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WV Co-Tenancy Bill Survives Challenge, Amended, Final Vote Today

Two days ago we reported that the West Virginia House of Delegates was due to vote on House Bill (HB) 4268, the “Co-tenancy Modernization and Majority Protection Act” (see WV Votes on Co-Tenancy Bill Today; Anti Gets Mouthy, “Dragged” Away). In WV there are often multiple rights owners listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them all to sign on the dotted line. Co-tenancy corrects that situation. A vote by the full House didn’t end up happening on Tuesday, as originally predicted. Amendments to the bill were offered. One of the amendments would have changed the ratio of rights owners who must sign on the dotted line to allow leasing from 75% all the way up to 90%–which isn’t feasible. Fortunately that amendment was voted down 57-40. However, another amendment–to reallocate half of the unclaimed royalties to fund health insurance for public employees including teachers–did pass (50-47). In the original bill 100% of unclaimed royalty revenue was to be used to cap orphan wells. Now the orphans only get half the funding. Perhaps most importantly, an amendment to limit co-tenancy to properties with seven or more rights owners passed 90-6. That amendment is intended to keep WV out of family squabbles, where just a few people own the mineral rights. The now fully-amended, fully-discussed bill is ready for a final final House vote, which is scheduled for today. After the House votes, it’s on to the Senate. Below are reports about the amendment process in the House…
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FERC Grants MVP OK to Begin Pipeline Construction in Virginia & W.V.

In January, MDN reported that Mountain Valley Pipeline (MVP)–a $3.5 billion, 301-mile pipeline that will run from Wetzel County, WV to the Transco Pipeline in Pittsylvania County, VA–had received permission from the Federal Energy Regulatory Commission (FERC) to begin tree clearing and construction of access roads and construction yards in five West Virginia counties: Wetzel, Harrison, Doddridge, Lewis and Braxton counties (see Mountain Valley Pipe Gets FERC Approval to Begin WV Construction). That was MVP’s very first permission to begin construction-related activities. It was the trickle. The flood gates burst open late last week when FERC began issuing what is (so far) four new orders. The new orders grant MVP permission to continue not only tree clearing and building roads, but also to begin construction of the actual pipeline itself. That is, digging trenches and laying steel in the ground–not only in WV, but also in Virginia. Construction is now under way in multiple counties in both states. We lay out where MVP is getting built, and what activities are now green lighted by FERC, below…
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WV Votes on Co-Tenancy Bill Today; Anti Gets Mouthy, “Dragged” Away

Today a co-tenancy bill is due for a vote by the full House of Delegates and from there will get sent on to the WV Senate. Co-tenancy is NOT forced pooling. It is legislation that will give a majority of rights owners in a property the authority to sign a lease on behalf of all the rights owners. In WV there are often multiple rights owners listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them all to sign on the dotted line. Co-tenancy corrects that situation. In the current bill, House Bill (HB) 4268, if 75% of the rights owners agree to lease the property for oil and gas drilling, that’s “good enough.” The bill will open up more Marcellus and Utica acreage to be drilled. As we previously reported, almost everyone is in favor it, including landowner groups (see WV Co-Tenancy Bill Picks Up Support from Landowner Group). Last Friday, the House of Delegates’ Judiciary Committee held a public hearing to gather more input from the public, and then voted to approve the bill, sending it to the full House for a vote. The public hearing was not without some drama. An anti-fossil fueler who is running for a House seat this fall, Democrat Lissa Lucas, got up to the mic during the public hearing and instead of addressing the merits (or lack thereof) for HB 4268, she proceeded to read the names of House members and contributions to their campaigns from the oil and gas industry. When asked to refrain from her stunt, she didn’t, so two men gently took her by the arms and escorted her out of the hearing. She now (hilariously) claims she was “dragged” out of the hearing. Here’s the latest on co-tenancy in WV–and the nutjobs who oppose it…
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Unions in WV Hiring Workers as Pipeline Construction Begins

Tree clearing for Dominion’s $5 billion Atlantic Coast Pipeline (ACP) has already begun in West Virginia (see Atlantic Coast Pipeline Begins Cutting Trees in WV & VA (Not NC)). Construction for ACP in WV will begin this spring. Tree clearing for EQT’s $3.5 billion Mountain Valley Pipeline (MVP), along with construction of access roads and construction yards, has not yet begun but soon will in WV (see Mountain Valley Pipe Gets FERC Approval to Begin WV Construction). What it all means is that a lot of workers will be needed in a hurry as construction gets underway. Enter trade unions. Union workers will perform the bulk of construction–everything from driving trucks to delivery of supplies (and people), to operating heavy equipment, to digging trenches, to welding–even cutting down the trees, an activity happening now. Unions in WV are currently recruiting new members who want a good-paying, hard-working jobs in the pipeline industry in the Mountain State…
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Ascent Resources Marcellus Plans to Exit Bankruptcy in Record Time

