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Thursday, February 28, 2013

Federal Grand Jury Indicts Two Men and Hardrock Excavating in Youngstown Dumping Case

From the Youngstown Vindicator:

Federal grand jury indicts Lupo, Guesman and Hardrock for violating Clean Water Act 

A federal grand jury returned an indictment charging two Ohio men and a Youngstown-based company each with one count of violating the Clean Water Act, said Steven M. Dettelbach, the United States Attorney for the Northern District of Ohio. 
Benedict W. Lupo, 62, of Poland, Ohio, Michael L. Guesman, 34, of Cortland, Ohio, and Hardrock Excavating LLC are each accused of illegally discharging brine and oil-based drilling mud into a stormwater drain on numerous occasions. The drain flowed into an unnamed tributary of the Mahoning River and ultimately into the Mahoning River, according to the indictment. 
The conduct took place between Nov. 1, 2012 and Jan. 31, 2013, according to the indictment.
Read the rest of the article here. 

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Sierra Club Working to Prevent University From Doing Fracking Research

From the Knoxville News Sentinel:
Nearly 600 students, alumni and employees of University of Tennessee campuses have signed a petition protesting a plan to partner with an oil and gas company to conduct research on hydraulic fracturing.
Two UT-Chattanooga professors started the petition two weeks ago on Change.org, a website that allows anyone to create and sign a petition. The duo has spread the word through social media and environmental groups about the University of Tennessee proposal, and they aim to slow down the state approval process to allow for more scrutiny.
“We’re not against it absolutely, but the study needs to be much more properly laid out, and the university owes it to the faculty to let us know about this,” said Henry Spratt, a biology professor who also sits on the board of the Tennessee Clean Water Network and is a member of the local Sierra Club. Spratt drafted the petition with Joe Wilferth, head of the English Department at UT-Chattanooga, and both are concerned about the integrity of the research and the potential environmental impacts of the study itself.
Read the whole story here. 

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Coshocton County Families Win Lawsuit Over Old Lease

From Shale Gas Reporter:
COSHOCTON, Ohio — A Coshocton County judge has ruled against a 1983 oil and gas lease that was holding property under the extension clause because it was producing enough natural gas for a household.

Background

George and Bonnie Clark and Roy W. and Sheila A. Krasky filed the lawsuit against Zelpha Myers in 2012 over a gas well and lease on their property. The gas well, which is owned by Myers, was producing enough gas for Myers’ household, and that production was being used to keep the lease in effect.
Read the whole article here. 

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Cautionary Tale for Ohio? Colorado Governor Says State Must Sue Towns Who Vote to Ban Fracking

From The Coloradoan:
“The governor takes no joy in suing local government,” [Colorado Governor John] Hickenlooper spokesman Eric Brown told the Coloradoan Wednesday. “As a former mayor he respects local planning and control. He also has an obligation to uphold the law. The governor wants to be honest with local communities about the state’s legal obligations. Bans like the one under consideration in Fort Collins violate state law.” 
Brown said Hickenlooper was unavailable to talk to local reporters Wednesday. 
Hickenlooper told CBS4 that banning oil and gas exploration and production within Fort Collins’ city limits is a “taking” of the mineral rights of the city’s own citizens. 
He said the state has “no choice” but to sue every city, town or county that chooses to ban oil and gas development and fracking.
Read the whole article here.

With several towns in Ohio pushing towards banning drilling in their areas despite the fact that Ohio too gives the authority to permit or deny gas drilling solely to the state, this strong stance from Colorado's governor should give reason to carefully consider the ramifications of violating state law - as legal advisers have warned councilman in town after town.  Courts are already striking down efforts by Ohio cities to override the state's authority.

Of course, Ohio Governor John Kasich has not said anything about suing these towns.  That doesn't mean that others who are affected by those decisions won't though, including landowners.  Just look at what's brewing in New York over that state's fracking moratorium.

It will be interesting to continue observing how the "home rule" conflict develops.

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Wednesday, February 27, 2013

Congress Takes a Look at FrackNation

From Politico:
Filmmaker Phelim McAleer’s campaign against those warning about the dangers of fracking continues Tuesday on Capitol Hill. 
McAleer will screen his film “FrackNation” at “an event for the House Committee on Science, Space, and Technology, Subcommittee on Environment,” according to an email from McAleer.
“FrackNation” is McAleer’s take on the controversial process of injecting chemicals into rocks in hope of extracting oil and gas and his response to what he sees as media and Hollywood bias on the topic.
Read the whole article here.

