Marcellus & Utica Shale Story Links: Fri, Dec 13, 2013

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading:

New York

Wishful Negative Thinking: The Fractivist Bar Scene
Natural Gas Now
The fractivist routine is now very familiar; speculate some harm you wish were true, hype it to grab media attention and move on to the next case while the industry is toiling to set the record straight on the last one. New York is a textbook case of the lengths to which fractivist types opposed to the development of shale gas will go to squelch the many improvements it is already making in the quality of life for other New Yorkers and deny them to the Southern Tier. Activists in the New York state of mind reliably jump on every band wagon story of supposed destruction and devastation from drilling well before any real data is gathered—data that nearly always shows the opposite of what has been speculated—and then blow these tales out of proportion to further their very narrow and selfish agenda. Once the headline has been generated, the fractivist is off and running to cry wolf somewhere else while the industry cleans up their mess. It’s just happened again, but it’s different this time.

Former New York Regulator Predicts Legislature Involvement in Fracking Debate
NGI’s Shale Daily
Regardless over how the New York Court of Appeals rules in a pair of cases on localities’ power to enact bans on oil and gas activities, the state legislature will insert itself into the debate at some point in the future, a former state official said Wednesday. Gregory Sovas, former director of the Department of Environmental Conservation’s (DEC) Division of Mineral Resources, also blamed regulators who came aboard during changes in the state’s administrations for the current state of affairs: a de facto statewide ban on high-volume hydraulic fracturing (HVHF) and the two legal challenges involving the towns of Dryden and Middlefield. “I don’t see how there’s going to be [oil and gas] industry investment without the supersedure provision,” Sovas said during an online presentation sponsored by the Empire Energy Forum. “The state has an extensive environmental regulatory framework [for both gas drilling and pipelines]. I don’t see any need for local ordinances or regulation. “But no matter which side of this comes out, I think the legislature is sure to weigh in one way or another.”


Drill Bits: News About the Gas and Oil Industry for Guernsey County and Eastern and Southeastern Ohio
Daily Jeffersonian
An interesting tidbit heard at the Oilfield Expo and Safety Congress. “Ohio is anticipating issuing a total of 2,573 Utica shale permits by the end of 2015, with 1,830 wells drilled by then, but only 750 will be in production due to lack of pipelines and processing,” said James Halloran, energy analyst and a member of OOGA’s governing board. He suggested that shale will produce 25 to 40 years of natural gas, not 100 years.

Carrizo Oil & Gas’s CEO Presents at Capital One Securities 2013 Energy Conference (Transcript)
Seeking Alpha
Our strategy is pretty consistent with what we’ve said for the last couple of years. our focus is on premier oil plays and less on natural gas. The two main plays we’ve been in, in the last couple of years have been Eagle Ford in South Texas and Niobrara in the Northeast Extension in Colorado. We’re now moving into the Utica also and we’ll have our first well tested in January. Right now it’s resting, we frac-ed it about six weeks ago and that’s in Southern Guernsey County.

Anti-fracking hysteria really takes the cake in recent letter
Athens News
RE: Nov. 9 letter from Mr. Welch. Wow, really? Anti-fracking activists invariably resort to false assertions and hyperbolic rhetoric, but this level of mindless nonsense really exceeds the norm for this community of professional protesters. I wonder if Mr. Welch realized, as he drove through the West Virginia countryside in his gasoline-powered car, how much of that car is actually made from products produced by this nation’s petrochemical industry? I wonder if he has the slightest clue how many of the conveniences and health products he uses each day were made from petrochem products? I wonder if he is aware that Americans use about 18 times as much water each day watering their lawns than is used in the oil and gas industry? I wonder if he is aware of the fact that, despite five years of feverish searching, the Obama Administration has been unable to identify a single instance in which hydraulic fracturing has polluted a water reservoir?


