This week the Pennsylvania Department of Environmental Protection (PADEP) announced the availability of emissions data from oil and gas operations in the Commonwealth. According to the PADEP press release, the data represents “2012 emissions levels from Marcellus Shale natural gas production and processing operations as well as compressor stations that receive gas from traditional oil and gas well sites.” PADEP reportedly received data from “56 Marcellus Shale operators covering 8,800 natural gas wells and 70 operators of 400 compressor stations.” Air contamination sources in the industry report emissions annually to PADEP.
On April 1, 2014, a group of eight U.S. House Democrats sent a letter to the U.S. Environmental Protection Agency (USEPA) urging the agency to address alleged water contamination near drilling sites in Dimock, Pennsylvania; Pavillion, Wyoming; and Parker County, Texas. The congressmen acknowledged that states act as a “major source” of regulations for the oil and gas industry, but expressed their belief that USEPA “has a key role to play in oil and gas development.”
TransCanada Corporation’s ANR Pipeline system has secured nearly 2.0 billion cubic feet per day of natural gas transportation commitments for the movement of oil and gas produced from the Utica and Marcellus formations through its Southeast Main Line. These contracts involve transporting natural gas to points both north and south within ANR’s system, as well as increasing their flow capability to the Gulf Coast. ANR is one of the few existing pipeline systems with access to both the Upper Midwest and the Gulf Coast, and they are exploring further opportunities to transport gas produced from the Utica Shale to these areas.
Utica East Ohio Midstream (“UEO”) recently purchased two buildings in downtown Salineville, Ohio. The company owns natural gas processing plants in nearby Kensington and Leesville. UEO plans to use the buildings for administrative offices for its oil and gas operations in the area. A company spokesman says that the purchase of the buildings solidifies UEO’s presence in the community. They estimate that 40 people will be working in the buildings.
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.