Friday, August 29, 2014

Billions Invested in Utica Shale, and More Development Keeps on Coming

Now that's big money -
being invested in Utica shale
From Energy in Depth:
Yesterday, Appalachian Resins announced that it will build a $1 billion facility in Monroe County that will be able to process approximately 18,000 barrels per day of ethane into ethylene and polyethylene, the feedstock for plastic and many other items we use in our daily lives.  The facility is expected to begin operating in early 2019 and will produce 600 million pounds of ethylene/polyethylene per a year.  This new feedstock has the potential to reinvigorate the manufacturing sector in the region, which will, in turn, increase investment and jobs in the Ohio Valley. 
In addition to the Appalachian Resins announcement, Columbia Pipeline Group also announcedits plans to invest $1.75 billion in a 160-mile pipeline in Ohio and West Virginia to support shale development in Pennsylvania, West Virginia and Ohio.  The pipeline will be capable of transporting 1.5 billion cubic feet of natural gas per day to markets in the Midwest and Gulf Coast. 
Last but not least, EnLink Midstream LLC is investing $250 million in new pipeline and processing facilities in eastern Ohio.  It is planning to build a 45-mile pipeline that will transport condensate coming from the liquid-rich portion of the Utica Shale and connect to existing 200 miles of pipeline in eastern Ohio and West Virginia.  The processing facilities, located in Belmont, Noble and Guernsey Counties, will be able to process up to 560 million cubic feet of natural gas and 41,500 barrels of condensate per day.
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Drillers Continue to Work on Environmentally Friendly Frack Fluids

From The Motley Fool:
The quest for green fracking fluids  
Some companies believe they are on the verge of such a discovery. ExxonMobil (NYSE:XOM  ) , for instance, says it has developed a new generation of fracking fluids that don't pose a threat to the environment. While the oil major's newly developed concoction hasn't been tested in the field yet, the company assures us that it doesn't contain any toxic chemicals. 
Similarly, Halliburton (NYSE: HAL  ) has developed a green fracking fluid that uses ingredients sourced from the food industry. Halliburton claims that the product, called CleanStim, provides an "extra margin of safety" to people, animals, and the environment in the event of a spill. To prove that the product is truly harmless, a Halliburton executive actually took a sip of CleanStim during an industry event last year. 
Besides the companies that actually do the fracking, smaller specialist firms are also making impressive strides in greening the fracking process. For instance, Austin, Texas-based Chem Rock Technologies has developed fracking fluids that it claims do not pose a threat to water supplies even in the event of a spill, while Rapid Drilling Fluids, also based in Austin, has developed biodegradable drilling fluids.
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PA DEP Releases Details of 243 Cases of Water Contamination Caused by Oil and Gas Development

From the Associated Press:
Six years into a natural gas boom, Pennsylvania has for the first time released details of 243 cases in which companies prospecting for oil or gas were found by state regulators to have contaminated private drinking water wells. 
The Department of Environmental Protection on Thursday posted online links to the documents after the agency conducted a "thorough review" of paper files stored among its regional offices. The Associated Press and other news outlets have filed lawsuits and numerous open-records requests over the last several years seeking records of the DEP's investigations into gas-drilling complaints. 
Pennsylvania's auditor general said in a report last month that DEP's system for handling complaints "was woefully inadequate" and that investigators could not even determine whether all complaints were actually entered into a reporting system. 
DEP didn't immediately issue a statement with the online release, but posted the links on the same day that seven environmental groups sent a letter urging the agency to heed the auditor general's 29 recommendations for improvement. 
"I guess this is a step in the right direction," Thomas Au of the Pennsylvania Sierra Club chapter said of the public release of documents on drinking well problems. "But this is something that should have been made public a long time ago." 
The 243 cases, from 2008 to 2014, include some where a single drilling operation impacted multiple water wells. The problems listed in the documents include methane gas contamination, spills of wastewater and other pollutants, and wells that went dry or were otherwise undrinkable. Some of the problems were temporary, but the names of landowners were redacted, so it wasn't clear if the problems were resolved to their satisfaction. Other complaints are still being investigated.
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Tuesday, August 26, 2014

SEC Charges Chimera Energy With Fraud Over Waterless Fracking Claims

UPDATE (08/15/14)

Chimera Energy has been charged with fraud by the Securities and Exchange Commission, according to reports.  Along with the company, Andrew Farmer (mentioned below in a previous update regarding the SEC investigation into Chimera), Charles Grob Jr, and Baldemar Rios are being charged.

From the Houston Business Journal:
The Securities and Exchange Commission is charging the now-defunct Houston-based Chimera Energy Corp. and its founders with alleged fraud. 
Going back to 2012, the SEC alleges Chimera was falsely touting contracts with state-owned Pemex in Mexico and was claiming it had developed revolutionary and environmentally friendly extraction technology that would replace hydraulic fracturing, or fracking. 
The SEC, which suspended Chimera trading in 2012 before filing federal charges this week, claims none of this was true. The SEC is charging the penny-stock company and four individuals behind a "pump-and-dump scheme that misled investors." 
The SEC is charging them with securities fraud, registration violations and reporting violations. 
The SEC court filing alleges that Andrew I. Farmer was behind the act, creating Chimera as a shell company and secretly obtaining control of all shares issued in an initial public offering in 2011, then launching an aggressive promotional campaign midway through 2012 to hype the stock to investors. Chimera issued more than 30 press releases in a two-month period about its supposed revolutionary technology and contracts, the SEC said. 
"While the stock was being pumped by the false claims, entities controlled by Farmer dumped more than 6 million shares on the public markets for illicit proceeds of more than $4.5 million," according to the SEC filing.
You can read the rest of that article here.

