Gateway Royalty, LLC, a royalty acquisition company based in Carrollton, Ohio, has raised $58.5 million to pay Utica shale play landowners for rights to their future royalty payments. Gateway’s goal is to invest in a broad range of oil and gas royalties across the eastern Ohio counties, which constitute the core of the new Utica shale play. It is a business model with a risk for both sides. The lump-sum payment could easily be bested by solid production. Conversely, it’s difficult to tell exactly how much oil or gas will come from a specific well, so it’s possible that the company could lose out.
Gateway, originally based in Texas, is willing to take the risk. The company moved to Carrollton in May 2012, investing $35 million on 20,000 acres. Those initial investments focused on the northern part of the play in Columbiana County. The new investments will move more toward the south but will continue Gateway’s policy of acquiring a diversified portfolio of oil and gas royalty interests without incurring any debt.
The Supreme Court of Ohio has agreed to hear a question certified from the United States District Court for the Southern District of Ohio, regarding the Ohio Dormant Minerals Act (the “ODMA”), in Chesapeake Exploration, L.L.C. v. Kenneth Buell. The two questions certified to the Supreme Court of Ohio are:
• Is a recorded lease of a severed subsurface mineral estate a title transaction under the ODMA? and,
• Is the expiration of a recorded lease and the reversion of the rights granted under that lease a title transaction that restarts the twenty-year forfeiture clock under ODMA at the time of the reversion?
The district court did not certify the question of whether the 1989 version or 2006 version of the ODMA applied to the parties’ dispute. This question is currently the subject of appeals to the Fifth and Seventh District Courts of Appeal and may also be addressed by the Ohio Supreme Court in Dodd v. Croskey.
According to WDTV, Fairmont Brine Processing located in Fairmont, West Virginia is using a “specialized evaporation and crystallization process” to recycle hundreds of thousands of gallons of water used in Marcellus development by natural gas operators across the area. Its evaporation process can distill constituents of the brine and transform them into products that can be beneficially used by local governments and organizations – such as salt to be used on the roads during the winter driving season. Fairmont Brine Processing hopes to provide cost-effective recycling services to operators as a way of encouraging development of the State’s natural gas reserves while also creating jobs and giving back to local communities.
As Reported by MetroNews on March 26, the proposed Wood County, West Virginia, petrochemical “Cracker” plant project, called Project Ascent, took a significant step forward on Wednesday with an announcement from Antero Resources that it would contribute 30,000 barrels of ethane per day to the proposed plant, which represents approximately one half of the ethane needed to operate the plant. The proposed Cracker plant will use ethane to manufacture polyethylene, which is used to making various plastics. Further information on the agreement between Antero and Ascent is expected to be announced on Wednesday, March 26, at the West Virginia Manufacturers Association’s Marcellus to Manufacturing Ethane Development Conference being held at the Charleston Civic Center in Charleston, West Virginia.
The Charleston Daily Mail reports that a 130-foot, 255 ton de-ethanizer tower was scheduled to arrive at the Williams Energy Oak Grove site in Marshall County on Monday or Tuesday. The tower is the second of three “Superload” installments being delivered to the Williams Energy site and indicates the growing impact of Marcellus and Utica Shale development on West Virginia. According to The Intelligencer/Wheeling News-Register, the de-ethanizer strips ethane from the natural gas stream prior to pipeline transport. In its processed form, ethane is a Natural Gas Liquid (NGL) and can be used to make plastics and medical and chemical products. The de-ethanizer is the first at the Oak Grove site and the third in Marshall County. The stripped ethane will likely be shipped via pipeline to the Gulf Coast or to Canada. That may change, however, if the proposed Cracker Plants in Beaver County, Pennsylvania and Wood County, West Virginia are completed.
On March 25, 2014, U.S. EPA and the U.S. Army Corps of Engineers released the pre-publication version of a proposed rule intended to make the process of identifying “waters of the United States” covered under the Clean Water Act less complicated and more efficient. Decisions of the U.S. Supreme Court in recent years which addressed the regulatory definition of “waters of the United States” created confusion and uncertainty for permitting programs under the Clean Water Act. The proposed rule attempts to clarify Clean Water Act jurisdictional issues in light of these cases. According to EPA’s webpage regarding the proposed rule, it does not cover any new water bodies not historically protected under the Clean Water Act and clarifies protection for streams and wetlands. Notably, the proposed rule would adopt the “significant nexus” standard enunciated in Justice Kennedy’s concurring opinion in Rapanos v. United States for determining whether “other waters,” which do not fit within the specific categories of waters that are jurisdictional by rule, would be subject to the Clean Water Act. Public comments on the proposed rule will be accepted for 90 days upon publication in the Federal Register.
The Future Fund Bill, which was passed by the House on February 25th, was signed into law by West Virginia governor Earl Ray Tomblin on March 20th, reports the West Virginia Metro News. As described in an earlier post on this blog, the Future Fund will be financed by 25 percent of the severance tax revenues collected from oil and gas exploration companies above a $175 million threshold. The fund would accrue interest for six years before it could be used to finance economic development projects, building infrastructure and increases in teacher salaries.
