As reported by the West Virginia Press Association, the West Virginia Division of Natural Resources (“DNR”) is seeking bids for natural gas drilling on state-owned land under the Ohio River. A legal notice published on Friday, August 22 indicates that the DNR intends to grant leasing rights to drill under the river in Marshall, Wetzel and Pleasants counties. The notice further states that applications to bid on these rights must be submitted by the September 11 deadline.
Veteran attorneys Timothy Miller from Robinson & McElwee, and Christopher ‘Kip” Power, Mychal Schulz and Robert Stonestreet from the Charleston office of Dinsmore & Shohl have joined forces with Babst Calland in providing senior-level legal counsel in key practice areas including environmental, litigation and employment. The addition of the new attorneys and staff will double the size of Babst Calland’s Charleston office which opened in 2011. For more information, please visit the firm’s website.
Natural Gas Intelligence reports that a new truck-to-rail transloading facility owned by Denver-based Concord Energy LLC, has opened in Parkersburg, West Virginia. The facility is capable of handling more than 150,000 bbl of crude oil condensate and natural gas liquids, and is expected to primarily serve E&P companies operating in southeast Ohio and northwest West Virginia. The facility will load light condensates, stabilized condensate, raw natural gas liquids (NGL) and purity NGL products, and includes warehouse space, a lay-down area and its location provides access to highways and the Ohio River. This announcement is the latest in a series of similar facilities that have revived dormant railroads and industrial sites throughout the region.
The State Journal reports that American Energy – Marcellus LLC, a subsidiary of Oklahoma City based American Energy Partners LP, has agreed to acquire 48,000 leasehold acres in Doddridge, Harrison, Marion, Tyler and Wetzel Counties in West Virginia from East Resources, Inc. and an unnamed third party. The deal to acquire West Virginia leasehold properties is part of a larger $4 billion effort by American Energy Partners to enter the Southern Marcellus and Permian Basin plays in West Virginia and West Texas and to expand its holdings in the Utica Shale in Ohio. The companies plan to operate four to six rigs on the newest West Virginia and Ohio acquisitions by the end of 2014. American Energy – Marcellus LLC expects the West Virginia property to produce 135 million cubic feet of natural gas equivalent per day by the time the deal closes.
“The 2014 Babst Calland Report – Appalachian Shale Industry in Transition: Evolving Challenges for Producers and Midstream Operators” comments on key issues facing producers and midstream operators from a legal and regulatory perspective, including:
- Governments and politics are playing a major role in shale energy. State elections will shape how the industry operates. In Ohio and Pennsylvania, the tax debate is still very much alive. In West Virginia, a gas severance tax has been in effect and has remained unchanged despite attempts to raise it. The industry faces increased budgetary and operational challenges from legislative sessions in all three states. Politically-driven developments continue to impact the prospects for new and existing underground injection wells, ranging from new seismic testing requirements to public objections to pending permit applications.
- Regulatory issues remain fluid for the Appalachian shale gas industry. There is no shortage of regulation for the burgeoning shale gas industry, particularly given the degree of transparency, public scrutiny and political influence for and against the extractive industries. A large number of regulatory issues remain, requiring constant attention to developments and details across a spectrum of subjects including: reporting, permitting, well site construction, impacts to species, and unique standards for water and air quality.
- Local government regulation of the industry is expanding. The line between state and local control is still being tested in the state of Ohio, while the implications of Post-Robinson Twp. (Act 13) local regulation in Pennsylvania will not be evident until later in 2014.
- Property rights and land use present more challenges than ever before. Myriad unresolved property rights, royalty disputes and land-related issues are pending in the courts. Producers in Ohio, West Virginia and Pennsylvania are facing a continuously evolving environment concerning property rights and land use.
- Safety and labor remain priorities. The industry’s workforce and supply chain partners are keys to productivity gains and maintaining the all-important license to operate. As the oil and gas industry must protect its workers 24/7, it must remain vigilant on safety compliance and labor matters.