UPDATE (08/12/14):

I received a return call from Dr. Fernando Flores Avila, whose business card describes him as assistant manager in coordination of technological management northern region for PEMEX (that was translated from Spanish).  He is also one of the gentlemen whom Charles Grob, former CEO of Chimera Energy, stated would verify a relationship between Chimera Energy and PEMEX.

Dr. Flores Avila, though, stated that Chimera Energy is under investigation by the PEMEX legal department.  He referred to the numerous press releases that described agreements and dealings between Chimera and PEMEX, and Dr. Flores Avila said that these releases were not true.  Chimera appeared, in his words, to be a "big fraud" and a "ghost company" - which he noted is under investigation by the U.S. Securities and Exchange Commission (as noted below in our previous updates on this story).  Dr. Flores Avila stated clearly that PEMEX has "no link to" Chimera Energy.

UPDATE (07/29/14):

We have received communication from Charles Grob, named in the Seeking Alpha article referenced below as the head man at Chimera Energy Corp.  Grob is no longer with the company, having resigned in October 2012.

Grob included in his communications business cards for two employees of PEMEX, whom he said would verify that what was reported by Seeking Alpha is inaccurate.  I have reached out to them for comment and will update this article if and when I am able to obtain a response.

I reached out to representatives of PEMEX when this original post was created back in 2012 to attempt to confirm the relationship between PEMEX and Chimera Energy Corp.  No response was ever received.  I also attempted to call the phone number listed on Chimera Energy press releases, with no success in reaching anyone.

There have been other developments around Chimera Energy since the posting of this article back in September of 2012.

- On September 21, 2012, Chimera issued a press release (click here to view the release) stating that "Company management has selected Air Liquide as its supplier of helium for use in Non-Hydraulic Extraction on Pemex wells in the Chicontepic Basin of Mexico."

- On September 25, 2012, Aire Liquide issued this statement (click here to view it):
On Friday, September 21st, a press release was issued by Chimera Energy Corp. (CHMR) stating that Air Liquide has been selected as its supplier for an upcoming project in Mexico.

Air Liquide has no business relationship or affiliation with Chimera or its principal, Charles Grob. Chimera’s press release was issued without the knowledge or consent of Air Liquide.
- On September 24, 2012, Chimera issued a press release containing a "signed PEMEX onsite schedule letter dated September 14, 2012 regarding CHMR's Non-Hydraulic Extraction." That release can be viewed here. I reached out to multiple PEMEX representatives to try and follow up on this letter and get more information about it in October of 2012. No one replied.

- On October 9, 2012, Chimera announced the appointment of Baldemar Rios as the company's new Chairman and CEO.  View the release here.

There isn't a whole lot more information available on Baldemar Rios that I can find, other than what is in the press release.  Prior to taking on this role at Chimera Energy, Rios was the President and CEO of Projects & Industrial Products LLC in Houston, Texas.  Again, not much information is turned up when you research the company.

One of the only things a search for information did turn up was a written opinion from Judge Marvin Isgur of The United States Bankruptcy Court for the Southern District of Texas Houston Division (click here to view it).  According to that court document, Rios and his wife filed a joint voluntary Chapter 11 petition on January 4, 2011.  FLSmidth Krebs Inc. filed an adversary proceeding seeking to have Rios' discharge denied, detailing how Rios repeatedly amended the value of his company during his bankruptcy case - placing it as high as $26,000,000 at one point before adjusting it down to $6,000,000.  (The case was eventually converted to a Chapter 7, and no value was recovered from the company.)

When pressed at trial for the reasons why he made such drastic amendments to the value of his company, Rios could give no real explanation.  His testimony included this exchange:
The Court: When you look at Exhibit number 2, it was filed on February 15. And then Exhibit number 3 was filed on March 3rd, so 18 days later. What events occurred that caused the $20,000,000 drop over 18 days? 
Mr. Rios: Yeah because, uh one thing that happened also that, you know ah, you know some of the places where we have some operations, we have some . . . companies have some debts, so equipment and um equipment for example and um so . . . the companies, so the subcontractors, that we owed the money, they just stop you know or didn’t pay, you know, for example, you know, one of the creditor, I mean one of the subcontractors put a lien, and then you know, put a lien on the company, and then they went with the final customer that was paying us . . . 
Rios also produced hardly any financial records for his company, which had nearly $78,000,000 in sales over the 4 years prior to the bankruptcy proceedings.

Not surprisingly, the discharge was denied.

Other than that court document, a search turns up very little reference to Baldemar Rios or his company.

- On October 10, 2012, Chimera announced that it completed its first collaboration with PEMEX at Chicontepec Basin (which is oddly misspelled as the Chicontepic Basin in the press release).  Along with that release there was this picture posted:

The caption to the photo said: Chimera Energy Corp President Baldemar Rios (2nd from left) meeting with Pemex officials Jaime Granados (center), Jose Ceron (2nd from right) and Francisco Rios (right) in Poza Rica.

