Marcellus & Utica Shale Story Links: Mon, Jan 6, 2014

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

New York

The Health Benefits from Shale Gas Development
Natural Gas Now
The hard data on the health impacts of shale gas development is already available, contrary to the suppositions of Governor Cuomo and it shows shale gas is a very healthy deal. Our good friend Uni Blake, over at Shale Health, has an excellent post noting the health benefits accruing from shale gas development. Here is some of what Uni notes: “The bottom line, increased utilization of natural gas continues to improve air quality in major cities. According to Mayor Bloomberg, NYC has decreased SO2 emissions by 69 percent and soot is down 23 percent (Huffington Post, September, 2013). Thanks in part to expanded natural gas usage. And, a study released by Clarkson University in 2011, shows that Rochester is also experiencing cleaner air since its conversation to natural gas – SO2 down by 53 percent and particulate matter down by 43 percent between 2002 and 2009. This is also in part to natural gas conversions (Democrat, February 2011). For those of without respiratory issues, this is all well and good but to 15 percent of the Rochester population with asthma, this is great news.” This prompted us to dig a little deeper and these are far from the only studies demonstrating the health benefits from conversions to natural gas from other fuels, conversions made ever more economically feasible by shale gas development here in the US, and especially in Pennsylvania. Here are some more evidence of what shale gas is doing for public health:


Wells starting to prove worth
Lisbon Morning Journal News
Ten Columbiana County oil and gas wells were among 245 statewide that produced more in three months last year than all of 2012, according to the Ohio Department of Natural Resources. The report released last week provided production figures for drilling activity in Ohio’s Utica shale play during the third quarter of 2013. This is the first time the quarterly figures were made available since a new state law passed requiring companies to file production reports every quarter instead of yearly. The report noted there are 285 horizontal wells, of which 245 were in production between July and September, producing 1.3 million barrels of oil and 33.6 billion cubic feet (MCF) of natural gas. In 2012, there were 85 wells in production that generated 635,876 barrels of oil and 12.8 billion MCF of gas. An MCF is equal to 1,000 feet of natural gas, while a barrel is equal to 42 gallons. The county only had five wells in production in 2012, but five more came on line last year. Following are the third-quarter production numbers for all 10 wells and the number of days they were in operation: The 10 wells also produced a combined 18,077 barrels of brine, a salty byproduct of drilling. The wells are among 97 wells in various stages of development at 74 drilling sites in the county.

2013 was a big year in Shale
Youngstown Vindicator
Probably the most-notable event in 2013 was the double defeat of the Youngstown “Community Bill of Rights.” The initiative to ban fracking-related activities was put on the ballot in the primary and general elections and was defeated both times. In October, a month before the general election, it looked like there would be a local groundswell resistance to injection wells starting when the city of Niles and Weathersfield Township passed ordinances banning injection wells within their borders. Niles later repealed its ordinance, and an injection well was permitted near Main Street in the city. In terms of moving the industry forward in our area, 2013 permitted a number of new wells in Trumbull, Mahoning and Columbiana counties.

2014 is pivotal for Utica Shale
Warren Tribune Chronicle
Next year will be pivotal in Utica shale play according to Mike Chadsey, director of public relations for the Ohio Oil and Gas Association. There is pipe in the ground and processing facilities ready to service 600 drilled wells in the region, some 250 which are now producing, he said. “Watch what happens in 2014 going into 2015,” he said. With about 400 wells yet to “be turned on,” Chadsey said oil and gas industry officials will carefully monitor the flow and analyze the production after they have run for a while. Two processing plants, the Hickory Bend Cryogenic Processing Plant in Spingfield Township in Mahoning County and the Utica East Ohio Buckeye cryogenic processing complex in Kensington in Columbiana County, underscore the regional impact and the scale of the industry’s commitment to the area.