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PDC Energy Announces Successful Results From Second Horizontal Utica Shale Well


DENVER, Feb. 27, 2013 (GLOBE NEWSWIRE) -- PDC Energy, Inc. ("PDC" or the "Company") (PDCE) today reported its 2012 fourth quarter and year-end financial and operating results.
In mid-February 2013, the Company flow tested its second horizontal Utica Shale well in Guernsey County, Ohio. The Detweiler 42-3H well tested through tubing at a peak rate of 2,197 barrels of oil equivalent ("Boe") per day on a 20/64" choke with an average rate of 2,039 Boe per day for 24 consecutive hours. The Detweiler 42-3H well flow test was conducted following a 60-day resting period. Based upon composition analysis, the gas being produced is 1,263 BTU rich gas. Assuming full ethane recovery with a natural gas shrink of 21%, the composition mix of the production is 49% condensate, 26% NGLs and 25% residue gas. The well was drilled to a lateral length of 3,868 feet and completed with 13 frac stages. The Company is currently drilling a three-well pad in Guernsey County, which will be followed by two horizontal wells in Washington County, Ohio.
2012 Highlights

Josh Fox Takes Another Approach to Attacking Oil & Gas Industry: They Don't Care About Worker Safety


TRAILER for "CJ's LAW " A New Short Film on Worker Safety in the Gas Fields by Josh Fox from JFOX on Vimeo.

Energy in Depth was quick to respond.  Here's a snippet of their article on the topic:
Now, make no mistake: not a single death or a serious injury that happens at an industrial worksite is acceptable to anyone. But in rare cases, accidents and incidents do occur, even with the most stringent regulatory system in place anywhere in the world, and the combined investment of literally billions of dollars each year into new processes, systems and technologies designed and proven to make the workplace even safer.
But Fox isn’t just saying that oil and gas companies don’t care about their employees, as scurrilous a charge as that may be. He’s also saying that the industry’s track-record on safety is bad, a contention echoed by a reporter at E&E News in a piece filed the week after Josh’s new video hit (and featuring the same interview subjects as Josh used).
But what do the actual data say about the industry’s safety record? While we have examined this issue before, it’s certainly worth revisiting, especially given the seriousness of the accusations.
The whole article can be read here. 

As always, we welcome your thoughts in the comments.

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Tuesday, February 26, 2013

Brunswick Decision to Take Anti-Drilling Stance Not Universally Popular

The Brunswick Chamber of Commerce has sent an open letter to the city's council members, expressing disappointment in the decision to take a stand for "home rule" and discourage the energy industry from investing in the community.  The letter, as shared by EID Ohio:
Dear Members of Council,
The Chamber Board of Directors has passed motion regarding the upcoming legislation 4-13 set for a 3rd reading and vote on Monday, February 25, 2013. Our understanding of the purpose of this legislation was to make the State of Ohio aware that the Council of Brunswick did not appreciate the disregard for “home rule” when it came to the oil & gas industry and the specific process known as hydraulic fracturing. Although, the Chamber Board of Directors understands the purpose of the legislation, we feel the result of the legislation will damage the reputation of a business friendly community we have worked so hard to create.
Having had our finger on the pulse of this industry for a few years, we have learned there is very little chance of having this type of drilling done in Medina County, let alone any of the three major cities. Therefore , the Chamber has encouraged our local businesses to act as a support system to this industry. The Chamber believes this is a tremendous economic development opportunity not only for the City of Brunswick, but for Medina County in general. It is very disappointing that our City government would consider passing legislation that would detour any economic growth in our city that can be driven by the activity generated from this industry. By passing this legislation, Council would be sending a message to the rest of the state that the City of Brunswick is not business friendly to this industry or to any other business associated with the oil & gas industry. We strongly oppose this legislation and encourage you to send it back to committee for further discussion.
Any additional questions can be directed to the Chamber office at 330.225.8411 or any of our Board Members.
Sincerely,
Melissa J. Krebs
President / CEO

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Chesapeake and Encana Not Safe From Collusion Fallout Yet

After Reuters reported that Chesapeake Energy and Canadian energy firm Encana were under investigation for violating antitrust laws by colluding to pay less to Michigan landowners for leases, Encana quickly conducted an internal investigation and cleared themselves of any wrongdoing.  Chesapeake recently followed suit.

But it doesn't look like everyone considers their self-examination convincing.