I have tried to obtain contact information for any of the individuals listed in that caption in order to reach out to them for comment on Chimera, but have had no success to this point.  A search of PEMEX's website doesn't return results for the names Jaime Granados, Jose Ceron, or Francisco Rios, nor does a search of an industry directory.  The business cards provided by Grob in his emails to us were not the cards for any of these men.

The validity of the photo was questioned by Hristina Beeva of Hotstocked, a microcap market information site.  Beeva wrote:
Just a little over a year since its incorporation, the company replaced 31-year-old founder and CEO Charles E. Grob (of unverified actual existence) with a Mr. Baldemar Rios, who claims to have worked closely with Mexican energy giant PEMEX, a completely legitimate state-owned company. The only proof that Chimera Energy has the Mexican Government's backing is a single blurry picture of Mr. Rios meeting a group of people, claimed to be PEMEX representatives of unknown rank.
- On October 11, 2012, Chimera declared that it was taking aggressive action against "naked short sellers."  The press release (view the whole thing here) stated, in part:
"The most serious challenge facing our Company is not the highly competitive industry in which we operate, nor the inherent uncertainties of cutting-edge technology, but the brazen greed of the individual(s) who are actively working every day to destroy Chimera before our technology has the opportunity to revolutionize the worldwide production of oil and gas," said Baldemar Rios, Chairman and CEO. "Today we go on the offensive. No longer will we sit idle while anonymous posters and bloggers spout egregious lies about the Company and our technology."
- On October 25, 2012, the Securities and Exchange Commission (SEC) announced a suspension of trading on Chimera Energy Corporation "because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things, the statements by Chimera in press releases to investors about the company’s business prospects and agreements."  Read the trading suspension by clicking here.  That suspension lasted through November 7, 2012.  Click here for an article looking at what that means for investors.

- On April 18, 2013, the SEC subpoenaed Andrew Farmer and Iridium Capital for failing to provide documents requested in the investigation of Chimera.  The litigation release (which can be read by clicking here) states, in part:
The SEC’s application explains that beginning in July 2012, Chimera commenced a promotional campaign that caused a dramatic increase in the trading volume and price of its stock. The SEC is investigating, among other things, whether the claims in Chimera’s press releases are materially false or misleading. On October 25, 2012, the SEC temporarily suspended trading in the securities of Chimera because of questions concerning the accuracy and adequacy of publicly disseminated information about, among other things, Chimera’s business prospects and agreements. 
As part of its investigation, the staff in the SEC’s Fort Worth Regional Office issued subpoenas to Farmer and Iridium in December 2012 seeking, among other things, materials related to their transactions in Chimera securities and to Chimera’s business. According to the SEC’s court papers, Farmer played an integral role in Chimera’s transition from a privately held to a publicly traded company. And, before Chimera’s securities became available for purchase to the public on the over-the-counter market, entities controlled by Farmer or for which Farmer acted as agent acquired millions of Chimera shares in private transactions, while Iridium, which Farmer also controlled, assisted in effectuating these transactions. According to the court papers, once Chimera’s promotional campaign was under way, entities controlled by Farmer sold to the public a substantial number of their privately obtained Chimera shares, generating hundreds of thousands, if not millions, of dollars in profits.
- On June 19, 2013, the SEC issued a subpoena enforcement action against Thomas Massey "for failure to produce documents in [a] market manipulation investigation."  A portion from that litigation release (which can be viewed here):
As part of its investigation, the staff in the SEC's Fort Worth Regional Office issued a subpoena to Massey in February 2013 seeking, among other things, materials related Massey's work on behalf of Chimera. According to the SEC's court papers, Massey played an important role in assisting Chimera with its business development and promotional efforts. Massey's work included assisting Chimera's executives in their attempts to establish a business relationship with a certain company based in a foreign nation, and providing draft press releases for review and approval by Chimera's executives.
Please note that the Seeking Alpha articles referenced below have been updated at their source to reflect that the accuracy of the articles is disputed.

I tried to visit Chimera Energy's website ( to see if the company had issued any updates lately, but the website is not active.  Another website referenced in Chimera's press releases,, returns a message from
NOTICE: This domain name expired on 7/17/2014 and is pending renewal or deletion.

Cases Before Ohio Supreme Court Have Major Financial Implications

The two cases before the court are battles over mineral rights – who owns the potentially valuable stuff below the surface, in these cases, oil and gas. 
Most landowners have both surface and mineral rights, but sometimes the two have been severed, meaning one owner controls the surface, while the other controls what’s beneath. Ohio law says if you own mineral rights but don’t exercise them for 20 years, the surface landowner can claim them back. 
But then what does it mean to exercise your right to a property’s minerals? 
That’s what the two Supreme Court cases are about. They both involve mineral rights owners from long ago, trying to reassert their ownership over the objection of surface landowners. The land in question is in Harrison County, part of the Utica shale gas boom, so the question of who owns what has big financial implications.
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14 New Utica Shale Permits on Latest Report

The Ohio Department of Natural Resources has released the latest weekly update on permitting activity in the Utica shale.  After passing 1,000 wells drilled 2 weeks ago and 500 wells producing last week, there were no new milestone numbers reached on this report.  Permitting activity keeps rolling along, though.