Is upswing in hotel/motel tax tourism or oil and gas?
Parkersburg News and Sentinel
Record collections of the hotel tax in Marietta appear to be more from the accelerating oil and natural gas industry than tourism, but some city councilmen say that doesn’t mean less of the revenue should go to the convention and visitors bureau. Marietta allocates half of the 6 percent “bed tax” to the Marietta-Washington County Convention and Visitors Bureau, the largest source of funding for the tourism agency. Collections have been higher than normal in the last few years: $786,154.32 in 2012 and $895,938.32 for 2013. While some merchants and hotel operators have cited more in leisure travel, the increase is large part from people coming into the area for the exploration and extraction and of natural gas and oil from deep underground shale formations, said Jeri Knowlton, executive director of the CVB.

Energy Giants Spar Over Name
The Intelligencer/Wheeling News-Register
After raising nearly $2 billion to drill natural gas wells in Ohio via his American Energy Partners firm, former Chesapeake Energy CEO Aubrey McClendon said he will not let coal magnate Robert Murray monopolize the term “American Energy” in eastern Ohio. Murray, founder and CEO of St. Clairsville-based Murray Energy Corp., in August sued McClendon in U.S. District Court in Ohio for “misappropriation and infringement” of the American Energy Corp. trade name, which is a Murray subsidiary that operates the Century Mine near Beallsville. Murray claims McClendon is violating the Ohio Deceptive Trade Practices Act and the Ohio Common Law of Unfair Competition. McClendon says in a legal filing that he does not believe Murray should have the exclusive right to the “American Energy” name – and has filed a countersuit against Murray in U.S. District Court in Oklahoma. McClendon also is trying to transfer the Ohio case to Oklahoma.

An update on lawmaker action and other activities at the Ohio Statehouse
Youngstown Vindicator
Natural-gas cars: The Ohio House began hearings on legislation to give tax breaks to consumers and businesses for purchasing new vehicles or converting existing ones to run on natural gas. HB 336 also would provide incentives for the purchase of electric vehicles and phase in motor-fuel tax collections for compressed natural gas. The bipartisan legislation has more than 60 co-sponsors, including its two primary sponsors, state Reps. Dave Hall, R-Milllersburg, and Sean O’Brien, D-Brookfield. It’s aimed at taking advantage of increased oil and natural-gas production in eastern Ohio’s emerging shale oil fields. “Ohio has an enormous opportunity present in shale — an opportunity which many states can only dream of having,” Hall said.

Cambridge ‘Selling’ its Location
Ohio Gas & Oil
The city of Cambridge has become an attractive location for energy related companies seeking to direct their operations throughout this region of Ohio and neighboring states as well. “Because of our location, we have become a focal point for companies looking to establish regional headquarters,” said Norm Blanchard, executive director of the Cambridge-Guernsey County Community Improvement Corporation. Because of the promise of the Marcellus and Utica shale formations as harbors of petroleum and natural gas, energy related companies have flocked to the area. Although most of the oil drilling activity has been east of Interstate 77, Cambridge and Guernsey County have proven to be attractive to companies wishing to do more than simply drill locally. “If a company locates a headquarters in Guernsey County, it has easy access in four directions,” Blanchard said, “and that’s what they like.”

Caldwell Receives Part of Oil Lease Payment
Ohio Gas & Oil
Caldwell received part of a oil lease agreement payment recently. A check for $670,950 was added to village coffers. Those funds are expected to help operate the village for the next year, said Councilman Jeff Minosky, chairman of the finance committee. “We don’t need quite that much to run the general fund so we’re going to move $200,000 from the general fund account to back to the light plant investment,” said Minosky. This will allow the money to draw interest. Council approved the transfer of $200,000 from the general fund to Raymond James Financial. The funds will go back to the light plant depository bond fund, said Minosky. Light plant investment monies had been withdrawn in order to pay for general fund expenses in 2013 after the defeat of the village income tax a year ago. Council approved the extension of a water withdrawal, pipeline access and damage agreement with CNX Gas Co. to supply effluent water to the company for fracking operations in Noble County through Dec. 31, 2014. The current contract runs through Dec. 31. The pact is in return for repairs to the water plant parking lot. Consol Energy, CNX Gas Co. reported that taking effluent water from Caldwell is a contingency plan and its primary source of water is surface water near a well.

