General Eric Schneiderman opened a new front Tuesday in battles over controversial natural-gas drilling projects with a lawsuit alleging that federal agencies are shirking environmental review of dangerous development techniques."
We've frequently noted the articles in the media on hydraulic fracturing. The NYT had one on May 7th (mis)stating: "But the practice [i.e., hydraulic fracturing] also pours millions of gallons of dangerous chemicals into the ground and into wastewater treatment systems, which in some cases cannot remove all the potential toxins. There are also numerous documented cases in which fracking fluids leaked into aquifers and contaminated drinking water." (From Google cache; emphasis is ours).
What you don't see often is the following:
Correction: May 17, 2011
An article on May 7 about the Obama administration’s appointment of a panel of experts to find ways to make hydraulic fracturing safer misstated the prevalence of cases in which fluids from the gas drilling process have been proven to have contaminated drinking water. There are few documented cases, not numerous ones, although federal and state investigations into reports of such incidents are continuing.
And even that isn't necessarily correct (what documented cases?) ... Still, the NYT should be commended for trying.
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."
It's starting to look like a frontal assault.
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.
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."
"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.
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.'"
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."
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.
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."
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!
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).]
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."
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.
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.
We have reported previously on the Laser Marcellus proceeding before the Pennsylvania Public Utility Commission (see here "PA Gathering Update," e.g.). The Administrative Law Judge has issued her recommended decision in the matter, finding that the application for a certificate of public convenience should be denied - despite the joint stipulation filed by several of the parties. Her reasoning: There is no reason - nor any statutory authority in Pennsylvania - for granting gathering companies the power of eminent domain. For example:
A gathering system is not analogous to a local distribution company. Eminent domain is not an appropriate tool for a gathering company to have when those citizens burdened by the pipeline do not benefit from it.
For a copy of the decision, see here.
Now it's up to the Commission.
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."
We've reported several times on the emergence of alleged air contamination issues relating to E&P operations, primarily out of the southwest and U.S. EPA. Not surprisingly, the claim has come to the Appalachian Basin. The Pennsylvania Department of Environmental Protection (DEP) has released a report on a short term air quality study conducted near Marcellus Shale natural gas operations in southwestern Pennsylvania. According to DEP Secretary John Hanger, "The data shows no emission levels that would constitute a concern to the health of residents living near these operations." (Emphasis is ours.)
For a copy of the report, see here.
Ohio's oil and gas industry celebrates its 150th anniversary this year! From the Suburbanite: "While energy, economics and jobs dominate the headlines, a homegrown industry has been supplying these benefits for a century and a half in the Buckeye State. This year, Ohio’s natural gas and crude oil industry celebrates its 150th anniversary, and its benefits to the state may surprise you."
For an article celebrating that achievement and the new technology available to continue that success in the Marcellus and Utica Shales, see here (from the Marietta Times). "'We're talking about something so big and vast that it could provide (much of the nation) with 50 to 100 years of gas production,' said Bob Chase, professor and chairman of the Department of Petroleum Engineering and Geology at Marietta College."
You can find more here, at the Ohio Oil & Gas Energy Education Program.
The issue of forced pooling has been a topic of conversation in Pennsylvania for some time. The Scranton Times-Tribune is reporting that related legislation is unlikely to become law this year: "Although there was talk of including forced/fair pooling in the natural gas severance tax that passed in the House and is now being considered in the Senate, Senate Republican President Pro Tempore Joseph Scarnati, R-25, Jefferson County, has indicated it isn't likely to happen this term."
On a related note, Ohio's mandatory pooling law was substantially modified earlier this year (see S.B. 165).
As readers of this blog know, hydraulic fracturing is a hot topic across the country. We thought you might be interested in one pundit's thoughts (from the WSJ): "Those who value pastoral poverty and bucolic quietude over all this grubby commercialism will just have to adjust, as the fishermen and sportsmen and sun bathers of the Gulf Coast have learned to live with oil drillers (and vice versa)." (Emphasis is ours.) Ha!
(Note: Subscription may be required.)
This is an interesting (read: not bashing) article on hydraulic fracturing. For example: "Bob Anthony, Oklahoma Corporation Commissioner, said in an address to the National Association of Regulatory Utility Commissioners in July, 'In my 20-plus years as a commissioner, I can't think of anything that can compare to the all-out assault on hydraulic fracturing by groups that are obviously using it to put a stop to the tapping of America's abundant natural gas supplies.'"
The comments are interesting as well.
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."
[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."]