14 new permits were issued for horizontal drilling in Ohio's Utica shale last week.  5 of those permits went to Hess Ohio Developments for Belmont County wells.  4 more were issued to Chesapeake Energy for Harrison County sites, while 2 permits each were issued for wells in Guernsey and Noble counties.  The final permit was for Chesapeake's Keystone Trust 34-10-3 1H well in Jefferson County.

With this activity added on, there have now been 1,457 permits issued for Utica shale drilling in the state.  1,038 wells are drilled and 549 are producing.  The Utica rig count is 46.

View the report by clicking here.

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Landowners in Crawford and Richland Counties Take in Information on Pipelines

From the Mansfield News Journal:
More than 50 landowners from across Crawford and Richland counties were informed Tuesday evening that there's not much they can do about a natural gas pipeline that's planned for their area, possibly their very property. 
But neither is the coming process of welcoming a giant pipeline to the neighborhood as grim as it might appear. 
That was the message from two eminent-domain attorneys from Columbus who organized a meeting in the northern Crawford County village of New Washington, at the Knights of Columbus hall. Yes, they were there seeking new clients, and likely to get some, as surveyors for Energy Transfer's proposed Rover pipeline, which would transport natural gas from the Marcellus and Utica shale gas plays in Pennsylvania and eastern Ohio through this region, and ultimately to Canada, are already surveying. 
Michael Braunstein and Bill Goldman, of Goldman & Braunstein, LLP, noted that there are plenty of other attorneys who do what they do. "But you will need representation," Goldman said.
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Stark State College's Well Site Training Center Goes Live in Canton

From the Alliance Review:
A $2.3 million Well Site Training Center was opened Thursday by Stark State College as Phase I of its downtown Canton expansion. 
The 7,000-square-foot site is located at the corner of Cherry Avenue and Third Street Southeast, which Para Jones, president of the college, said during her remarks at the grand opening is a perfect location as it connects with U.S. Route 30, state Route 43 and I-77. The purpose of the site is "to make us the shale capital," Jones said. 
"This facility showcases our mission of creating public/private partnerships to provide students with state-of-the-art education and training and prepare the workforce needed by business and industry in the region," Jones explained. 
She also pointed out that once a state appropriation from Gov. John Kasich of $10 million was given to the college about two years ago for the expansion, Kathleen Steere, coordinator of the college's gas and oil programs, seized the opportunity and went to work to leverage the funding by partnering with three other colleges, bringing in another $14.9 million in U.S. Department of Labor grant funds. In addition, Stark State will receive $2.76 million to provide the ShaleNET credit curriculum in the Utica Shale region. The college's three partners in the ShaleNET curriculum are Westmoreland County Community College in Pennsylvania, Pennsylvania College of Technology in the Marcellus Shale Region, and Navarro College of Texas, located in the Eagle Ford and Barnett Shale Region.
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Thursday, August 21, 2014

Links for 8/21/14: Methane in Wells Where No Fracking is Taking Place, Ohio Operator Files Lawsuit, and More

Energy in Depth:  Methane in Pike County Water Wells Unrelated to Shale Development   -   "The study began in the summer of 2012 sampled 20 water wells throughout Pike County in various geological formations. Of those 20 wells, four were chosen and monitored monthly for one year to give a solid baseline of water quality for the area.  With 80 percent of the wells testing positive for concentrations of methane, one might assume shale development is taking place in the area. That assumption would be incorrect. In fact..."

America's Natural Gas Alliance:  TVA Approves New Natural Gas Plant, Cites As ‘Best Way to Help Meet Our Cleaner Air Goals’   -   "Thanks to a Tennessee Valley Authority (TVA) decision today, nearly 600,000 homes in the greater-Memphis area will soon be powered by a state-of-the-art and cleaner combined cycle natural gas plant.  The new facility will replace the 55-year-old Allen coal plant, which after a significant environmental review by the TVA board decided that the natural gas option..."

Energy & Commerce Committee:  Abundant and Affordable Energy Fuels U.S. Gains in Global Manufacturing   -   "A new study from Boston Consulting Group shows the U.S. is making significant progress in regaining its position as the world’s manufacturing leader. The report suggest the gap between the U.S. and China is closing as China and other nations are losing their competitive edge over the U.S. thanks in large part to our abundant supply of affordable energy. BCG categorizes China as a nation “under pressure” as..."

Fuel Fix:  BP Names CEO of U.S. Onshore Business   -   "BP has tapped David Lawler, a former top executive at an independent oil producer, to lead the U.S. onshore unit it plans to separate early next year.  As CEO of BP’s U.S. lower 48 onshore business, Lawler, 46, will spearhead the London oil company’s efforts to make its unconventional drilling business more flexible and profitable – a challenge in..."

Columbus Business First:  Injection Well Operator Sues Critic Over Billboards   -   "A company that owns underground injection wells has sued a Coshocton man over the Ohio resident’s billboards opposed to them.  Buckeye Brine says Michael Boals’ billboards use false and defamatory language, the..."