From Dory Hippauf's "No Fracking Way" blog:
Northstar Energy which owns nearly 10,000 acres in Michigan’s Utica-Collingwood oil and gas shale formation, filed the lawsuit against Chesapeake and Canadian firm Encana in Michigan federal court Friday.
The U.S. Department of Justice and the attorney general in Michigan continue to investigate whether the firms violated antitrust laws in Michigan, and issued them subpoenas last June.
The Northstar lawsuit sheds new light on the communications between the top executives of the rival energy firms.
In a previously undisclosed email exchange obtained by Northstar, Chesapeake’s McClendon forwarded the draft proposals to divide up the Michigan counties and landowners to Eresman and Wojahn on June 15, 2010. He wrote, “Fyi, pushing to save us both some money, Aubrey.”
Eresman responded a few hours later. “Agreed. The sooner the better. Thanks for continuing to move this forward. Randy.”
Read the entire post here.

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UPDATE #2: Oil Rig Worker Killed in Carrollton

UPDATE #2

The Carrollton Free Press Standard is reporting fuller details of this story:
Abdal L. Audeh, 28, of 416 Marion St., Apt. 2, Dover, was injured in the accident and pronounced dead at Aultman Hospital at 5:35 p.m.   
Alex R. Cox, 20, of 46569 Davis Rd., Cadiz, received a head injury and was transported to Mercy Medical Center for treatment by EMT Ambulance. 
Lt. Troy Watson of the Carroll County Sheriff’s Department said Audeh and Cox were working on the rig platform together. Watson said Cox, who was conscious and talking when they arrived, told him the pair was “attaching the tongs and forgot to hook up a safety line” which he referred to as a “snub line.” 
The snub line is used to prevent a long handle on the tongs from swinging completely around and striking the workers.
In addition, the Times Reporter has a statement from Rex Energy:
“Yesterday afternoon, an accident occurred at the Rex Energy Brace West pad in Carroll County, Ohio, fatally injuring a contractor. Rex Energy remains in communication with the authorities, has preserved the location and will fully cooperate in the investigation of this tragic incident. Our thoughts and prayers are with the family at this time.”
For more information about how this accident can happen, click here to view some information from OSHA that helped me to understand it a little bit better.

UPDATE

The Akron Beacon Journal is reporting a couple of additional details on the fatal accident at Rex Energy's Brace Well in Carrollton yesterday.  In addition to the worker that was killed, another was injured in the accident.
The injured man, 21-year-old Alex Cox, told the sheriff that he and the other victim were using drilling equipment and hadn’t hooked up a safety line designed to keep it from swinging around and striking workers.
The name of the deceased worker is still not being released.

ORIGINAL POST:


The Times Reporter is reporting that an oil rig worker at the Brace Well on Brussel Road in Washington Township was killed Monday.  Carroll County Sheriff Dale Williams said the name is being withheld pending notification of family.

That is all that is being reported for now.  We will share more when we become aware of it.


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Monday, February 25, 2013

Links for 2/25/13: Kent Wants to Ban Fracking, Chesapeake Announces Mississippi Lime Deal, and More

Associated Press:  Kent to contact university about joint anti-fracking policy

Akron Beacon Journal:  Chesapeake statement on Mississippi Lime deal

ProPublica:  Land Grab Cheats North Dakota Tribes Out of $1 Billion, Suits Allege

The Times Reporter:  Carroll Concerned Citizens to Host Shale Gas Drilling Education Meeting

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Investigator's Affidavit Released in Youngstown Dumping Case



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Several Fracking Law Changes Included in Kasich Budget

From The Daily Jeffersonian:
Brine from horizontal hydraulic fracturing activities could not be spread on roads for dust or ice control, under language included in Gov. John Kasich's biennial budget proposal.
The provision is one of several related to fracking in eastern Ohio's growing oilfields included in the $63 billion-plus, two-year spending plan.
A comparison document compiled recently by the state's legislative service commission (online at www.lsc.state.oh.us) outlines fracking law changes at several state agencies.
The brine application language is part of proposals affecting the Ohio Department of Natural Resources. According to spokeswoman Bethany McCorkle, local governments could still allow road applications of brine from conventional vertical wells, as allowed under legislation passed more than a dozen years ago.
Read the rest of the article here. 