ODNR Triples Regulatory Staff, Poised to Regulate Gas, Oil Well Construction
Ohio Gas & Oil
The Ohio Department of Natural Resources wants the public to know while they want to see the gas and oil industry succeed in Ohio, they don’t want it to be at the expense of the environment or the citizens of the state. “That is our mission,” said James Zehringer, director of ODNR. Zehringer and Rick Simmer, chief of the ODNR’s Division of Oil and Gas Resources, presented information on Ohio’s gas and oil exploration and production during a talk recently held at Malone University, in Stark County. The event was organized by the Canton Regional Chamber of Commerce. Zehringer was brought on board by Governor John Kasich a little more than two years ago, after previously serving as the director of the Ohio Department of Agriculture. “Ohio is blessed with natural resources. Along with gas and oil, we have coal, water and public lands,” said Zehringer. “Our goals, as the division of the ODNR in charge of resources are 1) to safeguard the water quality; 2) clean up our 74 state parks; and 3) to regulate oil and gas responsibly, which is pretty important, because we have to do this right. We have nine divisions in the ODNR, and Oil and Gas Resource Management is one.”


Pennsylvania Supreme Court Ruling Impacts Shale Development
The decision leaves open whether the remaining provisions of Act 13 will survive on remand. No matter what happens on remand, this decision will impact development in the Marcellus shale formation. Due to the swift initial challenge, Act 13 was only effective for a short time. In fact, the Commonwealth Court’s injunction permitted local governments to enforce existing zoning ordinances that diverged from the Act 13 legal regime. As a result of the court’s decision, however, municipalities can presumably issue environmental and other zoning ordinances that restrict oil and gas development, and they can prevent oil and gas development in specific zoning districts. Additionally, since waivers are no longer a matter of right, operators may not be able to get waivers from setback provisions near bodies of water.

Can This High-Flying Natural Gas Stock Surge Higher in 2014?
The Motley Fool
Despite the huge run-up in Cabot’s stock price over the past 12 months, there are a couple of major reasons to continue to be optimistic about the company going forward. The first is its industry-leading growth in production and reserves and the second is its peer-leading low cost structure thanks to its large, high-quality acreage position in the Marcellus shale. Over the period 2010-2013, Cabot grew its production at an impressive compounded annual growth rate of 45%, while reserve growth over the period 2009-2012 averaged 23%. The company boosted its reserves by 27% in 2012, bringing its total proved reserves to 3.8 Tcfe as of year-end 2012. Going forward, it expects to deliver 30%-50% production growth in 2014. One of the biggest reasons behind the company’s phenomenally successful drilling program is its highly attractive low cost structure in the Marcellus, where it commands roughly 200,000 net acres. Even with natural gas prices at $3.50, Cabot can generate a 115% internal rate of return, or IRR, on wells that cost it $6.5 million to drill and complete. One would be hard pressed to find another gas producer that can generate these kinds of returns.

Drilling, mining boom does not spell environmental doom
Centre Daily Times
The myth that the gas boom spells doom is typical of the environmental movement’s propaganda against natural gas, oil and coal. There are countless local and national opinions that the Earth is in peril, but there are few facts to support this green train of thought. If we turn off all of the electric lights and the heat in our homes for just 24 hours, we would be more than left out in the cold; we would be frozen. Life as we enjoy it would cease to exist without Pennsylvania’s natural gas and coal, which provide good-paying jobs to thousands of residents. And without natural gas, no one would be able to ride a CATA bus. Solar, wind and geothermal energy can be supplemental sources to our energy needs but will not in the next 50 years be available in the amounts needed to sustain our present way of life and grow our nation’s economy so that the unemployed can be weaned off the rolls of government assistance.