The Motley Fool:  Is American Energy Dominance the New Normal?   -   "According to the Energy Information Administration, the United States in April produced 13.63 million barrels per day, or BPD, of oil and natural gas liquids. This was 2 million BPD more than Saudi Arabia -- the largest difference ever recorded between the two nations. To understand just how remarkable that is, consider this: Prior to 2008 Saudi Arabia routinely beat America by 2 million to 3 million BPD per month. Only a 67% increase in U.S. oil production since 2008 has allowed the complete reversal..."

InsideClimate:  Wall Street Warned About $91 Billion of High-Risk Oil Megaprojects   -   "Critics of environmentally risky oil projects proposed for deep undersea and Canada's tar sands got new ammunition last week when a report labeled those ventures and others as the industry's most financially questionable pursuits.  The new report, published by the Carbon Tracker Initiative (CTI), identifies a host of drawing-board oil projects that would cost..."

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Musings on the Second Great Recovery Experiment and the Promise of Natural Gas: Ron Muhlenkamp

Source: Tom Armistead of The Energy Report (8/21/14)

Like the economy as a whole, the Muhlenkamp Fund is still struggling to extricate itself from the morass of the Great Recession. Ron Muhlenkamp, founder of Muhlenkamp & Co. Inc., sees a forerunner to this downturn in the 1980–82 recession. In this interview, he tells The Energy Report how good policy ended the earlier slowdown and set the stage for two decades of prosperity. He also explains why bad policy is hampering recovery now, and what this means for investors.

The Energy Report: Ron, in an online seminar in June, you compared the government's response to the 2008 financial panic and recession with its response to the recession of 1980–82. How are those recessions comparable?

Ronald Muhlenkamp: We've had 12 recessions since World War II. We had a serious recession in 1973–74, and I've done a lot of work on recessions ever since. The 2008 recession shared a distinction with the 1980–82 recession: Each, at the time, was the most serious recession since the Great Depression of the 1930s. Each was preceded by conscious government policies that were meant to improve the economy. In the 1970s, we printed money in an attempt to negate periodic recession. We got inflation. In the early 2000s, we encouraged—mandated—the writing of mortgages to people with low incomes. We got a housing bubble. We then responded to these two recessions with very different policies, and the policies have produced different results. It is important for us to learn from that.

The 1980–82 recession followed a decade of high inflation during which an accommodative Federal Reserve was printing money. By 1979 inflation had reached 13%, and most economists believed it was intractable, that it was going to be 10% or more going forward.

Jimmy Carter appointed Paul Volcker chairman of the Federal Reserve, and Volcker said he was going to break the back of inflation by printing money at a 6% rate. Conventional economists responded by saying, "If inflation is 10% and you print money at only 6%, you'll have a minus-4% real gross domestic product, and you'll have a very serious recession bordering on depression." Volcker said, "I'm going to do it anyway." Within three years, inflation went from 13% to 3%.

Many economists argued at the time that the U.S. was a slow-growing economy; that the economy was mature, and the like. What Volcker and, later, Ronald Reagan, proved is that bad policy caused the distortion. The first part of the solution was Volcker saying, "I'm going to restrict the growth of the money supply." The dollar was weak, which is why Carter appointed him. What Volcker proved is that real growth under proper policies is stronger than inflation; that you could, in fact, lick inflation by restricting the growth of the money supply.

When Reagan was elected, we were in recession. To get the economy going again, he removed some of the burden from the employers and the general public by cutting tax rates and regulations. He essentially viewed the employer as a partner with government in getting people back to work. I refer to this period as the first great economic experiment of my adult lifetime.

The economic forecasts from the 1970s all predicted continued low growth and high inflation. Reagan and Volcker changed policies, and what we got was low inflation and high growth through the 1980s and the 1990s. That was the first great experiment: These two men led a change in monetary policy and fiscal policy that gave us good growth for a generation.

I think the reason the 2008 recession was so serious was that in 2005 and 2006, the Fed was raising interest rates and tightening monetary policy a little bit, but stopped short of triggering a recession. Every recession since World War II has been triggered by—not necessarily caused by—the Fed raising interest rates. This time, it raised the rates but stopped at 5.25%, trying to get a soft landing.

Behind that, it was mandated that if you wanted to be in the mortgage brokerage business, you had to make more loans to people with low incomes. The Fed accommodated this with monetary policy, and accountants instituted a mark-to-market rule on asset holdings, including for regulatory purposes, banks and insurance companies. In 2007 and 2008, as the price of bonds came down, banks and insurance companies, by regulation, had to either raise more equity capital or sell off their bonds. Of course, in selling their bonds, they drove the prices even lower.

We think the recession ended up being deeper and longer than it would have been without these two changes. In the middle of the 2008 recession, and coming out of it, the Fed continued to print money. The government also told employers that regulations were going up, their taxes were going up, and that they were going to have to pay for increased prices on healthcare.

In our latest newsletter (Muhlenkamp Memorandum #111), we show what employment costs have done. In January of every year, every one of our employees gets a W-2 form that shows that employee's gross pay, deductions, and net pay. We also give them a statement showing the employee cost to the company, including FICA and health insurance. Ignoring pension and profit sharing, in 1996, just the mandated taxes and contributions to Social Security, plus healthcare insurance for employees, cost the employer $1.53 for every $1 an employee took home. In 2014, that ratio is $1.94 to the employer per take-home $1. Employer costs have gone up $0.41 (which is 27%). Most of that has been in healthcare costs, but the point is that it's there.