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New Plant Opening in Portage County to Service Energy Industry

PLANT BRINGING JOBS WITH IT

From The Record Courier:
A Louisiana-based welding and fabrication company has bought the former Delphi plastics plant in Rootstown. Six C Fabrication Inc. will manufacture piping and structural steel equipment for the oil and gas industry working the Utica Shale gas play in eastern Ohio.
The company hopes to have up to 100 workers by the end of the year, according to Robin Cummings, the firm's president.
It's not the company's first operation in Ohio. Cummings said for about a year it has had a facility with about 40 employees in Carrollton, which is currently the heart of the natural gas drilling in Ohio.
Read the whole article here.

Cummings says the company will look to start hiring within the next couple of weeks, with opportunities for young people to be hired and train beside experienced workers.

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Friday, February 22, 2013

Group Releases Report Showing Cozy Relationship Between PA Politicians & Energy Industry

The Public Accountability Initiative has released a report entitled "Fracking and the Revolving Door in Pennsylvania."  The report details the ties between PA government officials - many of whom are or were involved in regulation of drilling and fracking - and the energy industry.  Many officials have either received jobs in the industry upon leaving their government office or worked for the industry prior to taking office.

The report is viewable below, and you can read another article from PAI that is focused on tearing down the Pennsylvania Environmental Council by clicking right here.

It should be noted that PAI receives funding from the Park Foundation, which spreads money around to many of the reports that end up being negative towards the oil and gas industry.  Isn't it odd that the "impartial studies" that receive Park Foundation money never seem to have a positive view of oil and gas development in general or fracking in particular?


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Internal Report Says EPA Emissions Studies Are Flawed

From Yahoo! News:
Limited data and unreliable estimates on air pollution from oil and natural gas production is hindering the Environmental Protection Agency's efforts to police the drilling boom, the agency's internal watchdog said in a report released Thursday.
Inspector General Arthur Elkins Jr. said the EPA has failed to directly measure emissions from some pieces of equipment and processes, and some estimates it does have are of "questionable quality."
"With limited data, human health risks are uncertain, states may design incorrect or ineffective emission control strategies, and EPA's decisions about regulating industry may be misinformed," Elkins said.
Read the rest of this story here.

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Fracking Protesters in Ohio May Be Charged Under Anti-Terrorism Act

We earlier this week noted a report of fracking protesters who briefly shut down a storage facility in Washington County, Ohio on Tuesday.

The original news article stated that the company whose facilities were descended upon by the activists stored wastewater from fracking. This isn't accurate. The brine stored on that site is not really waste from fracking, and doesn't contain fracking chemicals. It is mineral-rich salt water that comes from shale wells long after they've been drilled and fracked.

And yet, the site was chosen by fracktivists for a highly illegal raid which frightened workers and forced the company to shut down operations for six hours.

Here is a release from GreenHunter Energy, Inc., which operates the storage facility:

GreenHunter Water Terminalling Facility Held Hostage by Protestors

GRAPEVINE, Texas--(BUSINESS WIRE)--Feb. 20, 2013-- GreenHunter Energy, Inc. (NYSE MKT: GRH) (NYSE MKT: GRH.PRC), a diversified water resource, waste management and environmental services company specializing in the unconventional oil and natural gas shale resource plays, announced tonight, that at approximately 10:30 AM EST today, GreenHunter Water’s New Matamoras water handling facility located in Washington County, Ohio near the town of New Matamoras was illegally raided by approximately 100 protestors. The actions of these trespassers forced the Company to completely shut down the facility for approximately six hours today before police from a number of different agencies throughout the State of Ohio arrived and forcibly removed the protestors from GreenHunter Water's property.

Ten individuals were arrested for their actions and are subject to felony charges which may include violations under the Anti-Terrorism Act. These individuals are being held overnight in county jail with arraignment anticipated sometime tomorrow by the local magistrate.

Once all protestors were removed from the premises, full business operations were reinstated at approximately 4:00 PM EST today. The Company is not aware of any physical damages caused to its property or equipment. GreenHunter is continuing normal business operations at this facility.

The Company has hired legal counsel and plans to pursue all legal remedies available under the law against those individuals and organizations that were involved in today's illegal activities.

The New Matamoras bulk storage and transloading facility is a central collecting station fully licensed to do business by the appropriate governmental authorities. Contrary to erroneous media reports, this facility only handles salt water from oil and gas wells located in the States of Pennsylvania, West Virginia and Ohio. No Hazardous wastes or other unlicensed materials are handled by GreenHunter Water at this location.

Chesapeake Still Excited About Utica Shale

Several outlets are reporting on Chesapeake Energy's comments about the Utica shale during an earnings teleconference yesterday.  The statements from the energy giant make it clear that the Utica shale still figures prominently in their plans.