Shale Operators Turn To Recycling
Water Online
Range Resources pioneered flow-back water recycling in 2009, and today uses recycled water in most of its completion operations, says Dennis Degner, director of operations for Range’s Southern Marcellus Shale Division. “Reusing flow back and produced water accounts for 30 to 40 per cent of Range’s overall water usage in Pennsylvania,” he reports. When additional freshwater sourcing is needed, Degner says the company uses approved surface water withdrawals as well as municipal water sources. Typically, these are rivers and reservoirs that are resistant to drought. The majority of Range’s core operating area is serviced largely by withdrawing and recycling water from the Ohio River, states Degner. The company transports the water through its own infrastructure to well sites throughout its core operating area in southwestern Pennsylvania. “The infrastructure from the Ohio River is sized so that we can push enough water from the river at the flow rate needed for the frac job, and have essentially no impact on the river,” he says.

West Virginia

MarkWest Liberty Ethane Pipeline Approved by Regulators
NGI’s Shale Daily
FERC has granted approval for a rate structure for MarkWest’s $110 million Liberty Ethane Pipeline, which will transport ethane from Majorsville, WV, to Houston, PA, and give shippers the ability to tap into major pipeline systems that access key markets, including the U.S. Gulf Coast, Canada and other international markets. MarkWest Energy Partners LP and MarkWest Liberty Ethane Pipeline LLC announced a binding open season for the 34-mile line in November (see Shale Daily, Nov. 8, 2013) and later extended the deadline to mid-December to gauge further interest.

Natural Gas Taking Coal’s Place in the Power Plants
The Intelligencer/Wheeling News-Register
Robert Murray said if the U.S. Energy Information Administration’s projection that natural gas will surpass coal as a fuel used for electricity generation by 2040 comes to pass, it will hurt “our families, our region and our country.” However, R. Dennis Xander, past president and member of the Independent Oil and Gas Association of West Virginia, said the continued emergence of Marcellus and Utica shale natural gas does not need to work against the coal industry, as he said “co-firing” power plants with gas and coal could be an option for the future. The new federal report predicts that by 2040, 35 percent of U.S. electricity generation will come from natural gas, while only 32 percent will come from coal. The remainder will come from nuclear power and renewable sources such as wind, solar and hydroelectric.

West Virginia County to Pay Clerks Overtime for Extended Hours
NGI’s Shale Daily
A West Virginia county has changed course and will now pay overtime to employees in the county clerk’s office for extended hours to allow increased access to public records for Marcellus Shale development. According to a report by the Associated Press, a state audit found that “an outside party in the oil and gas industry” had been financing the overtime of employees in the Doddridge County Clerk’s Office. The report did not identify the industry financiers or say when Doddridge officials made the change. Doddridge County Commissioner Gregory Robinson told NGI’s Shale Daily that the “outside party” was either an attorney representing an oil and gas company, or a company itself, that paid employees in the county clerk’s office directly. “What happened was the attorney or the company — I’m not sure which it was because I never saw the checks — requested that the county clerk extend the hours past the normal closing time,” Robinson said Tuesday. “It’s my understanding that what was done, the employees were paid directly; it wasn’t included in the county employees’ wages.”

Senate President: Pa. court decision could help West Virginia
WV MetroNews
Senate President Jeff Kessler (D-Marshall) sees a recent ruling from the Pennsylvania Supreme Court as a possible advantage for West Virginia when it comes to future natural gas drilling in the Marcellus shale. Last month, the Pennsylvania Supreme Court declared major parts of Act 13, that state’s Marcellus shale drilling law which was passed in 2012, unconstitutional. The ruling was 4-2. Among the provisions found unconstitutional was the one allowing gas companies to override local zoning laws. Before the Court ruling, the law limited the power of local governments to determine where drilling was permitted. Now, drillers will now face varying regulations throughout Pennsylvania. “That opens up, in my view at least, an opportunity for folks to say, ‘Let’s go to West Virginia where we know what the rules are,’” said Kessler. West Virginia’s Legislature approved a comprehensive Marcellus shale bill during a December Special Session in 2011. It set up a statewide regulatory framework for the Marcellus shale industry. Kessler said the goal was to provide “predictability” within the industry. “I think West Virginia’s ahead of the game,” he said.


