Anyone following shale energy production and exploration in Ohio knows that pipeline construction is underway. But the number of pipeline projects may be surprising. Currently, there are over 100 pipeline projects in the works in Eastern Ohio alone. Many more are expected in the coming years. This infographic from the Public Utilities Commission of Ohio shows the number of planned pipelines by county in Eastern Ohio.
Two bills aimed at expanding natural gas infrastructure to rural and under-served areas in the state were passed by the Pennsylvania Senate on Wednesday. The legislation originated after realizing that a large part of Pennsylvania is not served by natural gas, even though the state hosts one of the largest natural gas deposits in the world. Senate Bill 738 would require natural gas utility companies to submit a three-year plan to the Public Utility Commission outlining plans for expansion. The bill will also allow for the accelerated expansion of projects at the request of residential, commercial, or industrial entities, and provide a cost-spreading plan for customers. Senate Bill 739 would amend the state’s Alternative Energy Investment Act and provide $20M for grants to schools, hospitals, and small business for access to natural gas. Such grants could provide up to half of the cost of a project. The bills will move to the Pennsylvania House of Representatives for further consideration.
Consol Energy, a company that has roots in coal mining in Columbiana County, Ohio since the 1860s, now sees a promising future in natural gas production in the area. Speaking at the 5th annual Columbiana Chamber of Commerce Business Breakfast on June 14, 2013, Harry Schurr, general manager of Utica shale operations for Consol Energy, indicated that Consol is being “methodical” in their drilling program, but is excited about the prospects in Columbiana and its neighboring counties. To date, Consol has drilled 200 horizontal shale wells, between the Marcellus and Utica, and, together with its joint ventures, plans on drilling another 27 Utica wells in 2013.
The Fifth District Court of Appeals held in a recent decision that a general disclaimer of implied covenants in a lease effectively disclaims any implied covenants to reasonably develop the leased property. In Bilbaran Farm, Inc. v. Bakerwell, Inc., the plaintiffs claimed that the lessees to the oil and gas lease breached the lease by not developing all portions of a 275 acre tract of land. The trial court dismissed the plaintiffs’ complaint citing the general disclaimer language in the lease. The Court of Appeals agreed that the general disclaimer was sufficient to disclaim any obligation to reasonably develop the undeveloped portions of the leasehold.
On June 13, 2013, Constitution Pipeline Company, LLC filed an application with the Federal Energy Regulatory Commission to construct a 122-mile interstate transmission line from Susquehanna County, Pennsylvania, to Schoharie County, New York. The line, if approved, would transport approximately 650,000 dekatherms per day of natural gas, enough to supply 3 million homes. Reuters reports that the project is expected to cost $683M.
In Minard Run Oil Co. v. U.S. Forest Service, the United States District Court for the Western District of Pennsylvania confirmed that the Forest Service did not have authority to preclude drilling by the owner of subsurface oil and gas rights while the Forest Service completed an environmental analysis of the impact on the Allegheny National Forest.
Read about this development and more in the Babst Calland Report. You may view an executive summary here, or request a full copy of the report here.
Ohio’s drilling rig count currently stands at 32 according to Ohio Oil and Gas Association Executive Vice President Tom Stewart. That is up from 19 in 2012 and now surpasses the 23 drilling rigs in West Virginia. According to Stewart, it will take many more rigs than 32 to fully develop the Utica Shale play in Ohio, but he is very optimistic that the number will increase. Much of the recent activity has been focused on the liquids-rich parts of the Utica Shale play.
On June 10, 2013, the U.S. Energy Information Administration (EIA) released a report assessing shale oil and gas resources in 137 shale formations in 41 countries outside of the United States. The report expanded upon EIA’s April 2011 assessment of 69 shale formations in 32 countries. In the updated report, EIA indicated that the current estimates of worldwide technically recoverable resources, including the United States, amount to 345 billion barrels of shale oil and 7,299 trillion cubic feet of shale gas. EIA estimates that shale resources account for 10 percent of global crude oil and 32 percent of the world’s natural gas. (The current estimate of global shale gas resources is 10 percent higher than EIA’s 2011 report, which did not include an assessment of shale oil.)