From Business Journal Daily:
Oklahoma City-based Chesapeake Energy Corp. said Thursday that its drilling operations in eastern Ohio's Utica shale continue to show promise in what the company calls the core of the play, although production was hampered last year for want of pipeline infrastructure.
However, the latest results from Chesapeake's Utica wells are dwarfed by some of the production numbers delivered last year by competitor Gulfport Energy Corp., which has also staked out a position in what is emerging as the most lucrative part of the play.
From the Akron Beacon Journal:
Chesapeake also offered production information on four wells that were completed in late 2012:
• The Cain well in Jefferson County’s Springfield Township with 1,540 barrels of oil equivalents per day. That includes 6.7 million cubic feet of natural gas and 425 barrels of natural gas liquids (ethane, butane and propane).
• The Walters well in Carroll County’s Perry Township with 1,140 barrels of oil equivalents per day. That includes 3.6 million cubic feet of natural gas per day, plus 315 barrels of oil and 220 barrels of natural gas liquids.
• The Houyouse well in Carroll County’s Lee Township with 1,730 barrels of oil equivalents. That includes 5.4 million cubic feet of natural gas per day plus 525 barrels of oil and 305 barrels of natural gas liquids. Chesapeake had disclosed the totals from this well last fall.
• The Coe well in Carroll County’s Lee Township is producing 2,225 barrels of oil equivalents per day. About one-third is liquids. No other information was released. 

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Chesapeake Reports Financial & Operational Results For 2012


CHESAPEAKE ENERGY CORPORATION REPORTS FINANCIAL AND OPERATIONAL RESULTS FOR THE 2012 FOURTH QUARTER AND FULL YEAR

2/21/2013 1:01 AM

Company Reports 2012 Fourth Quarter Net Income Available to Common Stockholders of

$257 Million, or $0.39 per Share, Adjusted Net Income Available to Common

Stockholders of $153 Million, or $0.26 per Share, and Adjusted

Ebitda and Operating Cash Flow of $1.1 Billion

 

2012 Fourth Quarter Production Totals 362 Bcfe for an Average of 3.9 Bcfe per Day, an

Increase of 9% Year over Year; 2012 Fourth Quarter Liquids Production Totals

147,500 Bbls per Day, an Increase of 39% Year over Year

 

Company Reports 2012 Year-End Proved Reserves of 15.7 Tcfe;

Adds Proved Reserves of 5.0 Tcfe in 2012

 
OKLAHOMA CITY, FEBRUARY 21, 2013 – Chesapeake Energy Corporation (NYSE:CHK) today announced financial and operational results for the 2012 fourth quarter and full year.  For the 2012 fourth quarter, Chesapeake reported net income available to common stockholders of $257 million ($0.39 per fully diluted common share), ebitda of $1.299 billion (defined as net income (loss) before income taxes, interest expense and depreciation, depletion and amortization), operating cash flow of $1.146 billion (defined as cash flow from operating activities before changes in assets and liabilities) and production of 362 billion cubic feet of natural gas equivalent (bcfe).  For the 2012 full year, Chesapeake reported a net loss available to common stockholders of $940 million, or a loss of $1.46 per fully diluted common share, ebitda of $1.914 billion, operating cash flow of $4.069 billion and production of 1.422 trillion cubic feet of natural gas equivalent (tcfe). 

The company’s 2012 fourth quarter and full year results include various items that are generally not included in published estimates of the company’s financial results by securities analysts.  Excluding such items, Chesapeake reported adjusted net income available to common stockholders of $153 million, or $0.26 per fully diluted common share, and adjusted ebitda of $1.089 billion for the 2012 fourth quarter and adjusted net income available to common stockholders of $285 million, or $0.61 per fully diluted common share, and adjusted ebitda of $3.754 billion for the 2012 full year.  The primary excluded items from the 2012 fourth quarter and full year reported results are the following:
  • a noncash after-tax impairment charge of $2.022 billion for the full year related to the carrying value of natural gas and oil properties;
  • an after-tax charge of $122 million related to the full repayment of the company’s May 2012 term loans for the fourth quarter and full year;
  • net unrealized noncash after-tax mark-to-market gains of $78 million for the fourth quarter and $347 million for the full year resulting from the company’s natural gas, oil and natural gas liquids (NGL) and interest rate hedging programs;
  • net after-tax gains of $166 million for the fourth quarter and $163 million for the full year related to gains and losses on sales, including a $176 million after-tax gain on the sale of the company’s midstream subsidiary for the fourth quarter and full year;
  • noncash after-tax charges of $36 million for the fourth quarter and $208 million for the full year related to the impairment of certain fixed assets; and
  • net after-tax gains of $19 million for the fourth quarter and $622 million for the full year related to certain investments, including a $629 million gain for the full year related to the sale of all of the company’s interests in Access Midstream Partners, L.P. (NYSE:ACMP).
A reconciliation of operating cash flow, ebitda, adjusted ebitda and adjusted net income to comparable financial measures calculated in accordance with generally accepted accounting principles is provided on pages 18 - 21 of this release.   