On Wednesday MDN brought you the news that Ascent Resources Marcellus, a company founded by Aubrey McClendon after he left Chesapeake Energy, has filed for Chapter 11 bankruptcy (see Ascent Resources’ Marcellus Unit Files for Chapter 11 Bankruptcy). Ascent Marcellus is one of several companies using the Ascent name. The Ascent Marcellus piece of the pie owns 43,000 of leases and has drilled some 547 wells in West Virginia. Big operation. The good news is that, according to Ascent, 75% of the shareholders in the company are already on board with a plan to hand over ownership to existing debtholders. Ascent worked hard to put all of their ducks in a row and presented a “prepackaged” bankruptcy plan to the court–a plan that should make things go fast. In fact, Ascent Marcellus expects to exit bankruptcy by March 31st. Below we details about who Ascent owes money to, and how they plan to order “one prepackaged bankruptcy to go” at the bankruptcy court drive-thru window…
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CNX Sells WV Gathering System to Former CONE Midstream for $265M

CNX Resources, in addition to issuing an announcement about proved reserves yesterday (see today’s companion story), also issued an announcement about CNX the drilling company selling its Shirley-Pennsboro gathering system in West Virginia to CNX the pipeline company (CNX Midstream) for $265 million. Yes, in a sense it is moving assets around on paper. However, this seemingly innocuous announcement is interesting to MDN for a couple of reasons. First, there is a trend of splitting companies apart–to spin out the pipeline/midstream stuff into its own standalone company, separate from the drilling part of the company. EQT, a major CNX competitor, is going through the process of evaluating whether or not to spin off their pipeline subsidiary into its own company (see EQT Begins Process of Separating Midstream…into New Company?). When we see moves like this from CNX, we wonder if they too are also preparing for such a split. We have no evidence that such a move is in the cards–just idle speculation on our part. However, the fact that CNX is moving pipeline assets into the midstream subsidiary certainly sets up the possibility that the pipeline subsidiary may (one day) become a standalone company. Second, the pipeline subsidiary is called CNX Midstream. That’s a new name. As of early January you would have known it as CONE Midstream. CNX bought out its joint venture partner in CONE (Noble Energy) late last year and now owns all of CONE. CNX renamed CONE as CNX Midstream in early January (see CONE Midstream Gets a New Name: CNX Midstream Partners). We’ve not seen anyone else point out the fact that the former CONE is the buyer of this asset. For those two reasons–the trend of splitting drilling and pipelines into different companies, and the fact that CONE was the buyer–our interest was piqued in CNX’s seemingly innocuous announcement yesterday…
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Ascent Resources’ Marcellus Unit Files for Chapter 11 Bankruptcy

Please see comments from Ascent Resources below in the 2/7/18 update…

We have to confess, we did not see this one coming. Ascent Resources Marcellus, a company founded by Aubrey McClendon after he left Chesapeake Energy, has filed for Chapter 11 bankruptcy. Note that Ascent, which was spun off from the McClendon company American Energy Partners, has a split corporate structure. On paper there are a number of “Ascent Resources” companies: Ascent Resources, LLC; Ascent Resources Utica Holdings, LLC; Ascent Resources – Utica, LLC; Ascent Resources Management Services, LLC; and, Ascent Resources Marcellus Holdings, LLC. Same management team for all and frankly, as a practical matter, they are all one company. But it is the last one in the list, Ascent Marcellus, that is seeking bankruptcy protection. According to the company website, Ascent Marcellus focuses its drilling activity on 43,000 leased acres in West Virginia. Ascent Marcellus has a couple of loans it can’t repay, so it’s taking the bankruptcy route which will transfer ownership of that portion of the company from existing shareholder to debtholders. We’ve seen this movie before. Nobody gets screwed except existing shareholders–at least, that’s the theory. According to an announcement by Ascent, the “restructuring” as it’s called, will not affect landowners or vendors. This is “an operational restructuring and is not intended to restructure or compromise any vendor, service provider, contractor, lessor, working interest owner or royalty owner obligations.” Of course “intent” and reality are sometimes two different things. We’ll keep a close eye out as this develops…

2/7/18 Update: Ascent Resources sent clarifications to our statements and assumptions above. Below are Ascent’s comments as provided, verbatim. We thank Ascent for taking the time to comment.

Regarding the comment that they are basically the same company:

It isn’t all the same company. This is a very important distinction. There are several different companies with similar names that are managed by another separate company that also has a similar name. The Marcellus company always had separate assets in West Virginia, a separate capital structure and separate debt that was collateralized solely by the West Virginia assets. It’s not all the same company.

Regarding the comment that “Nobody gets screwed except existing shareholders–at least, that’s the theory.”