According to EIA, significant data gaps in global shale resources still exist. For example, potentially productive shale formations underlying large oil fields located in the Middle East and the Caspian region have not been assessed. EIA also indicated that although shale resources have revolutionized oil and gas production in the United States—representing 29 percent of total U.S. crude oil production and 40 percent of natural gas production in 2012—the economic recoverability of global shale resources and the market implications of abundant shale resources remain uncertain.
Natural gas producers will pay $202.47 million in Marcellus Shale impact fees from 2012 activity, according to a June 13, 2013 Pennsylvania PUC press release. The Pittsburgh Post-Gazette reports that the number is down less than 1 percent from the $204.2 million collected from 2011 activity. Bradford County will collect the largest portion of the fees ($7.3 million) and Washington County will collect the second largest ($4.7 million). Chesapeake Appalachia paid the largest portion of the fees ($27.4 million), followed by Range Resources (nearly $24 million). The 2012 fees will be allocated as follows: county and local governments directly affected by drilling will receive $102.68 million, state agencies impacted by drilling will receive $28 million, and the Marcellus Legacy Fund will receive $71.79 million. Following the PUC’s release, Marcellus Shale Coalition CEO Kathryn Z. Klaber issued a press release, stating that the “[w]hile the impact fee represents a new and substantial revenue stream for local and state government agencies, the natural gas industry has also generated more than $1.8 billion in tax revenues since 2006 and has invested more than $500 million in road and infrastructure improvements, while contributing hundreds of thousands of dollars for emergency response training and other community-based programing.”
The Pittsburgh Post Gazette is reporting that Governor Tom Corbett has forced Richard J. Allan, Pennsylvania’s Secretary of the Department of Conservation and Natural Resources, to resign. Effective immediately, Ellen Ferretti, Deputy Secretary for Parks and Forestry, will serve as the acting secretary. The reason for the resignation is unknown at this time.
On Friday, June 7th, twelve energy-producing states, including Ohio and West Virginia, signed a letter to the EPA defending the industry practice of hydraulic fracturing. The letter was in response to recent threats to sue the EPA for not assuming regulatory responsibility of the energy industry made by several northeastern states. The letter warned the EPA not to utilize “sue and settle” tactics in an attempt to regulate hydraulic fracturing and emphasized that the Clean Air Act places the regulatory responsibility for the oil and gas industry on the states rather than the federal government.
Columbia Gas of Pennsylvania recently filed a lawsuit against the Borough of State College and Borough Manager Tom Fountaine after the borough refused to issue a right-of-way permit that would have extended a natural gas pipeline. Plans to convert Penn State’s West Campus steam plant from coal to natural gas require the extension. Statecollege.com and The Centre Daily Times report that council members passed a resolution instructing Mr. Fountaine not to approve the permit in April. The pipeline would run under several borough streets, including Bellaire Avenue, University Drive, Prospect Avenue and South Burrowes Street. Penn State and Columbia are reportedly working together to re-evaluate alternatives that would re-route the pipeline, which could take several weeks.
The Exponent Telegram reports a moratorium on floodplain oil and gas drilling permits in Doddridge County, WV has been lifted. The Doddridge County Commission voted 2-1 on June 4, 2013 to lift the moratorium, which had been in place since December 18, 2012.
MarkWest Energy is slated to sell some of its natural gas facilities in Doddridge County, West Virginia to Summit Midstream Partners in the coming days. According to Platts McGraw Hill Financial, the $210 million transaction is anticipated to close this month and will include approximately 40 miles of high-pressure gathering pipelines, designated right-of-ways associated with the gathering lines and two compressor stations. These WV pipeline and compressor station systems are currently serving an affiliate of Antero Resources based upon a long-term, fee for service contract.
The U.S. Department of the Interior has extended the comment period by 60 days for the revised proposed rules for hydraulic fracturing on federal lands. Interior Secretary Sally Jewell indicated that various interest groups had requested more time to review the 171-page proposal issued in May. The comment period was set to expire on June 24, 2013, but comments will now be accepted through late August.