MUCH MORE AFTER THE JUMP...

Thursday, February 21, 2013

Youngstown Council Sending Anti-Fracking Amendment to Ballot

UPDATE:

The Youngstown Vindicator has some further detail on this story:
“If you do the petition process correctly, we have no alternative but for council to pass it and send it to the [Mahoning County] Board of Elections,” said Law Director Anthony Farris. “There’s not really an alternative.” 
If the ballot initiative is approved, it’s unenforceable, he said.
“It’s in conflict with a field of regulations in which the state has” control, Farris said. “It would be illegal to enforce it.” 
But the state attorney general and secretary of state offices have said it still must be on the ballot if the initiative has enough valid signatures despite the legal issue, Farris said.
Read the whole article here.

From the Associated Press:
YOUNGSTOWN, OHIO: The Youngstown city council approved an anti-fracking amendment for the May 7 primary election ballot — even though there are doubts about whether it could be enforced.
The Vindicator newspaper reports that the council on Wednesday night approved the charter amendment for the ballot. It would ban the gas drilling process known as hydraulic fracturing, or fracking, in the city.
Law Director Anthony Farris said the council had no choice but to move the proposal to the ballot after a group called Frack Free Mahoning Valley collected about 4,000 signatures calling for it. The group needs just 1,562 valid signatures to get the measure to the voters.
Because the state regulates gas drilling, city officials said the ban would probably be unenforceable, although members of the activist group disagree.

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Analyst: Numbers Are Catching Up With Chesapeake Energy

From Seeking Alpha:
Chesapeake Energy Corp. (CHK) is a large US oil and gas acquisition, exploration, development and production company. It started as primarily a natural gas E & P company. It bet heavily on the natural gas industry. When the bottom fell out of the natural gas market, a seriously in debt CHK had to change its strategy to emphasize oil development. Aubrey McClendon et al came up with the strategy of buying huge leaseholdings in new unconventional oil fields early. CHK would then do a small amount of development to prove the new field was an economic success. Then CHK would sell a part of its interest in the field to pay for the entire cost of all of CHK's leases on the field plus some development costs. This strategy has been a great success, and it is probably the only thing that kept CHK out of bankruptcy when natural gas prices fell to historical lows (less than $2 per MMBtu) in Q2 2012. Even so, CHK needed emergency loans to see it through that time.
As part of this strategy CHK was the discoverer of the Haynesville, Utica, Powder River Niobrara, Tonkawa, and Mississippi Lime. It was one of the early developers in many more fields. This has made the CHK strategy work. It has allowed CHK to retain 15.1 million net acres of leaseholdings, while still selling or agreeing to sell approximately $12B in leaseholdings in FY2012 (and many more billions in the preceding years). Some have tried to say that CHK has been failing by selling off parts or all of its holdings in great fields. However, the opposite is true.
At the end of 2012, CHK claimed it had $4B in liquidity. Soon those $12B in 2012 deals will be completed. Plus CHK plans to sell another $5B-$7B in 2013. CHK asserts that these last sales should finally put it below $9.5B in debt by the end of 2013. At that point CHK will likely have more than $5B per year in operating cash flow. That sounds like a company that deserves an investment grade bond rating. Such a rating will be a huge acknowledgement of success for CHK. CHK should achieve that milestone by the end of 2013 (or shortly after it reports year end results for FY2013).
Read the whole article here. 

