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Monday, October 31, 2016

Oil and Gas Producers Inching Towards Tapping "Drilled But Uncompleted" Wells

From the Wall Street Journal:
U.S. oil and gas companies have drilled thousands of wells they have yet to tap, creating a ready reserve of fuel that could surge onto the market when energy prices recover. 
As producers report quarterly earnings during the next few weeks, a question looms: When will they start exploiting these “drilled but uncompleted” wells? 
While the industry often has an inventory of drilled wells awaiting completion, the backlog has grown significantly during the past two years as companies such as Continental Resources Inc. and EOG Resources Inc. deliberately delayed tapping wells to wait for higher energy prices.
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Even as Activity Has Slowed, Ohio Continues to Feel Benefits of Shale Boom

From the Marietta Times:
At times over the past few years it may have felt like Ohio’s shale revolution was over before it had even begun. The number of drilling rigs exploring for oil and natural gas has fallen by more than 70% over the last two years. Some energy companies even called it quits or faced bankruptcy. But make no mistake, the shale revolution has continued and it’s having an extremely positive impact on the state.

The number of rigs drilling for oil and gas in Ohio’s Utica shale is just a third of what it was in 2015, but overall production continues to grow. Monthly natural gas production has increased from just 0.1 billion cubic feet per day (Bcf/d) at the close of 2012, to more than 3.5 Bcf/d in June of this year. 
Energy companies in Ohio have gotten very good at what they do. The amount of natural gas produced from each new Utica well is now six times what it was for a well drilled in 2012. Ohio’s shale industry has proven its staying power. 
We have now entered a new phase in the shale revolution. It has already brought drilling jobs and pipeline and processing-plant construction jobs. It’s also creating jobs building new natural gas power plants and electricity transmission lines that will replace the state’s aging fleet of coal plants. In just the past five years, the Ohio Power Siting Board has approved 5,000 megawatts of new natural gas power capacity — enough capacity to power five million homes. These new power plants — many of them coming in southeast Ohio’s shale counties — represent billions of dollars in new investment and thousands of jobs that will be around for decades.
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Thursday, October 27, 2016

OOGA Representative Anticipates Increased Activity in Columbiana County

From the Morning Journal:
It may only be a matter of time before oil and gas activity increases again in Columbiana County. 
That was the message delivered by Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, who attended this week’s Columbiana County Port Authority meeting. He said oil and gas prices drive the market, and as those prices increase, so will drilling development in the county, he told the board during a brief presentation. 
The county was among the first in Ohio to experience a leasing boom in 2010 from companies wanting to drill for oil and natural gas in the region’s Utica shale reserves. Leasing activity continued until about 2013, followed by development, but all of that began to slow considerably after the increased supply resulted in a sharp decline in oil and gas prices, 
“There were some things Columbiana County could not control,” such as the drop in prices, he said.
The whole article can be read by clicking here. 

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Bill to Protect PA Landowners from Royalty Schemes Appears to be Dead For Now

From StateImpact Pennsylvania:
A bill aimed at addressing allegations natural gas drilling companies are cheating Pennsylvania landowners out of royalty money appears to be dead this legislative session. 
HB 1391 was introduced following years of complaints some drillers charge exorbitant fees for processing gas. In Pennsylvania’s northern tier, people have received notices their royalty account has a negative balance, saying they owe thousands of dollars to drillers. 
“I’m very disappointed for the landowners,” says the bill’s prime sponsor Garth Everett (R- Lycoming). “All we were asking for was a chance to get it to the floor.” 
The measure was scheduled for second consideration in the state House earlier this week, but did not come up for a vote. It reappeared again on Monday’s calendar, but House GOP spokesman Steve Miskin said Friday afternoon it’s been pulled from the schedule. 
“Everybody has been diligently trying to come up with a fair resolution. There’s not a single member who doesn’t understand why this bill was crafted,” says Miskin. “Clearly, we haven’t gotten to that point yet.” 
Every bill needs three public airings in both chambers. With HB 1391 off Monday’s schedule, the waning number of voting days in the House and Senate won’t allow enough time. There were rumors session days could be added to the calendar, but Miskin says he’s not aware of any discussions.
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Stone Energy Will File for Pre-Packaged Bankruptcy

From Offshore:
Stone Energy has announced steps toward filing for Chapter 11 bankruptcy protection by Dec. 9, according to a report in The Daily Advertiser in Lafayette. 
Spokeswoman Jennifer E. Mercer said that Stone, burdened with more than a billion in debt during a lingering downturn in energy prices, will sell its holdings in Appalachia for $350 million and has made agreements with senior bondholders, creditors and others to restructure its operations. 
“The company will continue to work,” Mercer said. “Stone is open for business and operating. People are showing up and working and getting paid; customers are being served. This will have no impact on day-to-day business.” 
Mercer said the company and other parties involved have developed a pre-packaged reorganization plan, which should help Stone navigate Chapter 11 proceedings and “come out on the other side,” perhaps as early as mid-2017. The agreement would relieve the company of some $850 million in debt and reduce its annual interest payments by $46 million.
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Obama Administration Sides with Activists on Methane Rule, Moves to Put Small Producers out of Business