PA Tax Law News: December 2013 — Sales Tax – Mine Site Preparation
On November 15th, the Pennsylvania Department of Revenue updated and reissued Sales and Use Tax Bulletin 2012-01, addressing sales and use tax issues with respect to drilling site preparation in the Marcellus Shale. As originally issued on April 16, 2012, the bulletin stated that equipment used to build drill rigging pads was taxable but tax would not apply to foundation materials, such as sand, stone and similar materials. As updated, the bulletin adds that where rigging pads are constructed in accord with certain statutory requirements applicable to containment for unconventional wells, “to control or abate pollutants generated in the mining operation,” materials such as liners, sand and gravel would be excluded from tax as pollution control devices. The bulletin continues to advise that equipment used in construction of ponds or other facilities, as well as liners and other materials used in such construction, are taxable where fresh water or other raw materials will be stored. However, where a pond is used to store pollutants generated in drilling operations, materials used in the construction of the pond, such as liners, would be exempt as pollution control devices. See our July 2012 newsletter for a review of other guidance concerning application of sales and use tax to drilling activities in the Marcellus Shale.

Range looks to sell Texas drilling assets
Pittsburgh Tribune-Review
Pennsylvania most likely would be the biggest beneficiary from Range Resources Corp.’s attempt to sell West Texas drilling land, according to analysts who follow the company. The Texas company told federal regulators this week it has hired Bank of America Merrill Lynch to market 90,000 acres it leases in the oil-rich Permian basin. That fits in with a long-standing trend at Range to sell assets around the country as it concentrates on drilling in the Marcellus and other gas-rich Appalachian formations. “Their returns in the Marcellus are higher than anything else they’ve got out there,” said Raymond Deacon, Brean Capital LLC’s lead analyst for oil and gas production companies.

Utilities Delivering Cheap Utica/Marcellus Gas Locally
NGI’s Shale Daily
Although brutally cold weather across much of the country is driving up natural gas delivery costs for utility companies, particularly those in the Northeast, increased production in the Marcellus and Utica shale formations has continued to push down the price customers are paying for the commodity this year as more utilities utilize local gas produced in the Appalachian Basin. More so than anywhere else, the Marcellus in Pennsylvania and West Virginia is pumping out record-high volumes of natural gas. On Monday, the U.S. Energy Information Administration said the formation is expected to produce 18% of all U.S. natural gas production this month (seeShale Daily, Dec. 9). Utility companies, such as those based in Ohio and Pennsylvania, are slowly utilizing more of that gas to serve customers in their own backyards. Last month, UGI Penn Natural Gas, which serves more than 350,000 customers in 15 southeastern Pennsylvania counties, said purchased gas cost rates would decrease until the end of the first quarter, primarily as a result of lower wholesale prices and increasing Marcellus production.

Career programs get a major boost
Washington (PA) Observer-Reporter
Western Area Career & Technology Center is getting a generous boost. So is the oil and gas industry. Energy giant Chevron and the Claude Worthington Benedum Foundation are contributing grants totaling nearly $400,000 to the school, according to an annoucement Thursday at the WACTC campus in Chartiers Township. The funds are earmarked for programs that will prepare students for sustainable careers in oil and gas, a field that is booming in the Marcellus Shale region. “This is a great partnership,” said Dennis McCarthy, director of WACTC. The funds – $280,000 from the Benedum Foundation, $119,600 from Chevron – will go toward enhancing three manufacturing-related programs: welding, machining and mechatronics. “Chevron wants to help develop programs that teach skills needed for jobs,” said Trip Oliver, manager of policy, government and public affairs at the Moon Township-based company.

Range Resources’ Management Presents at 2013 Capital One Securities Energy Conference (Transcript)
Seeking Alpha
Good morning. Good to be with you. The Range story is pretty simple. It’s been consistent over the years and we’ve had a real proven track record of performance really based around three core values: focused on production and reserve growth per share on a debt-adjusted basis, maintaining a real simple, strong financial balance sheet, and then operating safely and being good stewards. We’re currently in Texas, Virginia and Appalachia, and of course the crown jewel is the Marcellus and we’ll talk a lot about that as I go through the presentation. The story is pretty consistent. We see 20% to 25% line-of-sight production growth for many, many years. Of course, that’s based around our position in the Marcellus and Pennsylvania.