It's far more expensive to hire someone today than it was back in 1996, or in 2006. We believe that is why employment growth in the latest expansion has been so slow. As employers, we know healthcare costs are going up and insurance costs are going up, but we don't know by how much. We've been promised that our taxes are going up. The same is absolutely true of regulation. Half of the Dodd-Frank rules haven't been published yet. We know there are more rules coming.

The 1980–82 recession was the first great economic experiment; I call 2008 the second great economic experiment. We are seeing what happens when, coming out of a recession, you flood the economy with money and promise employers that their costs are going up. What we've seen is a subpar response. We have seen about 2% growth coming out of this recession. There was never really a catch-up. Of course, the population grows about 1%, and, historically, we've gotten about 2% productivity. This time, we're getting about 1% productivity. The data is out there for those who choose to look.

Our company just got the bill for our health insurance for next year, and the quote is up 19%. Our taxes are going up and we know more Dodd-Frank regulations are coming. As a businessman and an employer, it's very hard for me to justify hiring people or putting money out for capital expenditures when these increasing costs have been promised.

TER: Which specific metrics in the two recessions are directly comparable?

RM: Many recessions aren't visible in consumer spending. The consumer cuts back on long-term stuff, like housing and autos; those are cyclical purchases. But people don't cut back on food. They don't cut back on what they spend for utilities; they still heat their houses.

Wednesday, August 20, 2014

Report: Over 20,000 Jobs Created by Oil & Gas Industry So Far This Year

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Youngstown Oil & Gas Conference Cancelled Due to Lack of Interest

From the Youngstown Vindicator:
YOUNG had three successful years, according to the chamber, but this year there was a decline in participation. 
“Some of the major oil and gas companies have reprioritized their areas of exploration, and there are other industry delays overall,” Vice President of Marketing and Business Services for the chamber Kim Calvert said in a statement. 
“We hold our events to the highest standards and did not feel that we could move forward with this particular event if it was going to be anything less than it has been the past three years or not meaningful or valuable to participants and attendees.”
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Shale Boom Credited With Dropping Crude Oil Prices

From The Economic Times:
In a chat with ET Now, Narendra Taneja, Energy Expert, shares his view on oil prices. Excerpts:
ET Now: How are you looking at the Brent prices for 2014? It is down nearly 7.5% and still sliding.
Narendra Taneja: The Brent may slide even further. The demand is now growing and at the same time the market is very well supplied. Of course, the game changer has been America's Shale oil and Shale gas revolution which is the biggest consumer of hydrocarbon.
The US is no longer as dependent on imports as it used to be and increasingly you would see the US bringing down its dependence on oil imports and gas imports, particularly from the Middle East. So, what has happened is that their oil is now available for other fast growing economies such as India and China, and demand from India and China is not really going up, which means that plenty of oil is available in the market for others to consume it.
Click here to read the whole interview. 

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EnerVest Expresses Optimism Over Ability to Capitalize on Utica Shale Oil Window

From the Youngstown Vindicator:
EnerVest has found in Tuscarawas and Guernsey counties that by using more water and sand in the fracking process, there can be success in the oil-rich portions of the Utica, McKinney said. 
“Oil has different molecules than gas,” he said. 
Companies were using 200 feet to 250 feet spacing between injections, but for the oil area it needs to be shorter, about 150 feet, McKinney said. 
“It allows the oil to move more freely toward the well bore,” he said. 
If the tests for EnerVest are successful, there will be companies interested in leasing land in Trumbull and Stark counties, McKinney said. Trumbull and Stark counties are thought to be areas with oil-rich shale. 
The sections of the Utica can be divided into the dry-gas area, which is located around Belmont, Harrison and other counties in the southeast part of the state. Then there is the wet-gas area, which includes Carroll County and the sections of Ohio where most of the drilling activity has taken place. Finally, there is expected oil-rich section on the edge of the shale, which no company has successfully exploited at this time. 
The results of EnerVest’s first oil test wells will become public soon with the release of Ohio Department of Natural Resource’s second-quarter production reports. 
The results thus far have shown the new technique will produce economic and even “very profitable” wells, McKinney said.
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Tuesday, August 19, 2014

Gates Mills Community is Fighting About Fracking

From the Cleveland Plain Dealer:
Gates Mills Village Council refused on Tuesday to consider residents' petition for a bill of rights to ban additional fracking in the village. 
Residents formed the Citizens for the Preservation of Gates Mills when Mayor Shawn Riley announced his plans for villagers to pool their land to prepare for gas wells in the village. The group has gathered more than 130 signatures to have a bill of rights placed on the November ballot that would outlaw all new wells in the village. 
Council was supposed to vote on Tuesday whether to submit the issue to the Cuyahoga County Board of Elections. Council has until Sept. 6 to do it, but members "need more time to review the issue," Councilman Will Barnes said, refusing to comment further. 
On Friday, Law Director Margaret Cannon told petitioners they do not have enough valid signatures.
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ODNR Responds to Concerns Over Brine Disposal Orders