by Katie Brown, Energy in Depth

The Obama administration has released its final Control Techniques Guidelines (CTG) for oil and gas production, and as we’ve noted before, it is officially going through with its plan to eliminate an exemption for low producing oil and gas wells (marginal wells), even though it originally intended to exempt these wells due to the enormous economic consequences and the fact that their emissions are negligible.
It was this elimination of the exemption for marginal wells specifically, which caused the anti-fracking group, Clean Air Task Force (CATF), to praise EPA.  As Politico reported yesterday after the decision was made official,
The green group Clean Air Task Force praised EPA for removing an exemption for lower-producing wells from the draft guidelines it released earlier this year. The final version of the rules, still not officially posted on EPA’s website, seeks more data on those lower-producing wells before deciding how to proceed.
“It’s critical that EPA move forward swiftly to close this loophole and ensure the guidelines provide comprehensive protection for communities across the country,” CATF advocacy director Conrad Schneider said.
CATF, in their efforts to stop fracking across the country, specifically lobbied EPA to remove the planned exemption for marginal wells based on dubious science (more on that in a minute).
The implications of this decision will not be marginal, however. Thousands of family-owned businesses across the country operate marginal wells — smaller wells that produce 15 barrels or less per day, or 90,000 cubic feet or less of natural gas per day. These businesses have faced the biggest challenges in today’s low commodity price environment; now under EPA’s rules many of these small companies could essentially be wiped out.
The Interstate Oil and Gas Compact Commission’s (IOGCC) released a report last year, which finds the loss of marginal oil and gas wells developed in 2015 would trigger an estimated direct loss of 57,560 jobs in the oil and gas sector and $4.4 billion in direct earnings within the survey’s 29 states. Yet this report actually only looks at “stripper wells,” which are wells producing 10 barrels or less per day and 60 thousand cubic feet or less of natural gas per day. So if you were to evaluate job and GDP losses from eliminating all marginal wells, the impact would be even greater.
According to National Stripper Well Association Chairwoman Darlene Wallace,
“These new rules will cripple stripper and marginal well owners and operators, and on top of historically low oil prices, we are looking at total disaster. By requiring the addition of new costly equipment requirements and expensive leak detection the economics within the oil and gas industry as a whole will be fundamentally changed, severely and forever.”
Rules will impose prohibitive costs on vulnerable small producers already struggling  
Not only did EPA decide not to exempt marginal wells from its fugitive emissions program in the CTG, it is also requiring that producers install new pneumatic control technologies, even though the current ones on marginal wells aren’t typically active and therefore emissions are negligible. This will impose an enormous cost on small producers that will have little-to-no environmental benefit.
EPA is also requiring the installation of vapor recovery units on all storage tanks. Many of these tanks are too old to implement new technologies, which means small producers will have to replace these tanks entirely – and the cost of doing so is prohibitive.
As IPAA rightly stated in its comments to EPA,
“marginal well facilities should be excluded from the scope of the CTG. Clearly, the burden of adding capture equipment – and certainly the burden of replacing storage vessels – cannot be readily borne by marginal well operations.” (emphasis added)
EPA uses “unconventional” data, pushed by CATF and other activist groups, to justify decision
In its comments to EPA, CATF quoted a study spearheaded by the Environmental Defense Fund (EDF), Zavala-Araiza et. al, which CATF says shows that “lower producing wells can have significant emissions.” CATF would have you believe, counter-intuitively, that small sites can emit the same volume as larger sites.
But Zavala-Araiza et. al actually changes the definition of “super-emitter” in order to make this claim.  The researchers of the study define “functional super-emitters” not as sites that emit a lot of methane but as sites where a certain percentage of that well’s methane may be leaking.  From the report:

9 New Permits Issued for Utica Shale Drilling as Rig Count Declines Again

The Ohio Department of Natural Resources permitting report for last week shows that nine new permits were issued for Utica shale drilling, all of them for wells in Belmont County.  Eight of the nine permits were for Rice Energy wells, with the remaining one going to Ascent Resources.

Meanwhile, the rig count continued its decline for the third straight week, falling to 16.

There are now 2,277 permits issued, 1,834 wells drilled, and 1,414 wells producing.

View the report below or by clicking here.


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Tuesday, October 25, 2016

New Study: Probability of Environmental Impacts from Fracking Chemicals is Low

From Duke University:
Naturally occurring brines, not man-made fracking fluids, account for most of the wastewater coming from hydraulically fractured unconventional oil and gas wells, a new Duke University study finds.

“Much of the public fear about fracking has centered on the chemical-laden fracking fluids -- which are injected into wells at the start of production -- and the potential harm they could cause if they spill or are disposed of improperly into the environment,” said Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment. 
“Our new analysis, however, shows that these fluids only account for between 4 and 8 percent of wastewater being generated over the productive lifetime of fracked wells in the major U.S. unconventional oil and gas basins,” Vengosh said. “Most of the fracking fluids injected into these wells do not return to the surface; they are retained in the shale deep underground. 
“This means that the probability of having environmental impacts from the man-made chemicals in fracking fluids is low, unless a direct spill of the chemicals occurs before the actual fracking,” he said.
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Ohio Anti-Fracking Ballot Measures Face Strong Community Opposition in November

