As reported by The Times-Tribune in Scranton, four winners were chosen in the 3rd Annual Shale Gas Innovation Contest. The winners were KCF Technologies, Inc., NG Innovations, Inc., OPTIMUM Pumping Technology, and TM Industrial Supply, and each received a prize of $25,000. The contest received 80 entries, of which there were 13 finalists. The four companies submitted projects that included a wireless system for monitoring oil and gas equipment, a tracking system for the transportation of fluids using satellites, a high-performance manifold for natural gas compressors, and a filter system for the removal of substances from natural gas.
On Thursday, a group of Pennsylvania state legislators, led by Sen. Vincent Hughes (D-Philadelphia), unveiled a proposal that would impose a 5% severance tax on drillers operating in Pennsylvania’s Marcellus Shale industry. According to the legislators, this severance tax would net $720 million for Pennsylvania during the 2014-2015 budget year and be used for environmental protection, economic development, job training initiatives and education. Senator Hughes hopes that some of the revenue received from the severance tax would prevent the state from having to lease public land for gas drilling and exploration. Under the proposal, the severance tax would be levied in addition to the Act 13 well fees already imposed upon the natural gas drillers. Senator Hughes said that the severance tax and well fees together would generate $937 million for Pennsylvania in the 2014-2015 fiscal year. Senator Hughes’s proposal is one of numerous proposals recently introduced in the state legislature aimed at implementing a severance tax on the Marcellus Shale industry. Additionally, all four major candidates in the Democratic gubernatorial primary have also proposed a natural gas severance tax.
Today the U.S. Environmental Protection Agency (USEPA) published in the Federal Register its advance notice of proposed rulemaking regarding the disclosure of chemicals and mixtures associated with hydraulic fracturing (see previous post). Public comments will be accepted through August 18, 2014.
On May 9, 2014, the Ohio Division of Oil and Gas Resources Management announced changes in the procedure for obtaining orders approving drilling units. The procedure, established by R.C. 1509.28, authorizes the Division to approve drilling units that contain unleased properties and properties leased to operators who decline to agree to inclusion in the proposed drilling unit. The procedure is most often used to assemble units for horizontal drilling. The changes include extending the minimum period of time between the filing of an application and the hearing on the application from 45 to 120 days, requiring the submission of additional information by affidavit in the application, and providing additional notice to the public of the hearing. The changes appear in the Division’s guidelines for administering the unitization statute.
On May 9, 2014, in the case of Herder Spring Hunting Club v. Keller, the Superior Court of Pennsylvania issued an opinion addressing the termination of outstanding oil and gas interests through a tax sale in Pennsylvania. The property at issue was subject to a severance of oil and gas rights in 1899, and then later sold in a 1935 tax sale to the Centre County Commissioners. The appellants argued that the 1935 unseated tax sale extinguished all prior oil and gas interests and was a “title wash” which divested all prior owners of their respective interests. The Superior Court agreed with the appellants, reversing the trial court and granting summary judgment in their favor. The Superior Court held that the appellees’ predecessors failed to follow certain procedures in place at the time of the 1935 tax sale that could have preserved their interest in the oil and gas. This case is the first appellate decision addressing the “title wash” of subsurface property rights since the development of the Marcellus Shale formation in Pennsylvania began.
Today the U.S. Environmental Protection Agency (USEPA) announced the availability of an advance notice of proposed rulemaking (ANPR) to solicit public comments on “the information that should be reported or disclosed for hydraulic fracturing chemical substances and mixtures and the mechanism for obtaining this information.” USEPA’s action responds to a 2011 petition signed by Earthjustice and more than 100 other groups requesting that USEPA require toxicity testing of chemicals and mixtures used by the oil and gas industry and submission of various records pursuant to the federal Toxic Substances Control Act. Upon the ANPR’s publication in the Federal Register, USEPA will accept comments for 90 days on a number of issues relating to the “design and scope” of voluntary and/or mandatory approaches for USEPA to obtain information about chemicals and mixtures used in hydraulic fracturing. Jim Jones, USEPA Assistant Administrator for the Office of Chemical Safety and Pollution Prevention, considers the ANPR to be “an important step in increasing the public’s access to information on chemicals used in hydraulic fracturing activities.”
Yesterday the Pennsylvania Department of Environmental Protection (DEP) released its inaugural Oil and Gas Annual Report, which showcases DEP’s regulation of Pennsylvania’s oil and gas industry. The Report describes the structure of DEP’s Oil and Gas Program and provides an overview of how Pennsylvania shale plays are connected to energy security. The Report also provides examples of the agency’s work in the areas of “Permitting”, “Inspections,” “Compliance and Enforcement,” and “Stray Gas Investigations,” including mention of a database created by DEP for stray gas investigations with information dating back to 1987. In the section devoted to “Regulatory and Policy Development,” DEP indicates that it anticipates presenting a final Chapter 78, Subchapter C rulemaking to the Oil and Gas Technical Advisory Board in 2014. The Report concludes with highlights of DEP “Innovations” and a summary of studies and proposed regulations set for 2014.