From Business Journal Daily:
The Ohio Department of Natural Resources issued orders in January giving two Pennsylvania companies authority to dispose of brine at the Northstar Disposal Well #1, the well that officials say was responsible for a series of earthquakes that shook the Mahoning Valley in 2011 and early 2012.
Some were quick to sound off with grandstanding statements about how irresponsible it was for the ODNR to allow companies to bring frack waste to this site.  But the ODNR explained:
The separate orders to modify the two companies’ disposal plans each listed Northstar among the sites each had previously received approval to use. The orders approved adding the Barnesville #1 Well in Warren Township, Belmont County, to both companies’ lists. West Penn Energy’s order added the Kleese #1 and #2 wells in Vienna Township, Trumbull County, as well as sites in Guernsey and Morgan counties. 
The Northstar well, which had been operated by D&L Energy, was discovered to have triggered a series of earthquakes from March 2011 to January 2012. A moratorium has been in place since 2012 on injection wells within a five-mile radius of Northstar. 
The moratorium remains in place and Northstar is regularly inspected, ODNR spokesman Mark Bruce assured. 
Despite the moratorium, the Northstar well still has a legal permit, Bruce explained; as such, if a company requests the well in the event it is somehow reopened -- something Bruce does not see as likely in the near term -- ODNR can’t refuse the request. 
“Revoking a permit is a permanent thing. It is a permanent thing that cannot be undone,” Bruce added. “We’ve never felt that revoking the permit is the proper course of action,” in the event technology would be developed to permit the safe use of the well. That isn’t seen as likely in the near future but revoking the permit is “not the proper course of action either,” he said.
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Shell Divests U.S. Onshore Gas Assets in Pinedale and Haynesville, Adds Acreage in Marcellus and Utica

Royal Dutch Shell plc (“Shell”) announces today two separate transactions whereby the company will exit its Pinedale and Haynesville onshore gas assets in exchange for approximately $2.1 billion of cash, plus additional acreage in the Marcellus and Utica Shale areas in Pennsylvania.
In one agreement with Ultra Petroleum, Shell will acquire 155,000 net acres in the Marcellus and Utica Shale areas in Pennsylvania and receive a cash payment of $0.925 billion from Ultra in exchange for 100 percent of Shell’s Pinedale asset in Wyoming, including associated gathering and processing contracts, subject to closing.
In a separate agreement with Vine Oil & Gas LP and its partner Blackstone, Shell has agreed to sell 100 percent of its Haynesville asset in Louisiana, including associated field facilities and infrastructure for $1.2 billion in cash, subject to closing.
“We continue to restructure and focus our North America shale oil and gas portfolio to deliver the most value in the longer term. With this announcement we are adding highly attractive exploration acreage, where we have impressive well results in the Utica, and divesting our more mature, Pinedale and Haynesville dry gas positions,” said Marvin Odum, Shell’s Upstream Americas Director.
The Shell net production from Pinedale in the second quarter 2014 was 190 million standard cubic feet per day (mmscf/d) of dry gas (32 thousand barrels of oil equivalent per day (kboe/d)). During the first half of 2014, Ultra’s net production from the assets Shell is acquiring in Pennsylvania averaged 109 mmscf/d (19 kboe/d).
“We first entered the Pinedale Anticline in 2001, and I am proud of our operational excellence, community engagement, and leadership in responsible energy development over that time,” said Odum.
Shell’s Pinedale asset (which includes 19,000 net acres of leasehold interest, 1,108 gross wells and associated facilities, and an average of 0.7 percent overriding royalty interest in 11,500 acres) will be exchanged for cash and Ultra’s 100 percent interest in the Marshlands area (63,000 net acres) as well as its entire interest (92,000 net acres) in the Tioga Area of Mutual Interest (AMI), an unincorporated joint venture with Shell.  After completion of this transaction, Shell will have a 100 percent interest in the Tioga AMI.  The agreement is effective 1 April 2014, and is expected to close this year.
Shell’s Haynesville asset includes 107,000 net acres in in north Louisiana.  The transaction includes 418 producing wells, 193 of them operated by Shell. As of 1 July 2014, the gross production from the Haynesville asset was approximately 700 mmscf/d of dry gas, with Shell’s net working interest share at approximately 250 mmscf/d (43 kboe/d).  The agreement is effective 1 July 2014, and is expected to close in the fourth quarter of this year.
“We very much appreciate the support we have had in north Louisiana, and we will continue to operate in the state, as we have for decades, through our downstream, retail, midstream, and New Orleans-based deep-water operations,” said Odum.

Utica Shale Blows Past Another Milestone in Latest Weekly Report

Ohio's Utica shale went flying past yet another milestone number in the latest weekly permitting update from the Ohio Department of Natural Resources.  This week the number to be reached was 500 producing wells.

19 new permits were issued last week.  8 of those were for Harrison County, 7 for Belmont County, and the remaining 4 for Carroll County.  10 of those permits were issued to Aubrey McClendon's American Energy Utica.

These 19 permits bring the cumulative total to 1,446.  The wells drilled number has grown to 1,025 after crossing over the 1,000 mark last week.  And after inching closer to 500 wells producing on last week's report, 52 new producing wells were added this week, bringing the new total of producing wells to 547.  The Utica rig count is 46.