by Jackie Stewart, Energy in Depth

With 83 percent of anti-fracking ballot measures in Ohio having failed or been ruled invalid by various courts, it’s certainly fair to say that the Community Environmental Legal Defense Fund (CELDF) has been marginalized.
However, despite the onslaught of defeats, CELDF continues to abuse Ohio cities by pushing anti-fracking ballot measures on them. On Election Day two cities, Youngstown and Waterville, will vote on the so-called Community Bill of Rights.  In response, coalition groups comprised of business leaders, elected officials, and unions are organizing to defeat the measures. In other words, CELDF will once again face strong opposition.
Here’s what you need to know about both ballot measures:
City of Youngstown Issue 4: Community Bill of Rights
Five Times Failed, CELDF Abuses Voters for Sixth Time
If at first you don’t succeed, try six times? That’s the story in Youngstown, where voters will go to the ballot for the sixth consecutive time on “Issue 4” to vote on the Community Bill of Rights – and taxpayers will be footing the bill.
Taxpayers Have Already Spent Tens of Thousands
So far, the measure has cost taxpayers over $80,000 just to go on the ballot for the first five defeats. With this upcoming “Issue 4” on the ballot, it’s guaranteed to cost several thousand more.
Campaign Using Children (Again) To Advance Agenda
The Youngstown Community Bill of Rights is, of course, the brain child of CELDF, but it is also being pushed by Frack Free Mahoning Valley, led by Dr. Ray and Susie Biersdorfer. The Biersdorfers were recently at the center of an opinion editorial from the Youngstown Vindicatorentitled “Frick and Frack are Back,” recalling that just a few months ago Susie Biersdorfer was caught attacking me personally, while I was nine months pregnant. In short, to say these activists are fringe environmental extremists or outliers is an understatement.  But as this below flyer shows, they’re at it again, using pregnant women and children as pons in their deceptive campaign:
frackfree
In response, the City of Youngstown Mayor debunked this argument. As the Youngstown Business Journal reported:
As for the safety of the water residents drink, Youngstown is a distributor of the water the Mahoning Valley Sanitary District treats, the mayor pointed out. The accusation that the U.S. Environmental Protection Agency three times in the last three years notified the city “that our drinking water is in VIOLATION of safe drinking water standards [emphasis in committee’s packet]” is another incomplete truth, McNally said. The U.S. EPA notified the city only once,” he said, and the notification was “not related to injection wells or fracking.”
Community Coalition Formed to Stop Issue 4

Rice Energy Closes on Acquisition of Vantage Energy

From a Rice Energy press release:
Rice Energy Inc. (NYSE: RICE) ("Rice Energy") announced today that it has completed the previously announced acquisition of Vantage Energy, LLC and Vantage Energy II, LLC (collectively, "Vantage"). In connection with the closing, Rice Energy has completed the sale of the acquired Vantage midstream assets to Rice Midstream Partners LP (NYSE: RMP) ("Rice Midstream Partners"). 
With this acquisition, Rice Energy now controls approximately 231,000 net acres in the Marcellus and Ohio Utica Shale cores with an inventory of 1,164 drilling locations. Similarly, Rice Midstream Partners possesses one of the largest and most concentrated core dry gas acreage dedications in Appalachia, covering approximately 199,000 acres in Washington and Greene Counties.
Read the whole release by clicking here.

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Ohio First Responders Get Prepared for Emergencies at Shale Safety Institute 2016

From The Daily Jeffersonian:
For the third year in a row, Belmont College welcomed local first responders to Shale Safety Institute 2016, a partnership between Belmont College and Hess Corporation. More than 40 fire and EMS stations were represented at the event which was designed to prepare local emergency agencies to respond in emergency situations, including incidents in the oilfield in a safe and confident manner.
“Energy development in the Ohio Valley has presented many great opportunities, including a stronger local economy and incredible advancements and research. With this development has also brought a heightened awareness regarding safety issues.” said Dr. Paul Gasparro, Belmont College president. 
He went on to say, “We are so grateful to Hess Corporation for their commitment to the local community and our first responders. Through the Shale Safety Institute, first responders and emergency service personnel are receiving the highly relevant training and education they need to be able to respond to oilfield related incidents and keep our communities safe.” 
“We’re proud to say that this is our third year of our partnership with Belmont College to host the Shale Safety Institute. We have a safety-first culture where our ultimate goal is zero incidents. First responders are critical to this community and we hope this training provides them with some of the tools they would need to respond in the event of an oil and gas emergency,” said Rob Williams, Hess manager of operations, Utica.
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Monday, October 24, 2016

Gulfport Energy Corporation Provides Third Quarter 2016 Operational Update and Schedules Third Quarter 2016 Financial and Operational Results Conference Call

OKLAHOMA CITY, Oct. 17, 2016 (GLOBE NEWSWIRE) -- Gulfport Energy Corporation (NASDAQ:GPOR) (“Gulfport” or the “Company”) today provided an operational update for the quarter ended September 30, 2016 and scheduled its third quarter financial and operational results conference call.  Key information for the third quarter of 2016 includes the following:
  • Net production averaged 734.1 MMcfe per day, a 13% increase over the third quarter of 2015 and a 10% increase versus the second quarter of 2016, exceeding Gulfport’s previously provided third quarter of 2016 guidance of 685 MMcfe per day to 705 MMcfe per day.
  • Realized natural gas price, before the impact of derivatives and including transportation costs, averaged $2.10 per Mcf, a $0.71 per Mcf differential to the average trade month NYMEX settled price.
  • Realized oil price, before the impact of derivatives and including transportation costs, averaged $41.81 per barrel, a $3.13 per barrel differential to the average WTI oil price.
  • Realized natural gas liquids price, before the impact of derivatives and including transportation costs, averaged $13.98 per barrel, or $0.33 per gallon.
Third Quarter Production and Realized Prices
Gulfport’s net daily production for the third quarter of 2016 averaged approximately 734.1 MMcfe per day. For the third quarter of 2016, Gulfport’s net daily production mix was comprised of approximately 86% natural gas, 9% natural gas liquids and 5% oil.
Gulfport’s realized prices for the third quarter of 2016 were $2.67 per Mcf of natural gas, $45.09 per barrel of oil and $0.34 per gallon of NGL, resulting in a total equivalent price of $2.87 per Mcfe. Gulfport's realized prices for the third quarter of 2016 include an aggregate non-cash derivative gain of $22.4 million. Before the impact of derivatives, realized prices for the third quarter of 2016, including transportation costs, were $2.10 per Mcf of natural gas, $41.81 per barrel of oil and $0.33 per gallon of NGL, for a total equivalent price of $2.35 per Mcfe.