You should know that Marcellus private equity owners hold more than 75% of the stock and control the board, so they were integrally involved in determining the most appropriate outcome for shareholders as part of the Chapter 11 discussions. So “in theory” does not apply to the detailed plan of reorganization that has been worked out between the company’s owners and the creditors. Continue reading

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WV Co-Tenancy, Royalty Transparency Bills Make Progress

As predicated, a co-tenancy bill has been introduced in this year’s 60-day session of the West Virginia legislature (see Co-Tenancy Front and Center for WV Legislature as Session Nears). What is co-tenancy? It is legislation that will give a majority of rights owners of a property the authority to sign a lease on behalf of all the rights owners. It corrects a situation in which multiple rights owners are listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them to sign on the dotted line. Co-tenancy corrects that situation, opening up more Marcellus and Utica acreage that can be drilled. Last Thursday a co-tenancy bill was introduced in the House Energy Committee–House Bill (HB) 4268–which should see an initial vote this week. Various groups are lobbying for and against the bill. The WV Surface Owners Rights Organization is pushing for two amendments, without which they won’t support the bill. Although co-tenancy is a major emphasis for Marcellus/Utica drillers, a different bill is a major emphasis for landowners–a bill to provide greater transparency of royalty statements (more information provided on statements). House Bill (HB) 4270 already passed in a vote by the House Energy Committee last week. It still has to pass muster with the House Judiciary Committee, but the bill seems to be off to a fast start. Here’s a rundown on these two important bills, with copies of the bills as introduced, with background on the backroom wheeling and dealing over the co-tenancy bill…
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WV Farm Bureau Urges Legislature to Tread Carefully re Co-Tenancy

In another MDN post today, we do a deep dive into West Virginia House Bill (HB) 4268, the “Co-tenancy Modernization and Majority Protection Act” (see WV Co-Tenancy, Royalty Transparency Bills Make Progress). One of the organizations closely watching the progress of that bill is the WV Farm Bureau, which lobbies for the best interests of mineral owners, farmers and rural residents. What does the Farm Bureau think of the bill so far? Last week, on the very day HB 4268 was introduced, Farm Bureau director of Governmental Affairs, Dwayne O’Dell, penned an editorial in which he lends tepid support for the bill, IF there are protections built in for landowners. O’Dell begins his editorial by stating he’s worried that WV legislators are, “allowing oil and gas developers to take private property rights unfettered.” That is, they are literally “giving away the farm.” O’Dell is favor of “providing oil and gas companies with a reasonable platform to succeed.” But not at the expense of his members. Here’s a big, fat caution flag being waved by the WV Farm Bureau with respect to the co-tenancy bill, along with a call for the legislature to revisit the issue of “at the well head” pricing…
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WV Senate Bill Allows Counties to Assess “Impact Fees” on O&G

A newly introduced bill in the West Virginia legislature–Senate Bill (SB) 295–appears to give WV counties the power to impose their own “impact fee” on the oil and gas industry. We say appears because the words “oil” and “gas” never appear in the bill–but those words do appear in a newspaper article discussing the bill. WV counties are in a bind. In PA, counties and towns get a healthy stream of revenue from PA’s “impact fee” (equivalent of a severance tax). When drilling comes to town roads get a lot of heavy truck traffic. Public services of all kinds–police, fire, government buildings–see more use. PA’s impact fee helps with those things. In Ohio, towns sign RUMAs with drillers–Road Use Maintenance Agreements. But in WV, the tax money counties did receive from the oil and gas industry was reduced in 2011 when the state legislature granted discounts to companies spending more than $50 million in the state. Want to fix or build a new road to handle traffic? Good luck! Enter SB 295 which (again) appears to grant counties the ability to assess certain fees, including an “impact fee,” on certain companies in order to assist with things like building and fixing roads. Here’s what we could find about SB 295…
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Atlantic Coast Pipeline Begins Cutting Trees in WV & VA (Not NC)

In December MDN told you that Dominion’s $5 billion Atlantic Coast Pipeline (ACP) project had asked permission from the Federal Energy Regulatory Commission (FERC) to begin clearing trees along the path of the pipeline in all three states where the pipeline will run: West Virginia, Virginia, and North Carolina (see Atlantic Coast Pipe Asks FERC to Begin Tree Cutting in WV, VA, NC). FERC approved the project last October (see FERC Approves Atlantic Coast, Mountain Valley Pipeline Projects). However, two of the three states–Virginia and North Carolina–have not yet given final water crossing permits for the project (see Atlantic Coast Pipeline Delayed in Virginia by Water Board Vote and NC Plays “Death by a Thousand Questions” with Atlantic Coast Pipe). Lack of water crossing permits isn’t stopping ACP, nor FERC. Last Friday FERC granted ACP permission to begin felling trees, and the chainsaws have been busy over the weekend–at least in WV and VA (not yet in NC). The clock is ticking. Because of cockamamie Obama regulations, clearcutting of trees along the path for a pipeline (or roadway, or whatever) is banned from April 1st through October 31st, in an effort to protect the “endangered” northern long-eared bat (see Marcellus/Utica Drillers Ask for Special Permit to Kill Some Bats). ACP will be busy between now and March 31st cutting down trees to prepare for laying pipe…
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WV Co-Tenancy Bill Picks Up Support from Landowner Group