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Wednesday, February 20, 2013

Chesapeake Releases Results of Company Investigation; "No Intentional Misconduct" by McClendon

Extensive Review of Alleged Conflicts of Interest and Other Matters Involving CEO Aubrey K. McClendon Did Not Find Any Intentional Misconduct
Board Also Finds Company Did Not Violate Antitrust Laws in Regard to Acquisition of Michigan Oil and Gas Rights in 2010
OKLAHOMA CITY--(BUSINESS WIRE)--Feb. 20, 2013-- Chesapeake Energy Corporation (NYSE:CHK) today announced that its Board of Directors has received the results of its previously announced review of the financing arrangements between co-founder, Chief Executive Officer and President, Aubrey K. McClendon (and the entities through which he participates in the Founder Well Participation Program (“FWPP”)) and third parties identified as having a financial relationship with the company, as well as other matters. The review, which was led by the Audit Committee of the Board, with the assistance of independent counsel retained by the independent members of the Board in April 2012, has been substantially completed. In connection with the review, millions of pages of documents were collected and reviewed and more than 50 interviews of Chesapeake and third-party personnel were conducted.
Among the transactions reviewed were the 2008-2012 financing arrangements between EIG Global Energy Partners (“EIG”) and affiliates of Mr. McClendon regarding financing of his participation in the FWPP, as well as the preferred stock investments by EIG in CHK Utica, L.L.C. and CHK Cleveland-Tonkawa, L.L.C. The review of the financing arrangements did not reveal any improper benefit to Mr. McClendon or increased cost to the company as a result of the overlap in the financial relationships.
The review also covered:
  1. other relationships in which both Mr. McClendon and the company conducted business with the same financial institutions;
  2. the trading activities of the Heritage Hedge Fund (co-founded by Mr. McClendon) through 2007, when the Heritage Hedge Fund ceased operations; and
  3. other matters, including issues regarding administration of the FWPP, and a 1998 loan to Mr. McClendon by then Board member Frederick B. Whittemore.
Based on the documents reviewed and interviews conducted, no intentional misconduct by Mr. McClendon or any of the company’s management was found by the Board concerning these relationships and/or these transactions and issues.
As previously announced, Mr. McClendon has agreed with the Board that he will retire from the company on April 1, 2013, and will continue to serve as Chief Executive Officer until the earlier of his successor being appointed and April 1, 2013. The Board and Mr. McClendon’s decision to commence a search for a new leader was not related to the Board’s review of his financing arrangements and other matters.
Chesapeake also announced today that its Board of Directors has concluded that the company did not violate antitrust laws in connection with the acquisition of Michigan oil and gas rights in 2010. The company previously reported that in June 2012 it had received a subpoena duces tecum from the Antitrust Division, Midwest Field Office, of the United States Department of Justice, and demands for documents and information from state governmental agencies, investigating possible antitrust violations arising from 2010 leasing activities in Michigan. The company has been responding to these requests. The Board commenced its own investigation of these allegations in June 2012. The Board based the conclusion it announced today on a thorough review conducted independently by outside counsel, and on Chesapeake’s cooperation with the Department of Justice.

EPA Emails Suggest That Media Misrepresented Conclusions in Pavillion, Wyoming

From Energy in Depth:
Emails obtained from the EPA in a recent FOIA request show that the agency pushed back immediately against the claim that it had linked hydraulic fracturing to water contamination, suggesting that a narrative repeated to this day was actually manufactured by the news media and not reported by EPA.
In one email, EPA’s then-press secretary, Betsaida Alcantara, told Lisa Jackson that the agency was pushing back against the AP’s breaking story on the Pavillion report in December 2011, which ran under the headline: “EPA implicates hydraulic fracturing in groundwater pollution at Wyoming gas field.” Alcantara said the AP’s “headline and lead are unnecessarily inflammatory and irresponsible,” and that the AP would be updating the story “heavily” to emphasize the unconfirmed nature of the findings.
Notably, the headline was changed from “EPA implicates hydraulic fracturing” to “EPA theorizes fracking pollution link.” The original AP story also declared in the opening paragraph that EPA had “implicated fracking” for causing contamination, but the version corrected at EPA’s request was changed to say that fracking “may be to blame.”
The revelation undermines critics of hydraulic fracturing, who frequently claim that EPA’s findings in Pavillion “prove” that the practice contaminates drinking water. The NRDC said EPA’s findings represented “the first official evidence that fracking is a threat to drinking water,” while ProPublica ran a story about EPA’s report under the headline “Feds Link Water Contamination to Fracking for the First Time.”
But if the EPA pushed back so vehemently against that characterization in the press, what does that say about one of opponents’ favorite talking points — namely, that EPA’s findings in Pavillion support their thesis of contamination?
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Protesters Briefly Shut Down Brine Storage Site, 10 Arrested

From the Associated Press:
 Authorities say a protest by members of environmental groups temporarily shut down operations at a gas drilling waste storage site in Southeast Ohio.
The Washington County Sheriff’s Office said it happened Tuesday at the GreenHunter Water storage facility in New Matamoras on the Ohio River.
About 100 people staged the protest, which included one of them perching on a chair at the top of a 30-foot pole. Operations at the facility — which stores wastewater from hydraulic fracturing, or fracking — were disrupted for about four hours.

