Ohio House Bill 490, which would strengthen penalties for violating Ohio’s oil and gas regulations, is now pending before the Ohio House agriculture committee. The bill was introduced in response to illegal dumping of oil field waste. Industry officials have so far indicated support for the bill.
The Seventh District Court of Appeals issued a ruling concerning application of the Ohio Dormant Mineral Act. In Walker v. Noon, the appeals court upheld the ruling of a Noble County trial court finding that the 1989 version of the Dormant Mineral Act applied and that a severed mineral estate became vested with the owner of the surface by operation of the statute.
As reported by the Akron Beacon Journal Online on April 4, 2014, the Ohio Environmental Protection Agency issued revised general permits for the installation and operation of air contaminant sources at oil and gas horizontal well sites to address methane gas released from valves, connectors and other equipment. Under the new permits, operators are required to scan all the equipment at a well site on a quarterly basis for any leaks of hydrocarbons. The purpose of the new permits is to quickly identify and correct potential gas leaks at well sites and to prevent unnecessary emissions. Colorado and Wyoming have recently adopted similar air emissions requirements.
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.
The Ohio Department of Natural Resources, on February 21, 2014, published several draft rules concerning horizontal well site construction and an update to the industry standards referenced in its rules on oil and gas well drilling, permitting and safety. The public comment period for the draft rules ends on March 10, 2014. A subsequent thirty-day comment period will be announced after the draft rules are formally proposed. The draft rules and an electronic form for the submission of comments can be accessed here.
A third, 160-foot demethanizer tower was completed January 11th at the Utica East Ohio Kensington Plant in Columbiana County, Ohio. The plant serves as a collection and compression point for harvested natural gas from the Utica Shale. The tower, which will likely be commissioned within the next three months, separates the natural gas liquids from the shale gas. As production from the Utica shale formation increases an additional tower may be installed to keep up with demand.
The Ohio Department of Natural Resources released its first quarterly production update thanks to a new law that requires production to be reported on a quarterly versus annual basis. The report showed that Ohio’s 245 horizontal wells produced a total of 1,332,477 barrels of oil and 33,606,075 thousand cubic feet of natural gas during the third quarter of 2013 (July to September). Industry analysts say that the results are positive and indicate that the 245 wells could produce as much as $1 billion in revenue per year . Ohio’s largest producing oil well is operated by Gulfport in Harrison County and produced 41,617 barrels of oil during 70 days of production in the third quarter. The largest producing gas well is also operated by Gulfport, but in Belmont County. That well produced 1,249,739 thousand cubic feet of natural gas during 89 days of production.
Ohio legislation enacted earlier this year imposes new requirements on facilities that store, recycle, treat, process or dispose of brine or other waste substances associated with the exploration, development and operations of oil and gas wells. Under the new requirements, the Chief of the Division of Oil and Gas Resources Management must adopt rules establishing the procedures and requirements for applications to obtain permits for the installation and operation of these waste facilities. The Division has established a two-step process for waste facility operators to comply with the new requirements:
The Division of Oil and Gas Resource Management intends to propose the new rules in early 2014. Guidelines for applying for Chief’s Orders for interim authority to install or operate facilities have been posted on ODNR’s website and are available here.
Kinder Morgan Energy Partners, L.P. (KMP) announced that its subsidiary, Kinder Morgan Cochin LLC, signed a letter of intent with NOVA Chemicals Corporation to develop a new $300 million products pipeline for the Utica Shale, coined Kinder Morgan Utica To Ontario Pipeline Access (UTOPIA).
The 210-mile pipeline is expected to be operational by mid-2017, with an initial capacity of 50,000 barrels per day. The pipeline will enable KMP to move product from multiple facilities in Harrison County, Ohio to Kinder Morgan’s Cochin Pipeline near Riga, Michigan, and ultimately, to Windsor, Ontario, Canada.
The State of Ohio issued nearly than double the amount of Utica shale drilling permits than first expected for 2013. The Ohio Department of Natural Resources initially predicted that it would issue 525 permits for 2013. According to ODNR’s most recent report, the State has issued 1015 permits. An industry spokesman says that the higher than expected increase reflects the interest in exploring the Utica shale’s oil and gas reserves. The permits were issued to 30 different companies operating in Eastern Ohio.
The Ohio Department of Natural Resources released its annual oil and gas summary for 2012. The summary provides a comprehensive review of oil and gas permitting, drilling and production activity across the entire state of Ohio. The report can be accessed here.
The U.S. House of Representatives passed a bill prohibiting the Interior Department from enforcing regulations on hydraulic fracturing in any state that already has regulations in place. The bill recognizes the states’ authority to regulate hydraulic fracturing within their borders and was passed in reaction to recent federal regulations that have been proposed to regulate hydraulic fracturing. The House bill would not prevent the federal government from implementing baseline standards in states where none exist. However, under the legislation federal regulations would not be permitted to supersede the applicable states’ laws.