West Virginia

Lewis Glasser Expands Office In Morgantown To Serve Natural Gas Clients
West Virginia Natural Gas Blog
Lewis Glasser Casey & Rollins PLLC has expanded its law offices in Morgantown with a new location in the Wharf District. New, larger offices on the third floor of Marina Tower are helping our law firm meet the needs of our growing clientele in the region. The address for the new office is 48 Donley Street Suite 300, Morgantown WV 26501. “Lewis Glasser is very pleased to be expanding to this new office space in Morgantown, which now allows our law firm to better serve our clients, particularly those engaged in the state’s energy and shale industry,” said Richard Gottlieb, Managing Member. “Our law firm has a long history of representing the oil and natural gas industry – producers, midstream companies and interstate pipelines – and we pride ourselves on our high-quality, personal and results-oriented services.” Lewis Glasser first opened an office in Morgantown in 2012 and since that time has continued to add new lawyers and staff. Rudolph P. “Buck” Duranti, Jr., heads the Morgantown office’s six lawyers under the leadership of Mark A. Sadd. The law firm’s other offices are located in Charleston, W.Va. and in Columbus Ohio.


Down On Legal Woes, Buy Anadarko
Seeking Alpha
Shares of Anadarko Petroleum (APC) plummeted 10% after hours when it was announced that the company had a lost a critical case at the district court level (details of the court’s opinion are here). Shares have already underperformed in 2013 with gains of 12.5% this year, and after this drop, shares are up less than 5%. In this article, I will go over what the courts said and why investors should use the drop to buy Anadarko. This case is related to toxic pollution claims at a unit of Anadarko, Kerr-McGee. In 2005, Kerr-MCGee spun off its chemical business and legacy environmental issues into Tronox, and Anadarko subsequently bought Kerr-McGee’s remaining oil and natural gas assets. Eventually, environmental liabilities (with the U.S. government seeking upwards of $25 billion) became too much to handle, forcing Tronox into bankruptcy in 2009. Once in bankruptcy, Tronox sued Anadarko, saying that the spin-off was improper and left Tronox woefully undercapitalized and essentially was an effort to defraud the EPA of the penalty funds to which it was entitled. Anadarko had countered that all actions were wholly legitimate.

The Shale-Driven Pipeline Future
Digital Media Net
Production from U.S. shale plays is expected to continue growing for the next few years, driving stable investment in pipeline infrastructure. The latest edition of the DW North American Pipeline Database identifies $22 billion in expenditure for the construction of over 23,000 miles of pipeline between 2014 and 2020. Over 1,100 miles of transmission pipelines relate to the transportation of Permian crude and are planned to be built by the end of 2014. These lines will buffer the pricing of Permian crude from temporary disruptions in refineries and in the existing takeaway infrastructure and potentially enable greater volumes of production. The capacity of pipelines to be installed from the Eagle Ford by 2017 actually exceeds expected production and will similarly ensure consumers stable supply.

The LPG Echo of the Shale Gas Boom
Energy Outlook/GSW Strategy Group
Increased US production of LPG and natural gas liquids is an outgrowth of the shale gas revolution and a key ingredient for translating its benefits into industrial growth. The infrastructure investments, export opportunities and price relationships for these liquids represents a microcosm of the similar issues for shale gas and LNG.

Shale oil pushes U.S. crude production to 25-year high
Bloomberg/Akron Beacon Journal
U.S. crude production rose to the highest level in a quarter-century as a shale drilling boom in states such as Texas and North Dakota cut the need for foreign oil and pushed the country closer to energy independence. The U.S. pumped 8.075 million barrels a day in the week ended Dec. 6, a gain of 0.8 percent, or 64,000 barrels a day, the Energy Information Administration said today. It’s the most since October 1988. “You can’t swing a cat without hitting a barrel of oil in North America,” said Stephen Schork, president of the Schork Group Inc., an energy consulting firm in Villanova, Pennsylvania. “It’s amazing how quickly things can change.”

Propane demand hits a record high for November
EIA Today in Energy
Propane is produced from natural gas at processing plants and from crude oil at refineries. Propane produced from natural gas has been the fastest-growing component of overall U.S. propane supply. Propane production in the United States has set record highs on an almost weekly basis in 2013 as a result of increased oil and natural gas drilling. A record corn crop harvest has increased the demand for propane (shown in the graph above as product supplied) in the central United States. Expanded propane production met this agricultural demand, while continuing to supply other markets.

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