U.S. Oil Output on the Rebound as Rigs Spring Back into Action

From Bloomberg:
Increased drilling by shale producers buoyed by higher prices will slow the decline in U.S. crude production, a government forecast showed. 
The Energy Information Administration raised its outlook for U.S. crude production next year, which now is estimated to fall 1.6 percent from 2016, compared to the 3 percent decline it predicted last month in its monthly Short-Term Energy Outlook. The forecast released Thursday takes into account a surge in drilling activity as crude prices rose 90 percent from lows in February. 
"There’s growing optimism about shale, especially in the Permian basin," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "It’s the dog that didn’t bark."

The agency boosted its domestic output forecast for next year to 8.59 million barrels a day from 8.51 million projected in September, according to the data. It cut its 2016 forecast to 8.73 million barrels a day from 8.77 million.
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Friday, October 21, 2016

EIA Releases Latest Drilling Productivity Report

Each month the US Energy Information Administration releases its Drilling Productivity Report.  The latest can be viewed at the EIA site by clicking here, although most of the relevant information is contained below.








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Despite Huge Fundraising Flop, CELDF Still Pushing for More Lawsuits in Ohio

by Jackie Stewart, Energy in Depth

The Community Environmental Legal Defense Fund (CELDF) has had a really tough year in Ohio, losing almost every attempt they have made at anti-fracking ballot measures. Despite this fact, the Community Environmental Legal Defense Fund (CELDF) continues to abuse Ohio taxpayers with frivolous lawsuits in an attempt to try to manipulate Ohio laws and place unenforceable measures on local ballots.
But if their last fundraiser is any indication, their efforts aren’t exactly popular with Ohioans. Take a look at the recent $28 per plate CELDF fundraiser in Athens, Ohio, which only had two attendees and three people interested, according to Athens anti-fracking Facebook page.
celdf-athens
It’s not difficult to see why considering that the group’s Ohio organizer Tish O’Dell was caught saying, “If we know the law is wrong, why are we obedient?”  In other words, if you do not agree with a law—any law—the recourse is simply to disobey that law.
While they would like folks to believe their “local” efforts are pure, in reality CELDF and its lawyers are nothing more than a marketing machine focused on lining their own pockets. Since they got involved in local control issue, CELDF’s coffers have swelled to over $1.4 million in assets. However, CELDF’s most recent 2014 tax filings showed that their failed efforts are starting to hurt their checkbook as they lost $113,965 in contributions from the previous year.
One thing that we have learned as these 29 ballot measures have played out in Ohio is that CELDF continues to “tweak” its strategies in the hope that they can manipulate Ohio election laws and procedures. They are at it again, according to the Ohio University student paper,
Dick McGinn, chairman of the charter, followed O’Dell’s speech with a call to action for where the group could go next with its legal battles. To conclude the night, he encouraged the group to start a third new charter, fixing the points it was denied upon previously.
It has become abundantly clear that the only goal of these groups pushing “local control” measures is to cash in on Ohio taxpayers by any means possible, and with such outlandish ideologies like, “If we know the law is wrong, why are we obedient?”
It’s no wonder they can’t hold a successful fundraiser in Ohio. Still, this election season continues to prove that CELDF and the lawyers they work with are only in it for themselves.

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Thursday, October 20, 2016

Permitting Slows and Rig Count Declines Again on Latest ODNR Report

The Utica rig count dropped for the second straight week on the latest permitting update from the Ohio Department of Natural Resources.  After going over 20 for the first time all year two weeks ago, the latest report shows that the rig count is back down to 17.

There were also just two new permits issued last week, both in Belmont County.

2,268 wells are now permitted, 1,827 are drilled, and 1,413 are producing.

View the report below or by clicking here.


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Tuesday, October 18, 2016

Video Tells Story of How Chesapeake Energy is Cheating PA Landowners

We have mentioned in the past on the blog how Chesapeake Energy has been drastically reducing royalties paid to leaseholders by deducting huge post-production costs.  As ProPublica reporter Abrahm Lustgarten detailed in a 2014 article, Chesapeake formed Access Midstream and then sold it's pipelines to Access for nearly $5 billion.  In return, Access was guaranteed to transport the gas Chesapeake extracted at exorbitant rates, the cost of which were then passed on to landowners.  As Lustgarten put it:
While the precise details of Access’ pricing remains private, immediately after the transactions Access reported to the SEC that it collected more money to move each unit of gas, while Chesapeake reported that it also paid more to have that gas moved. Access said that gathering fees are its predominant source of income, and that Chesapeake accounts for 84 percent of the company’s business. 
What’s more, SEC documents show, Chesapeake retained a stake in the gathering process. While Chesapeake collected fees from landowners like Drake to cover the costs of what it paid Access to move the gas, Access in turn paid Chesapeake for equipment it used to complete that process, circulating at least a portion of the money back to Chesapeake. 
ProPublica repeatedly sought comment and explanations from both Chesapeake and Access Midstream over the course of several months. Both companies declined to make executives available to discuss the deals or to respond to written questions submitted by ProPublica. 
Days after the last of the deals closed, Drake and other landowners learned the expense of sending their gas through Access’s pipelines would eat up nearly all of the money they had been previously earning from their wells. Some saw their monthly checks fall by as much as 94 percent. 
An executive at a rival company who reviewed the deal at ProPublica’s request said it looked like Chesapeake had found a way to make the landowners pay the principal and interest on what amounts to a multi-billion loan to the company from Access Midstream.
The state of Pennsylvania is looking at passing a bill which would close the loophole being exploited by Chesapeake (and some other drillers to a lesser extent) and guarantee landowners 12.5% royalties from the gas sold...which happens to be exactly what they were promised by landmen when they signed their leases.