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Monday, August 18, 2014

ODNR Reviews Updates to Mining’s Water Replacement Rules

CARROLLTON, OHIO: After pressure from landowners and the US Department of the Interior, the Ohio Department of Natural Resources (ODNR) has updated the Procedural Directive that dictates if and how domestic and agricultural water sources are replaced when coal mining impacts water wells or springs.

On September 4, Cheryl Socotch, Administrator of Remining and Field Hydrology at ODNR, will review the regulatory requirements, highlight recent changes, and the process for initiating a water replacement investigation. She will also discuss options for landowners to better document their premining water quality and quantity and answer general questions. Ms. Socotch will not be able to comment specifically on individual landowner issues or any pending coal permit applications.

“The initial 9,600 acre phase of the proposed Rosebud Carrollton Mine has already identified dozens of landowners who will either lose their water or have a likelihood of negative groundwater impacts. It is critical that people understand ODNR’s water replacement process, its shortcomings and the landowner’s responsibility in that process.” said Paul Feezel Chair of Carroll Concerned Citizens who will be hosting the meeting.

Future plans from Rosebud include mining North and very near the Village’s water well system and the abandoned Wynn/Tripp mine on SR 171. This water well field is considered to be a backup source for landowners at risk of water loss from the first phase of mining planned for South of the Village.

Feezel added, “We only have to look to nearby Toledo or Charleston, WV to see the consequences of impacting municipal water systems like Carrollton’s. In the Freedom Industries case, the leak of chemicals used in coal washing has a local connection. Clifford Forest, Freedom’s owner, also owns Rosebud Mining Company.”

The meeting will begin at 7:00pm at the Church of Christ, 353 Moody Ave. Carrollton. It is free and open to the public.
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Friday, August 15, 2014

1st NRG Reports First Utica Shale Test Well Coming in September

DENVER, CO / ACCESSWIRE / August 14, 2014 / 1st NRG Corp. (OTC Pink: FNRC) (PINKSHEETS: FNRC), is an exploration and production company currently engaged in the development of natural gas producing properties in the United States.  Headquartered in Denver Colorado, our focus has been centered in the Powder River Basin, where we hold a working interest in 42 producing wells, 8 permitted locations and 3,300 undeveloped acres of coal bed methane reserves.  The Company has expanded its activities into one of North America’s most exciting shale plays participating in a development of prospective acreage in SE Ohio encompassing approximately 7,000 acres.
At Clabaugh Ranch we have been slowly advancing toward the highly anticipated initial production from the 42-15 well drilled in December 2013.  We are awaiting approval of our applications to use the ARID tool for water disposal, power has been installed and we are exploring our options to transport our natural gas production. 
In Ohio, the permit for the vertical test well has been approved and the drill pad is being constructed.  This well will be drilled through the Point Pleasant/Utica Shale complex to approximately at 7,600 feet in depth.  Pending weather and rig availability, we expect the test well to be drilled in September 2014.  1st NRG Corp holds a 20% working interest in the development and is carried in the drilling of the vertical test well.
The Company reported a net loss of $403,150 or $0.438 per common share for the six month period ended June 30, 2014 compared to a $575,026 net loss or $0.646 per common share for the six month period ended June 30, 2013.
On May 12, 2014, FINRA announced the Company’s declared special dividend to qualified shareholders holding a minimum of 100,000 common shares.  The dividend consisted of one (1) Series "E" Preferred Share to qualified shareholders of record at 4/28/2014 for each 100,000 shares of common stock held.  Each Series "E" Preferred converts to common shares at par - $0.00001.  Shares of Series E Preferred Stock may not be converted into shares of Common Stock for a period of: a) six (6) months, if the Company voluntarily or involuntarily files public reports pursuant to Section 12 or 15 of the Securities Exchange Act of 1934; or b) twelve (12) months if the Company does not file such public reports.  The Series E Shares have a face value of $2.50 per share and do not have voting rights. At June 30, 2014 there were 183,969 Series "E" Preferred Shares outstanding.
The Company will need additional capital to facilitate its acquisition and development activities and as part of the Company’s growth Strategy, we plan to offer a private placement of up to 1,000,000 shares or $2,500,000 of our Series "B" Preferred Shares at a price of $2.50 per share.  This announcement is for informational purposes only and is not a solicitation or offer to sell the securities represented by our Series "B" Preferred Shares. The securities will be offered only to accredited investors via a written offering circular and only in jurisdictions where the sale is allowed.    The Series "B" and Series "E" share the same attributes in that a share of either is convertible into 100,000 shares of the Company’s Common Stock, have liquidation rights and are non-voting.
Effective June 23, 2014 the Company effectuated a reverse stock split comprised of one share of newly issued common stock for each 20,000 shares of common stock  held as of the effective date.  After the reverse split the Company now has 919,828 common shares outstanding.
For more information, please visit http;//,
Forward-Looking Statements
Forward-looking statements in this release are within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934.  A statement identified by the words "expects," "projects," "plans," "feels", "anticipates," and certain of the other foregoing statements may be deemed "forward-looking statements."  Although 1st NRG Corp. believes the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this press release.
Brad Holmes
Energy IR:
(713) 654 4009

SOURCE: 1st NRG Corp.

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