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Fracking Research is Big Business

From the Washington Times:
Millions of dollars already have been spent, and much more soon will be dumped into a litany of studies looking at fracking’s impact on water and air quality and at possible links to cancer and other diseases. 
The industry argues that there are no such links; indeed, studies have shown little or no health risks or effects related to fracking. But other reports have claimed the opposite. 
Many analysts believe there simply hasn’t been enough research to draw firm conclusions. 
“There’s a lot of rhetoric on both sides. You can only get at the truth if you base it on sound science, and that’s where the problem is. There’s very little sound science” on the subject, said Trevor Penning, head of the University of Pennsylvania's Center of Excellence in Environmental Toxicology. 
Mr. Penning and colleagues at the University of Texas, Harvard University and other institutions are seeking funding from the federal government to help gather that science. The center already has begun a health survey of residents in Pennsylvania’s Marcellus Shale region, home to one of the largest natural gas deposits in the world and an area where fracking is widely employed.
So, with the industry buying pro-fracking research and the fracktivists buying anti-fracking research, the objective researcher turns to the federal government to have the taxpayers fund their research.

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Brunswick Anti-Drilling Resolution Could Lead to Big Tax Revenue Loss

Brunswick City Council
President Patricia Hanek
From The Plain Dealer:
BRUNSWICK - A company recently recognized by the city for its more than 100 years in business could be moving its newest business venture outside Brunswick should a resolution opposing hydraulic fracturing within the city be passed by city council. 
“Since providing environmentally friendly products to this industry is a key growth component of the company’s strategic plan, Philpott will be forced to locate its new wholesale operation outside of Brunswick,” said Michael Baach, president of Philpott Rubber, at a press conference Feb. 18 announcing the company’s new wholly owned subsidiary, Philpott Energy & Transportation Company.
Baach feels the city should try to market itself to attract some of the companies that are drilling in the busy spots of the Utica shale, particularly Carroll County.  However, City Council President Patricia Hanek apparently feels that Medina County is far superior to Carroll County, even without trying to attract drilling dollars.
“I was looking at a comparison and, as of December, the unemployment rate in Carroll County was 7.4 percent; it was 5.6 percent in Medina,” Hanek said. “The average home value was $112,000 there and $184,000 in Medina, and the average annual income in Carroll County was $43,000 – in Medina is was $63,000. So this alleged economic boom does not seem to reflect in the figures.”
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Kent State Not Likely to Allow Fracking on Campuses

From the Kent Patch:
The decision to allow or deny hydraulic fracturing for oil and natural gas on Kent State University campuses lies with local university administrators, according to a state official.
Kent State owns hundreds of acres of land across Northeast Ohio, including its eight campuses, the Kent State Airport in Stow and the Kent State Golf Course in Franklin Township.
Almost any of those large masses of property — the Kent campus alone is nearly 900 acres — would provide easy access to Ohio's portions of the Marcellus and Utica shale formations for oil and gas drillers.
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Pittsburgh Airport Approves Huge Gas Drilling Deal

From WPXI:
The Allegheny County Airport Authority approved a deal Friday with Consol Energy that could be worth $500 million for rights to drill for natural gas and oil at Pittsburgh International Airport. 
Under the deal, Consol will pay a signing bonus of $50 million and then pay 18 percent royalties on future production. Officials expect the royalties to total $450 million over the next 20 years, though that figure isn't guaranteed.
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Tuesday, February 19, 2013

2/19/13 Links: Imagining the Worst-Case Scenario for Fracking Brine Accidents, Will a New CEO Deliver Chesapeake, and More

Akron Beacon Journal:  What happens when the unthinkable accident occurs?

Northeast Ohio Public Radio:  Shale Industry Moves Into Infrastructure Development Next

Seeking Alpha:  Will a New CEO Deliver Gains For Chesapeake Investors?

The Review:  EL firm to design park entrance

Business Journal Daily:  Patriot Water Treatment Bristles at ODNR Directive

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