The Pittsburgh Post-Gazette reports that Shell Chemical, a division of Royal Dutch Shell, has begun to solicit ethane commitments from Marcellus Shale operators for its proposed Beaver County, Pennsylvania cracker plant. The company has already secured commitments from CONSOL Energy Inc., Noble Energy Inc., Seneca Resources Corp. and Hilcorp Energy Co. Shell has indicated that the response from bidders will help to determine whether it will build the first world-scale cracker plant in the Marcellus region. The bidding period will last two months.
The Wheeling Planning Commission has approved plans of GreenHunter Resources, Inc. for a water recycling and barging facility to be constructed in Wheeling, WV. The $1.7 million construction project, as reported by the Pittsburgh Business Times, is GreenHunter’s latest solution for dealing with production water resulting from hydraulic fracturing activities in West Virginia. The facility will treat production water to be re-used by companies, with any remaining water transported by barge to disposal wells. GreenHunter estimates that every 10,000 barrel barge load can remove 100 trucks from the water transportation process.
A report created by the West Virginia Department of Environmental Protection’s Office of Oil and Gas, which was anticipated pursuant to previous studies conducted by the DEP, indicates that no new rules are necessary to protect West Virginia’s air quality from natural gas drilling, reports The Sacramento Bee. The report stated that based upon air quality monitoring data there were no indications of a public health emergency or threat because of hydraulic fracturing. The results of the study were presented to West Virginia State Lawmakers on Tuesday during an interim committee meeting.
This week, the Pittsburgh Business Times published a ranking of the largest law firm energy practices in the Pittsburgh region. Among the 31 law firms listed, Babst Calland, with 70 lawyers serving the energy industry, ranked first among all firms practicing energy law. Serving a majority of E&P and Midstream operators in one or more legal practice areas, Babst Calland’s energy practice has grown six-fold during the past few years, including full-service offices in Pennsylvania, Ohio and West Virginia.
To view a copy of the full listing, click here https://www.bizjournals.com/pittsburgh/subscriber-only/2013/08/16/Largest-region-law-firm-energy-practices.html.
The Pittsburgh Business Times publishes weekly lists, which are compiled annually in the Book of Lists and recognized by readers as reliable and reputable sources of business information.
Updating our previous post, a representative of the Center for Sustainable Shale Development (CSSD) indicated at a recent workshop that CSSD leaders want to begin certifying compliance with the CSSD Performance Standards later this year. The CSSD represents a collaborative effort by Chevron Corp., Shell Oil Co., EQT Corp., and Consol Energy Inc., as well as various environmental advocacy groups and philanthropic organizations, to support innovative practices and continuous improvement in the way companies develop shale gas. The CSSD Performance Standards focus on preventing potential water and air pollution issues. Compliance with the Performance Standards is voluntary and will be certified by independent auditors.
The compressed natural gas (CNG) services company IGS Energy recently announced that its CNG fueling station in Bridgeport should be open by September 1st, and that it began construction on another station in Charleston on August 6th, the State Journal reported. The company has committed to building a $10 million dollar CNG fueling corridor in West Virginia and Pennsylvania to provide the infrastructure for the use of the region’s abundant natural gas resources by companies and consumers interested in adopting CNG-powered vehicles. As reported by West Virginia Public Broadcasting, the adoption of CNG-powered vehicles is expected to increase in the region due to Ford Motor Company’s release of a CNG compatible version of its popular F-150 truck.
New York Governor Andrew Cuomo reportedly stated in a radio interview on August 19, 2013 that although the economic benefits of shale gas drilling are “obvious,” the question of whether such benefits outweigh potential environmental and public health impacts remains unanswered. Governor Cuomo was asked about the support of shale gas drilling by President Obama, who is scheduled to visit Upstate New York this week. “The President’s point that fracking has economic benefits, energy benefits for this country—that’s inarguable,” Cuomo responded. “The question is: is there a cost to the environment, et cetera? And that’s what has to be assessed and that’s what has to be weighed and that’s what we’re going through now,” added Cuomo.
The Pennsylvania Environmental Quality Board, the Commonwealth’s environmental rulemaking body, will consider proposed rulemaking to Subchapter C to Chapter 78 of Pennsylvania’s oil and gas regulations during its next meeting on August 27, 2013.
On August 13th, the United States District Court for the Middle District of Pennsylvania granted partial summary judgment in favor of Chief Exploration & Development and other defendants (Chief) in a consolidated case regarding the extension of three oil and gas leases in which the primary terms had expired. Three landowners filed lawsuits in the Court of Common Pleas against Chief in order to terminate the oil and gas leases. Chief then removed the suits to the federal district court based on diversity jurisdiction, and filed a motion for summary judgment arguing that it had extended the term of the leases pursuant to the habendum clause and unitization clause by performing various predrilling activities.
The habendum clause of the lease provided that “the lease shall remain in force for a primary term of five (5) years . . . for as long thereafter as operations are conducted on the Leasehold in search of production of oil, gas or their constituents . . .” The court recognized this provision as a ‘commence clause’. The plaintiffs argued that the habendum clause was ambiguous and that parol evidence was required to determine the intention of the parties. The plaintiffs further argued that Chief failed to commence operations prior to the expiration of the primary term and failed to proceed to the completion of a well with due diligence.