As part of his off-year budget bill, Ohio governor, John Kasich, has proposed a top severance tax rate increase on horizontal drilling to 2.5% as part of a tax package designed to lower income-tax rates. The bill, which is expected to be supported by the Ohio Oil and Gas Association, will allow for a broader exemption for drillers from the commercial activity tax, and it would implement a gross-receipts tax at the first point of sale, after deductions for costs such as gas transportation and processing.
Since early 2012, Kasich has been pushing to increase Ohio’s severance tax on horizontal hydraulic fracturing, but has met with unwillingness by Republican legislators. His latest attempt is set to be introduced in committee today and Kasich hopes to see a full House vote on May 14, 2014. Under Kasich’s plan, Ohio would still have the lowest effective tax rate in the United States, 63% below the average tax rates of other states that have significant drilling activity.
The PA Environment Digest reports that the Independent Regulatory Review Commission (IRRC) approved an Environmental Quality Board regulation increasing oil and gas well fees. Additional information regarding IRRC’s approval can be found at its website. Under the current rule, fees are calculated based on wellbore length. Under the proposed rule, which was previously published in the Pennsylvania Bulletin, “unconventional nonvertical wells” and “unconventional vertical wells” will be assessed a fee of $5,000 and $4,200, respectively, regardless of total well bore length. Currently, the average permit fee is $3,200.
As reported by the Pittsburgh Business Times, the Allegheny County Council voted to approve a non-surface lease and drilling plan with Range Resources under Deer Lakes Park. Allegheny County Executive Rich Fitzgerald said that the plan would provide for environmental protection of the park while bringing in much needed revenue to the county. Despite the County Executive’s endorsement, the vote was heavily opposed by some members of the public in attendance at the hearing.
On April 23, 2014, the Findlay Township Board of Supervisors approved the conditional use application of CONSOL Energy, Inc.’s affiliate, CNX Gas Company LLC, to construct on the property of the Pittsburgh International Airport 6 well pads, up to 60 unconventional gas wells, 3 centralized impoundments (I fresh water and 2 produced water), and related pipelines and access roads. The approval is the culmination of two public hearings, held in February and March of this year, and thousands of pages of application materials. The Board of Supervisors placed 23 conditions on the approval. CNX paid the Allegheny County Airport Authority $50 million in 2013 for the airport drilling rights, and it is expected that the drilling will provide approximately $450 million in royalties to the Authority over the next 20 years.
The Ohio Department of Jobs and Family Services released its quarterly report on the shale industry last Friday. The report shows a 79% increase in core shale-related industry employment in Ohio over the last two years, with an additional 1.5% increase in ancillary jobs, such as trucking services and geophysical surveying. Areas of particularly significant growth include pipeline construction and fossil fuel electric power generation. An accompanying analysis of wage growth shows that the average wage for core industry employees was $27,003 greater than the average wage for industry jobs across Ohio. The number of businesses providing core shale services has also increased, from 610 core businesses in 2011 to 737 in 2013. A pdf of the full report can be viewed here.
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The Belmont County Court of Common Pleas ruled that a recorded will is a title transaction for purposes of Ohio’s Dormant Mineral Act. In Albanese v. Batman the trial court held that a will recorded in the county recorder’s office qualifies as title transaction and savings event even where no certificate of transfer relating to the real estate was filed. The court cited Ohio appellate courts that have held that title to real estate passes by testate succession at the time of the property owner’s death. The certificate of transfer is not that actual conveyance document, but rather the recorded will is the vehicle that transfers the property.
On April 24, 2014, Representative Robert Matzie of the Pennsylvania House of Representatives, indicated in a statement that he will introduce legislation concerning liability for damage caused by a party conducting seismic testing. The statement indicates that the soon to be proposed legislation will seek to create a rebuttable presumption of liability for any damage occurring within 90 days of the completion of the testing, and within a 1,000 foot radius of where the testing occurs.
Plans by Moundsville Power LLC to build a natural gas power plant were approved by members of the Marshall County Commission on April 22, 2014. The proposed 549 megawatt natural gas power plant is considered the first “downstream” project of its kind in West Virginia, is expected to use more than $100 million worth of natural gas per year, and will replace recently closed and retiring power plants in the area. As planned, the plant will generate power 24 hours a day and enough electricity to power approximately 549,000 homes. Current plans for construction are expected to begin in 2015 to bring the plant online in 2018, with the estimated cost of the plant to be $615 million. The project still requires state and federal approvals prior to development.