With that bill in mind, Bradford County commissioners hired a public relations firm to create a video highlighting what some of the landowners are dealing with, including the story of an animal sanctuary that not only stopped receiving royalty checks, but received a letter from Chesapeake saying that they owed the company over $30,000.

Here is the video:



The industry, for its part, is going all in to fight the bill.  You can read the argument that the American Petroleum Institute sent to the Pennsylvania House of Representatives below:




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Saturday, October 15, 2016

10/15/16 Links of the Day: New Study From OSU, 6 Cracker Plants in Appalachian Basin?, and More

Seeking Alpha:  Marcellus Asset Valuation Moving Higher   -   "Last week, Rice Energy (NYSE:RICE) acquired Vantage Energy, a private operator owned by Quantum Energy Partners, Riverstone Holdings and Lime Rock Partners for a total of $2.7 billion. The acquisition is interesting as it represents an uptick in..."

Cleveland.com:  OSU Will Study Impact of Gas Pipeline Construction on Agricultural Fields   -   "Ohio State University will launch a study this fall in conjunction with a planned $500 million, 215-mile petroleum pipeline from Harrison County in Eastern Ohio to the Michigan border. The Utopia East pipeline project will transport 50,000 barrels a day of ethane and ethane-propane mixtures for..."

Marcellus Drilling News:  Multiple Lawsuits Against Chesapeake for Alleged Securities Fraud   -   "These lawsuits are new and stem from the recent announcement that the U.S. Department of Justice, Securities and Exchange Commission and even the U.S. Postal Service have launched investigations into Chesapeake (see Everybody Just Subpoenaed Chesapeake Energy for Everything). The suspicion is that Chesapeake may have engaged in securities fraud by making misleading or false..."

Kallanish Energy News:  Energy Giant Shell Wants to Sell Electricity in Ohio   -   "Oil Supermajor Royal Dutch Shell hopes to sell electricity to large businesses in Ohio, Kallanish Energy learns. Royal Dutch Shell’s Shell Energy North America subsidiary has applied to Ohio regulators to sell electricity to industrial companies and large commercial businesses in the state. Shell currently is authorized to sell power to..."

Canton Repository:  Utica Summit Talks Cracker Plants   -   "Shell Chemical Appalachia is building a $6 billion ethane cracker near Monaca, Pennsylvania. It is the first major U.S. cracker outside the Gulf Coast. A Thai company, PTT Global Chemical, is exploring a $5 billion project in Belmont County and has spent $100 million on project studies. Gellrich said Shell’s decision to build in the Appalachian Basin would serve as a catalyst for similar projects in the future. He predicted that as many as six crackers could be..."

Press release:  Cornerstone Pipeline Begins Operations, Provides Connectivity to Utica Shale   -   "MPLX LP (NYSE: MPLX) today announced that its newly constructed Cornerstone Pipeline is now fully operational. "Cornerstone is a state-of-the-art pipeline that adds superior safety, reliability and economics to existing transportation alternatives," said MPLX Chairman and CEO Gary R. Heminger. "As the first Utica shale..."

Royal Holloway University of London:  Wetlands and Agriculture, Not Fossil Fuels Could Be Causing a Global Rise in Methane   -   "Research published today in the American Geophysical Union’s journalGlobal Biogeochemical Cycles shows that recent rises in levels of methane in our atmosphere is being driven by biological sources, such as swamp gas, cow burps, or rice fields, rather than fossil fuel emissions. Atmospheric methane is..."

Natural Gas Now:  The Insufferable Josh Fox Loses It on BBC Radio   -   "Josh Fox was on BBC Radio earlier this week and made a complete ass of himself. He was totally insufferable. He talked rapidly and tried to overwhelm the BBC interviewer, Sarah Montague. He revealed his frustration there’s anyone in the world who could possibly disagree with him. He treated Montague as if she had no right to ask questions..."

The Blade:  Wood County Judge Nixes Pipeline Builder's Eminent Domain Plans   -   "A Wood County Common Pleas judge ruled today that the company behind the Utopia East pipeline project does not have eminent domain rights, throwing a potentially expensive roadblock into the project’s path. Judge Robert Pollex ruled that Kinder Morgan’s plan to pipe ethane from the Utica shale region in eastern Ohio to..."

Business Journal Daily:  Marathon Bets $1 Billion on Ohio Utica   -   "Eighty-five years ago, the Allegheny-Arrow Oil Co. commissioned a new refinery in Canton to process the crude oil that gushed out of the vertical wells in Ohio. Much of that local supply was exhausted over the next several decades, leaving the refinery to process oil shipped from other areas of the country and imported from abroad. Today, the refinery – now owned by Findlay, Ohio-based Marathon..."