The court first concluded that the habendum clause was not ambiguous. It summarized the rules of contract interpretation and how they apply to oil and gas leases. In doing so, it stated that while it is common for commence clauses to condition a lease extension explicitly on the commencement of operations, the failure to use the word commencement or commence does not render such a clause ambiguous. It further provided that a reference to operations standing alone is generally sufficient to make the meaning of the clause distinct. Therefore, the court found that it was the intent of the parties to condition the extension of the leases on the commencement of operations and that the habendum clause was unambiguous.
The court then held that Chief adequately commenced operations in order to extend the term of the lease. It first stated that commencement of operations does not mean actual drilling of the well. It noted that lessees must be given “great leeway” in manifesting their intent to drill. The court held that the quantum or nature of the lessee’s preparatory activities do not in themselves matter much to the commencement inquiry. The material issue is, rather, whether the activity – minimal or extensive – is undertaking “in good faith, and with a determination on the lessee’s part to prosecute with due diligence the work the lessee was authorized by the lease to do.” The court held that Chief’s activities were sufficient to trigger the lease extensions. Specifically, Chief established the location of the well on a neighboring tract, conducted field surveys, staked the well location, obtained a vertical drilling permit and Erosion and Sediment Control General Permit from the Department of Environmental Protection, and finalized several necessary regulatory submissions prior to unitizing the plaintiffs’ leaseholds. After creating the unit, Chief surveyed the tract of land in which the well was to be located, placed a bulldozer on the property and began to clear lumber.
As expected, the recent increase in shale production and exploration has caused a major increase in job creation in the oil and gas industry, recent reports show. According to data released by the Energy Information Administration and the U.S. Department of Labor, over a six year period ending in 2012, industry employment jumped 40%, or approximately 162,000 jobs. By comparison, the entire private sector in America grew by just 1%, or approximately one million jobs.
The Labor Department numbers show that the job creation seen in the “extraction” and “support” subcategories of the industry have grown the most. Extraction jobs, which range from exploration through some aspects of production, grew by nearly 40%. Similarly, support jobs, which are limited to areas like excavation and well construction and maintenance, and do not include housing and manufacturing data, grew by approximately 55% between 2007 and 2012.
The growth in industry employment is necessary to sustain the nation’s rising energy production; over the same six-year period, domestic crude oil production grew 39%, while natural gas production increased by 25%.
Essroc Cement Corporation, with locations scattered across the Midwest and Northeast, has filed a federal lawsuit in Pittsburgh, seeking to stop a planned pipeline from crossing property in Lawrence County. The pipeline is a joint venture operation between NiSource Inc., of Indiana, and Hilcorp Energy Co., of Texas, and is planned to travel upwards of 50 miles from Utica Shale wells in Pennsylvania and Ohio to a liquids processing plant in Ohio.
According to Essroc, the 20-inch pipeline would materially affect its ability to extract valuable coal and limestone from Essroc’s property. The company, which holds nearly 4,000 acres of subsurface rights around the North Beaver plant, is attempting to sell the property, according to the lawsuit.
On August 16, 2013, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) in the Federal Register that contained a package of periodic updates to the voluntary consensus standards that are incorporated into the federal pipeline safety regulations by reference, as well as several non-substantive, miscellaneous amendments. As PHMSA explained in the NPRM, the National Technology Transfer and Advancement Act of 1995 (Publ. L. 104-113) requires federal agencies to adopt voluntary consensus standards by regulation where appropriate, and there are 64 such standards incorporated by reference into the federal pipeline safety regulations. PHMSA also explained that a congressional mandate in the recent reauthorization of the federal pipeline safety laws requires the agency to make these industry standards available to the public, free of charge, on the Internet. Among the noteworthy changes in the NPRM is a proposal to incorporate the first edition of API Recommended Practice 5LT, “Recommended Practice for Truck Transportation of Line Pipe,” into the federal pipeline safety regulations. A variety of other applicable industry standards would also be updated, including those that apply to the transportation of line pipe by rail, barge, marine vessel; the specifications for line pipe, pipeline valves, and storage tanks; and the methodology for conducting pipeline external corrosion direct assessments. PHMSA is also proposing to clarify the text of three regulations by making non-substantive changes.
Recently confirmed U. S. EPA Administrator Gina McCarthy spoke at a forum at the University of Colorado School of Law on August 14 and addressed President Obama’s Climate Action Plan before participating in a panel discussion. In her remarks, McCarthy emphasized that climate change is not an “ancillary environmental concern” and stated that the EPA will work with states and representatives of the oil and gas industry to ensure that natural gas extraction will not harm public health and the environment. “The President has asked us to bring leaders in oil and gas to the table … natural gas is part of the energy future for this country, but natural gas extraction has to be done in an environmentally safe way.”
The Ohio Department of Natural Resources has released information regarding oil and gas permitting and drilling activity, indicating that 32 drilling rigs are currently operating in the state and that 832 total horizontal well permits have been issued since record keeping began. The ODNR issued 80 new horizontal drilling permits in July of 2013, the highest number of which (15) were issued in Belmont County.
During a recent radio interview, New York Governor Andrew Cuomo said that additional initiatives beyond hydrofracking, including reducing taxes and increasing tourism and manufacturing, will be required to improve the economy of Upstate New York. “If we approved hydrofracking today, that is not in and of itself going to change the trajectory of the upstate economy,” Cuomo said. Governor Cuomo also indicated that the New York Department of Health has not provided an update on its review of the potential health impacts of hydrofracking, which Cuomo previously said needs to be completed before a decision is made on lifting the state’s five-year-old moratorium.