2 Energy Companies Aggressively Investing in the Future
The Motley Fool
Capital investment often foreshadows future growth and profits. This is especially true in the energy sector due to the capital-intensive nature of the business. As a long term investor, when companies announce large amounts of investment spending it often grabs my attention. Here are two companies that piqued my interest with their plans for the future. Noble Energy looks to be making modest increases in its capital spending projections for 2014, up $1 billion from 2013 to $4.8 billion. Look for 70% of this to be used for onshore development in the U.S. Approximately two-thirds of the company’s total 2014 to 2018 capital investments are planned for the continued acceleration of the DJ Basin and Marcellus Shale plays, highlighting the importance of this region. In percentage terms, a similar increase in capital spending for 2014 can be found in Cabot Oil & Gas. Not only do its projections call for approximately a 35% increase, up from 1.1 billion to 1.475 billion, but 98% of this activity will be in the Eagle Ford and Marcellus.

Getting specific on MLP general partners
The master-limited-partnership (MLP) structure often comprises two entities: a limited partnership (LP) that owns the underlying assets and a general partner (GP) that’s responsible for managing the operating entity. In addition to a minority stake in the limited partnership, the general partner holds incentive distribution rights (IDR) that entitle it to an incrementally higher percentage of the LP’s distributable cash flow as the payout reaches certain predetermined thresholds. This arrangement effectively motivates the GP to pursue initiatives that will enable the operating MLP to grow its cash flow and quarterly disbursements to unitholders; a rising payout at the LP level translates into disproportionate increases to the GP’s incentive distribution. Many GPs also own a significant percentage of the LP’s common units. As the MLP achieves certain distribution targets laid out in the partnership agreement, the IDR schedule allocates a growing proportion of the LP’s cash flow to the GP. The first interval of these sharing arrangements usually starts with the GP receiving 2% of cash flow designated for disbursement and the LP unitholders receiving 98 percent.

Natural Gas Liquids Companies Could Steal the Show in 2014
The Motley Fool
In America, everyone talks about rising natural gas or crude oil production, casting natural gas liquids, or NGLs, off to the side. But why, when NGLs (ethane, butane, propane, isobutene, and pentane) have so many great things going on in the industry right now? While most analysts in the energy sector are well aware of the rise in NGL production, it seems to not receive the attention it deserves. Well, I will try to push some of the limelight toward the subject. Hydraulic fracking is used to unlock oil and gas hidden in shale formations, and fractionation is used to process the NGLs that come out.

Time to Sell Natural Gas, the Antidote to Green Pessimism
Natural Gas Now
Our energy picture is brighter every day–getting better all the time–and the natural gas industry needs to sell those benefits, rather than cater to the pessimism of ever negative enviros, greens and fractivists. A piece of good news consistently misunderstood by both sides in the energy debate is that we use far less energy that we once did. From the right, the argument is that energy creates wealth and we can ignore any consequences, but from the left, equally misinformed, is the idea that using energy is inherently unsustainable in a world of declining resources. We need to go back to the most consistently wrong scientist of all time, Thomas Malthus, followed by the even more depressing William Jevons to find the root of these misconceptions. As usual, the simplest theories are often the wrongest. Flat earth, earth at center of universe ,moon made of cheese and flames coming out of taps sounds logical to primitive societies, but history has proved that more people and more energy have improved the world, not destroyed it.

Public Comment Period on Illinois Frack Rules Expires
NGI’s Shale Daily
A 50-day public comment period on rules that would implement Illinois’ Hydraulic Fracturing Regulatory Act (HFRA) was set to expire Friday, but some environmental groups opposed to fracking are asking the state for an extension. The Illinois Department of Natural Resources (IDNR) held five public hearings on the proposal, in November and December. The HFRA would add a series of laws to the Illinois Administrative Code. Specifically, Part 245 would govern fracking and be added under Title 62, which covers the mining industry. New laws would be enacted to cover registration and permitting procedures; permit decisions; well site preparation; well construction; water quality; chemical disclosure and trade secrets; high-volume hydraulic fracturing (HVHF) preparations and operations; HVHF production; plugging and restoration; enforcement, and medium-volume hydraulic fracturing (MVHF) operations.

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