Jones Day:  Ohio Supreme Court Decision Clarifies Mineral Rights in Utica and Marcellus Shale Plays   -   "Many states have "dormant mineral" legislation providing for the transfer of severed mineral interests to the surface owner if the mineral owner does not develop the minerals or take other action manifesting an intent to preserve his interest over an extended period of time, typically 20 years. The basic purpose of such legislation is..."


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Friday, October 14, 2016

Natural Gas Prices Hit Highest Point in Nearly Two Years

From Investing.com:
U.S. natural gas futures spiked to the highest level since January 2015 on Monday, as the outlook for a colder winter boosted demand expectations for the heating fuel. 
Natural gas for delivery in November on the New York Mercantile Exchange rose nearly 2% to a daily peak of $3.256 per million British thermal units, a level not seen since January 15, 2015. 
It was last at $3.253 by 10:40AM ET (14:40GMT), up 6.0 cents, or 1.88%. 
There will be no floor trading on the Nymex on Monday because of the Columbus Day holiday in the U.S. All electronic transactions will be booked with Tuesday's trades for settlement. 
On Friday, the November natural gas contract surged 14.4 cents, or 4.72%, after updated weather forecasting models pointed to unseasonably cold temperatures across the northeastern and north-central U.S. through October 20.
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Thursday, October 13, 2016

Chesapeake Energy Continues Maneuvering in Efforts to Improve Cash Flow, Reduce Debt

From Reuters:
U.S. natural gas producer Chesapeake Energy Corp closed a private placement of $1.25 billion of debt on Wednesday, shoring up capital for debt repayment 10 months after it said it had no plans to file for bankruptcy. 
Chesapeake, struggling with a huge pile of debt taken for shale development, said it could convert the 10-year notes to equity in three years if its stock trades above 130 percent of the conversion price for a specified period. 
The company also said it exchanged its common shares for preferred shares representing about $1.2 billion of liquidation value, at a discount of over 40 percent.

"Through the transactions that closed today, we have substantially improved our capital structure," said Chesapeake Chief Executive Doug Lawler.
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Waterville Group Seeking Ordinance to Block NEXUS Pipeline

From The Blade:
A citizens group in Waterville is trying to establish a community bill of rights to force a proposed gas pipeline to be rerouted out of the city. 
Protecting Air for Waterville collected more than 400 signatures to put Issue 3 on the ballot.

The NEXUS pipeline would cross the Maumee River in Waterville. A compressor station would be built in Waterville Township. 
The ordinance would ban gas infrastructure inside city limits. 
“A station of this size is not typically put this close to a populated area,” PAW spokesman Kelly Jacobs said. “So it has everyone concerned about emissions.”
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OPEC Agreement to Slow Oil Production is Showing Some Cracks

From Forbes:
This has to trouble OPEC, and mostly Saudi Arabia, who has been trying to micromanage global oil prices over the past few weeks with announcements to agree to agree to production cuts at OPEC’s next meeting in November. 
There is even talk that Iran, who is still trying to reach pre-sanctions production levels, would actually not have to cut production as part of the deal, as well as a potential waiver for both Nigeria and Libya. Russia is also reportedly going to meet with OPEC members in a meeting in Istanbul this week over possible production cuts. 
However, Iraq could increase its oil production despite OPEC’s recent announcement. Iraq’s oil minister, Jabar Ali al-Luaibi, has urged oil and natural gas producers operating in the country to continue increasing output for the rest of the year and in 2017, Iraq’s oil ministry disclosed on Sunday.
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Utica Rig Count Declines on Latest ODNR Report

After hitting its highest level in 2016 in the week ending October 1, 2016, the Utica shale rig count dropped back down to 19 on the latest report from the Ohio Department of Natural Resources.

Further, 6 new permits were issued last week.  3 went to Rice Drilling for wells in Belmont County, and 3 were issued to Antero Resources for Noble County sites.  There are now 2,266 permits issued, 1,822 wells drilled, and 1,409 wells producing.

View the report below or by clicking here.