- Next step in the transition: we are at the threshold of a manufacturing renaissance. The Appalachian Basin is playing a leading role in the United States’ production of record amounts of oil, gas and natural gas liquids. New business opportunities are rapidly developing, and the Appalachian Basin has the potential to evolve from our vastly successful resource extraction activities to reclaim its historic reputation as a manufacturing juggernaut.
To request a copy of “The 2014 Babst Calland Report,” contact info@babstcalland.com.
While Marcellus Shale gas continues to be developed in the area, West Virginia is also experiencing a Utica Shale boom in its northern counties. According to Natural Gas Intelligence, multiple operators are investing more capital and manpower into developing Utica Shale wells in Tyler, Marshall, Wood and Wetzel Counties. Several operators are in varying stages of permitting, drilling, and testing deep wells straddling the Ohio-West Virginia Utica boundaries. Additionally, initial data suggests that Utica Shale core dry gas shows significant promise for gas development in the state.
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.
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.
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.
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.
As originally described in a post by Ben Milleville on February 25th, amended Senate Bill 461, known as The Future Fund Bill, has passed the Senate and now awaits ratification by Governor Earl Ray Tomblin. As the West Virginia State Journal reports, the amended bill, modified by the House of Delegates and then passed by the Senate for a second time, calls for a baseline severance tax rate on all minerals – not just on oil and gas. Despite concerns about how the severance tax would impact the coal industry, the West Virginia Legislature ultimately agreed that the Future Fund would be a constructive way to generate revenue. Specific limitations placed on the Future Fund dictate how the money may be used and how much of the fund may be allocated at one time.
The West Virginia University College of Law is now offering a Master of Laws in Energy and Sustainable Development Law set to begin during the Fall Semester 2014. With the addition of the one-year LL.M. program, the College of Law is focusing on West Virginia’s important role in the development of the Marcellus shale and supplementing the existing WVU Law Center for Energy & Sustainable Development as well as the National Energy & Sustainability Moot Court Competition, which occurs this year on March 27, 28 and 29 in Morgantown. The College of Law recognizes that “[e]nergy is the foundation of our nation’s future, both economically and environmentally. West Virginia is as the center of energy production in the country.” The LL.M. curriculum includes a variety of energy related courses including Oil and Gas Law, Energy Regulation, Markets and Environment, Land Use and Sustainable Development, Natural Resources Law and Environmental Protection Law, among others, and is designed to prepare attorneys to work on a broad spectrum of energy related issues. Review of applications began on March 1 but the LL.M. Program maintains a rolling admissions process.
As reported in the Pittsburgh Business Times, the proposed ethane cracker plant near Parkersburg, West Virginia, could potentially have a multi-billion dollar positive effect on the state’s economy. Emeritus Professor of Economics Tom S. Witt of West Virginia University authored a report, entitled “Building Value from Shale Gas: The Promise of Expanding Petrochemicals in West Virginia,” wherein he analyzed the short and long term impact of the proposed facility on West Virginia’s economy. Based upon the conclusions of Professor Witt’s report, the construction and operation of the proposed ethane cracker plant could generate a total of 19,710 jobs, representing employee compensation of $1.047 Billion and total economic output of $2.261 Billion. Professor Witt, in his report and in an interview with the Charleston Daily Mail, gives specific policy and legislative recommendations for West Virginia to successfully attract large scale projects, such as the ethane cracker.
As reported in The Wheeling Intelligencer, the West Virginia Legislature continues to consider H.B. 4558 and S.B. 578, which would allow oil and gas producers to create production units through “Forced Pooling.” If passed, such a law would allow natural gas producers to include un-leased acreage in their active drilling units if all of the un-leased landowner’s neighbors have been leased. Industry advocates pushing for passage of these measures argue their necessity for West Virginia production to remain competitive in the Marcellus markets, as Pennsylvania and Ohio have similar laws. Opponents of the idea fear that such a law could weaken the position of landowners when negotiating leases with oil and gas companies. The West Virginia Legislature considered similar laws in the past, without success.
The respective bills are currently in Committee in both the House and the Senate. With the current legislative session ending in early March 2014, it is unclear whether the bills will be taken up for a full vote in either house of the legislature prior to the close of the session.