The Pittsburgh Business Times reports that the Beaver County Board of Commissioners and representatives from Royal Dutch Shell met to discuss the next planning steps for the proposed cracker plant in Beaver County, Pennsylvania. Although the meeting did not result in a final decision as to whether the company will build the plant, the commissioners and representatives discussed relocating a portion of a highway, power lines, a rail line and developing a dock. Shell began demolition activities at the former Horsehead site in February. It has also begun to secure feedstock supply for the plant by securing agreements with CNX Gas Co. LLC, Hilcorp Energy Co., Noble Energy Inc. and Seneca Resources Corp.
The Pittsburgh Business Times reports that Allegheny County has reached a deal with Range Resources and Huntley & Huntley as to leasing the oil and gas under Deer Lakes Park in Allegheny County, Pennsylvania. Allegheny County Executive Rich Fitzgerald announced the county will receive $4.7 million in bonus payments, $3 million for the Park Improvement Fund, and a 18% royalty. He also announced that operations in Deer Lake Park are prohibited by the terms of the lease. The deal must be approved by Allegheny County Council.
As reported by legal news website Law360, a Pennsylvania bill was approved by the House Environmental Resources and Energy Committee that would amend the Guaranteed Minimum Royalty Act of 1979 (GMRA) and will move to the House floor. House Bill 1684 would amend the GMRA to clarify the definition of the minimum royalty payable under an oil and gas lease. The GMRA already sets the minimum threshold at one-eighth, but does not clearly define how royalties should be calculated. House Bill 1684 would prevent operators from reducing royalty payments by the costs of production if the reductions would result in a payment of less than a one-eighth royalty. Supporters of the bill say that landowners should be protected from the possibility of unfair deductions and calculations of their royalty payments by oil and gas operators. Opponents of the bill argue that the bill violates both the state and federal constitutions by changing the terms of leases already in existence and that the bill would result in excessive litigation, which would not ultimately benefit the landowners that the bill seeks to protect.
As reported by Pittsburgh’s NPR News Station, 90.5 WESA, three advocacy groups, Leaders of Policy Matters Ohio, the Pennsylvania Budget and Policy Center, and the West Virginia Center on Budget & Policy, sent a letter to the governors of Ohio, Pennsylvania and West Virginia requesting a common severance tax for oil and gas production in all three states. These advocacy groups suggest that the purpose of a common severance tax would be to provide consistency in the industry allowing each state to similarly benefit from the economic opportunities created by oil and gas production. The letter asserts that a common policy would provide long-term predictability and take taxing out of the competitive equation between the states. The letter recommends that West Virginia’s severance tax should be set as a minimum rate, as it is in the middle range of taxes in gas-producing states.
This week the U.S. Environmental Protection Agency (EPA) published a proposal to amend Subpart W of the greenhouse gas reporting program rules, which affects the Petroleum and Natural Gas Systems source category. According to EPA’s fact sheet, “[t]he proposal includes revisions to certain calculation methods, monitoring and data reporting requirements, terms and definitions, and technical and editorial errors that were identified during the course of implementation.” The fact sheet also indicates that EPA is proposing confidentiality determinations for “new or substantially revised data elements” and proposing a revised confidentiality determination for one existing data element. EPA expects that the amendments would not “significantly” change the amount of entities or greenhouse gas emissions covered by the reporting program.
The Ohio Supreme Court has accepted jurisdiction of a discretionary appeal in Dodd v. Croskey, which involves Ohio’s Dormant Mineral Act (“DMA”). Under the DMA there are several “savings events” which may occur in the previous twenty years that will prevent the abandonment and vesting of a severed mineral interest in the owner of the surface. One of the savings events involves the holder of the severed mineral interest filing a “claim to preserve” the mineral interest after receiving notice of the surface owner’s intent to declare it abandoned.
The Seventh District Court of Appeals previously held that the claim to preserve did not have to occur during the twenty-year period prior to the surface owner providing notice to the holder of the mineral interest. Instead, the present act of filing the claim to preserve after receiving notice was sufficient. The Ohio Supreme Court is poised to decide whether the present act of filing a claim to preserve satisfies the DMA or whether it must have been filed during the previous twenty-year period.
The Secretary of Energy Advisory Board (SEAB) recently published its recommendations for improving the effectiveness of FracFocus. The report entitled, “Task Force Report on FracFocus 2.0,” recommends improving the accuracy and completeness of registry submissions by fully disclosing all known constituents while claiming as few, if any, trade secret exemptions as possible. The report suggests using a “systems approach” that reports the chemicals added separately from the additive names and product names that contain them to protect trade secrets. The report also contains recommendation for improving FracFocus’s data storage and retention.
The Ohio Department of Health has issued guidelines for sampling and analysis of Technologically Enhanced Naturally Occurring Radioactive Material (TENORM) commonly found in drilling wastes. The guidelines were issued in conjunction with Ohio House Bill 59, which required the Director of Health to adopt rules establishing requirements governing TENORM.