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Wednesday, October 12, 2016

Unions Pack the House In Support of Ohio Pipeline

by Jackie Stewart, Energy in Depth

As EID has continued to highlight, unions have been speaking out against the Keep It in the Ground movement. As the war between fringe anti-fracking extremists and unions wages nationwide, in Ohio, local men and women are standing their ground to fight for jobs.
These jobs consist of the “900 local union construction jobs” promised to Ohioans from Kinder Morgan, as part of their Utopia East pipeline, which is a $500 million project to transport ethane and propane from eastern Ohio to the Ohio/Michigan border.
In response to the news that the pipeline would be coming to Ohio, men and women of Laborer’s (Local 500), Operating Engineers (Local 18), and the Plumbers and Pipefitters (Local 798) packed the house at a recent Environmental Protection Agency (EPA) hearing on a water quality certification in Harrison County in support of the pipeline. The audience at the forum was about 99 percent made up of union members who wanted to see the project go forward. There were two landowners who provided comments and questions about the line, but did not oppose the project. Here’s a highlight of the comments made by the International Union of Operating Engineers, Local 18:
On behalf of our estimated 15,000 current and retired members, We are here to inform the Ohio EPA that the International Union of Operating Engineers, Local 18 has officially endorsed and is fully supportive of the proposed Utopia East Pipeline Project.
Kinder Morgan who proposes to develop the Utopia East Pipeline system has committed to utilize a local union work force on the entire project. Kinder Morgan has always committed to operate safely, protect the public, their employees, contractors and the environment in all areas they operate. Local 18 members are trained, skilled and the safest workforce with extreme passion about their craft and job they do. With the combination of Kinder Morgan and the Union Trades building the Utopia, all federal and state agencies can be certain the project will be built and maintained at the highest safety standard.
The Utopia East Pipeline will cross numerous sources of water across its 215-mile path. I can assure you all that there will be no negative impacts to the quality of the streams, wetlands or watersheds along the entire route. The members of Local 18 are just as concerned about the water sources as anyone else. They too live in the cities and towns the Utopia will pass through along with their friends and families.
We look forward to a timely decision by the OH EPA so that we can begin work on the Utopia East Pipeline and get the job done right. Thank you for your time
In an article entitled “Union workers come out in support of Utopia East pipeline” the News-Messenger reported:
David Fleetwood, a business manager with Laborers International Union of North America Local 500, said the project would be a boost to the state’s economy…he emphasized the safety measures employed by workers on large-scale projects like Utopia East. “People think that pipelines aren’t safe. But today’s pipelines have sophisticated monitoring equipment,” Fleetwood said. (Emphasis added)
The Utopia East pipeline project is slated to start construction next month and run through 2017, going into service early 2018 with a capacity to move 50,000 barrels per day. According to a studyby Kent State University, Kinder Morgan’s line will boost Ohio’s economy by approximately $237 million, generate $4.9 million in tax revenues, create 2,132 direct and indirect jobs in Ohio (of which 900 are union construction jobs), contribute $144.9 million to Ohio’s gross state product and provide $87.5 million uplift to the Ohio economy through additional income and spending. Allen Fore, vice president of public affairs for Kinder Morgan said,
Ohio’s Utica shale production is driving energy industry growth, creating thousands of good jobs, powering U.S. economic growth and helping to make our nation more energy independent. Overall, many communities and landowners along the pipeline route are positive and welcoming of the clear benefits this project will bring to their local economy, the state of Ohio and ultimately, the Great Lakes region.” (Emphasis added)
Mr. Fore’s statement was certainly obvious by the packed house of support at the hearing last week.
One of the most important things about these pipeline and natural gas power plants coming to Ohio is that for the first time in five years, practically all areas of the state will be reaping the benefits from the unprecedented production from Utica shale wells. The largest portion of taxes to be realized from Utopia East will come in the form of sales tax revenues to state and local/county coffers. As EID recently showed in a new report, shale counties realized a 65 percent boost to sales tax revenues over the past five years.
In EID’s sales tax report, we looked at nine shale counties: Belmont, Carroll, Columbiana, Guernsey, Harrison, Jefferson, Monroe, Belmont, and Noble. However, thanks to these new pipelines and natural gas fired power plants, areas throughout Ohio will start to realize a boost to their local taxes as well, such the 14 counties included in Kinder Morgan’s Utopia East pipeline.
In short, Ohio’s Utica shale renaissance is just getting started. With rigs ticking back up again, coupled with the infrastructure buildout such as these pipelines, we are poised to see an exciting fourth quarter.

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Tuesday, October 11, 2016

Analysts: Oil Rally is Here, But Don't Expect it to Last

From Morningstar:
Crude markets have tightened a good deal in recent months, as strong demand growth and supply issues have pulled forward industry recovery by about a year, relative to our previous outlook. Fundamentals after 2017 are looking particularly bullish for prices, and an oil price rally in 2018 is looking more likely. 
Industry conditions begin to look much stronger post-2017, as a collapse in new nonshale capacity additions and growing demand could lead to meaningful supply shortages. We are increasingly bullish on oil prices rallying in the medium term, and have raised our WTI forecast to $65/bbl for 2018, which is the level we believe is required to drive a large-scale recovery in U.S. shale activity.

Even so, the strength of U.S. shale is lurking beneath the surface: Our analysis shows that the recent uptick in rigs and falling shale decline rates together are enough to stabilize U.S. crude production within six months. Remarkably, if activity isn't scaled back, U.S. production will begin growing in 2017 (albeit barely). This underscores the strength of U.S. tight oil: Should a price rally ensue, it is far too strong to not overheat and eventually snuff out any future oil price rally. We remain bearish on oil prices for the longer term, and we reiterate our midcycle oil price outlook of $55 WTI ($60 Brent).

Sharp curtailments in oil-directed drilling activity could reduce U.S. natural gas production growth in the near term, but the wealth of low-cost inventory in areas like the Marcellus and Utica ultimately points to continued growth through the end of this decade and beyond.
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Monday, October 10, 2016

Shale Producers Rush to Hedge 2017 Prices During Oil Rally

From Bloomberg:
Independent oil companies are using the post-OPEC rally to hedge their price risk for next year, banks and consultants said, a trend that’s likely to be viewed with concern from Saudi Arabia to Venezuela. 
The clamor to hedge -- locking in future cash flows and sales prices -- could translate into higher U.S. oil production next year, offsetting an output cut that the Organization of Petroleum Exporting Countries outlined in Algiers last week. Shale firms in particular would enjoy extra income to pay for additional drilling. 
“We are seeing significant producer flows which early estimates suggest could be the highest we have seen all year,” Adam Longson, commodity strategist at Morgan Stanley in New York said in a note to clients.
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Engineer: Renewables Aren't Ready for Keep-It-In-the-Ground Movement to Be Practical

From Gas & Oil:
As an engineer and retired business leader, I believe that renewable energy and energy conservation are important for meeting our long term energy needs, especially if they can reduce dependence on oil imports that drain U.S. financial wealth and enrich countries that are not necessarily friendly allies. 
I also believe that climate change is real. In fact, scientific evidence shows that the earth’s climate has changed continually since the beginning of time, with both warming and cooling cycles. However, I am not convinced that scientific evidence proves that the current climate change cycle is caused by humans or by the use of fossil fuels. But that debate is not the primary objective of this article. 
Natural gas and oil production from every well – big and small - declines rapidly with time. In as little as one or two years, production typically declines to a small fraction of what it was originally. Therefore, new reservoirs must be discovered and new wells must be continually drilled (and stimulated by hydraulic fracturing or “fracking”) to the maintain production levels required to meet the nation’s energy needs. Otherwise, shortages occur and energy prices increase drastically (as occurred in 2003 to 2014 before U.S. shale resources were widely developed). 
So, it is a concern that anti-fossil fuel advocates are gaining ground with politicians calling for bans on fossil fuels and fracking. A July report4 by Oil Change International (OCI), a coalition of national and regional organizations opposed to fossil fuel production and consumption, opposes all pipeline capacity expansions, especially any carrying natural gas to market from the Appalachian Basin.
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Is Natural Gas Much More Than Just a Bridge Fuel?

From Oil & Gas 360:
It’s time to overstate the obvious: the wide range of uses for natural gas makes it a critical resource for the United States and world economies. 
Natural gas is used in an amazing number of ways. Although it is widely seen as a cooking and heating fuel in most U.S. homes, natural gas has many other energy related and raw material uses. It can be used as a vehicle fuel, it can power pipelines and infrastructure for the purpose of transporting natural gas or oil, and is widely prevalent in industrial use as a raw material. Natural gas is an ingredient used to make fertilizer, antifreeze, plastics, pharmaceuticals and fabrics. It is also used to manufacture a wide range of chemicals such as ammonia, methanol, butane, ethane, propane and acetic acid.

Despite the ubiquity of natural gas through many aspects of our life, natural gas has been likened to a “bridge fuel” for years, a source of electrical generation that can tide us over until renewables are ready to carry the full load. When it is burned natural gas emits about half of the CO2 as coal, making it a preferred alternative to coal, which has long dominated U.S. power grids. 
Environmentalists have criticized natural gas because although it is cleaner than coal, it still is a fossil fuel that emits greenhouse gases. Methane is released during production and transmission, a particularly potent greenhouse gas. Moreover, the idea of a “bridge fuel” is a not as neat as is often claimed, environmentalists argue, because investing billions of dollars into long-lived assets – pipelines, power plants, processing facilities – will leave us locked into that infrastructure for decades.
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Friday, October 7, 2016

EIA Releases Annual Gas Report for 2015

The Energy Information Administration has released its Natural Gas Annual report for the year 2015.  It's a huge report, chock full of information from around the country.

Here are some of the main points:
* The 2015 Natural Gas Annual shows record U.S. natural gas production levels for the fifth consecutive year and record consumption levels for the sixth consecutive year. 
* Domestic dry natural gas production of 27.1 trillion cubic feet (Tcf), or 74.1 billion cubic feet per day (Bcf/d), in 2015 was 4.5% above the 2014 level. For the third consecutive year, Pennsylvania saw the largest total gain in annual production, increasing from 11.56 Bcf/d in 2014 to 13.04 Bcf/d in 2015. Production in Ohio increased the most, percentage-wise, of any state, for the second consecutive year. Dry natural gas production in Ohio rose more than 99%, from 1.31 Bcf/d in 2014 to 2.62 Bcf/d in 2015. 
* Deliveries to consumers of natural gas in 2015 were a record level of 25.1 Tcf, or 68.6 Bcf/d, an increase of 2.8% from 2014 deliveries. Deliveries to the electric power sector increased by 18.7% in 2015 to a record level of 26.5 Bcf/d. Deliveries of natural gas used as vehicle fuel also increased (by 11.6%) in 2015. Increases in these two sectors were offset by decreases in deliveries to the residential, commercial, and industrial sectors, which dropped by 9.4%, 7.7%, and 1.5%, respectively, from 2014 levels. 
* In 2015, U.S. natural gas imports increased year-to-year for the first time since 2007. Total imports of natural gas in 2015 were 2,718 Bcf, an increase of 0.8% from 2014. Exports of natural gas increased year-to-year for the first time since 2012, from 1,514 Bcf in 2014 to 1,783 Bcf in 2015, an increase of 17.8%.
Click here to access any information you would like to from the report.

Here is the Ohio section:


And here is the full 212-page report:


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Could Officials Be Prosecuted in Towns That Adopt Fracking Bans?

From Powersource:
Since Pittsburgh banned fracking in 2010, more than 100 municipalities have introduced their own ordinances to limit or completely prohibit oil and gas extraction, pipelines, or waste injection wells. 
And while those that have been challenged in court have generally failed, Kevin Moody, general counsel for the Pennsylvania Independent Oil & Gas Association in Wexford, says the fight is draining and doesn't seem to be deterring municipal officials from attempting to block oil and gas development. 
Maybe criminal prosecution will do the trick, he has wondered. 
It’s a concept he’s been exploring, albeit on the back burner, for several years and Mr. Moody thinks he’s found a fitting criminal statute to try it out. It’s called official oppression and makes it a second degree misdemeanor for a public official to deny or impede someone’s rights or privileges with the knowledge such actions are illegal. The penalty is up to two years in prison and a fine of up to $5,000. 
“We think that fits to a tee,” Mr. Moody said, “because these officials are voting for ordinances that are based on a right to self-government that simply does not exist.
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