It’s looking more and more like co-tenancy legislation will pass this year in West Virginia (see Co-Tenancy Front and Center for WV Legislature as Session Nears). What is co-tenancy? It is legislation that will give a majority of rights owners of a property the authority to sign a lease on behalf of all the rights owners. It corrects a situation in which multiple rights owners are listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them to sign on the dotted line. Co-tenancy corrects that situation, opening up more Marcellus and Utica acreage that can be drilled. The main oil and gas associations in WV are pushing hard for it. Very importantly, the West Virginia Royalty Owners Association is giving its guarded blessing to the effort. About the only group still outright opposing it is the West Virginia Surface Owners Organization. They risk not having a seat at the table to influence the final version of the bill by their ongoing opposition. The co-tenancy train has already left the station and is picking up steam. The time is now to weigh in if you want to have a say in the bill that (we predict) WILL get passed–as long as legislators keep it “clean” and don’t lard it up with other stuff, like “joint development”…
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WVU Research to Convert Shale Gas into Hydrogen and “Good” Carbon

It never ceases to amaze us at how an unshakable belief in the myth of man-made global warming drives normally sane people to do insane things. Like using millions in taxpayer dollars (“grants”) to figure out a way to convert shale gas into a more “environmental friendly” form of fuel for energy usage–explosive hydrogen. Methane (i.e. natural gas) has one carbon atom along with four hydrogen atoms–CH4. What do you do with that carbon atom when you split methane into its component parts? We can’t have that carbon atom mating with a couple of oxygen atoms and forming CO2 (carbon dioxide)! Perish the thought!! (Even though CO2 is what you exhale every time you breathe, CO2 has been bastardized into being considered a pollutant by the general population thanks to the efforts of Big Green.) West Virginia University, along with Southern California Gas Company and Pacific Northwest National Laboratory, is launching new research this month that aims to convert “methane to CO2-free hydrogen and solid carbon nanotubes”–that is, into hydrogen and “good” carbon, not “bad” CO2 carbon. Whatever…
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WV Update on China Investment: “Dirt Could be Flying This Year”

WV Commerce Sec. Woody Thrasher

West Virginia State Commerce Secretary Woody Thrasher, the man who brokered an unbelievable deal with China, getting China to agree to spend a mind-blowing $83.7 BILLION in the Mountain State over the next 20 years, gave an update to WV legislators yesterday on the China deal. In early November Thrasher visited China as part of a trade delegation with President Trump. On that trip, China agreed to invest a total of $250 billion in American (mostly energy) projects, $83.7B of which (a full third!) will go to investments in WV (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). One legislator at yesterday’s meeting wanted to know when the state might begin to see actual construction activity. Thrasher, who said he’s already made three visits to China and is leaving for his fourth visit this Saturday, said the Chinese have “a great sense of urgency” about beginning projects in the state, and that “the dirt could be flying this year.” Thrasher cautioned legislators that the state needs to up its regulatory and business game–to make the state more attractive to China and others who will flock to the region following a buildup of the shale/petrochemical industry. Thrasher also hinted that the Chinese may be willing to invest in the much-talked-about $10 billion NGL storage hub, the same project that recently received positive signs it will receive a loan guarantee from the federal government (see Appalachian NGL Storage Hub Gets Serious with DOE Loan Guarantee). Here’s Thrasher’s timely update to WV legislators…
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Co-Tenancy Front and Center for WV Legislature as Session Nears

At the beginning of each new year the West Virginia legislature meets for a 60-day session. This year the session runs from Jan. 10 to Mar. 10. For the previous maybe 6-7 years, the shale industry has pushed for some sort of forced pooling legislation. Each year those bills, as close they sometimes got, were defeated. This year the industry is staying well away from saying anything about “forced pooling.” Last time around (in 2017) we came close with something MDN calls forced pooling lite–a bill that would have allowed for co-tenancy and joint development. That bill was eventually defeated (see WV Force Pooling Lite Goes Down in Flames – Lawmakers Blame Pot). For the rest of last year WVONGA (the West Virginia Oil and Natural Gas Association) hyped both co-tenancy and joint development. What are they? Co-tenancy says a majority of rights owners can vote to accept a lease for drilling. It corrects a situation in which multiple rights owners are listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them to sign on the dotted line. Joint development (sometimes called “lease consolidation”) is more nuanced. Currently there are a number of existing old leases, signed before shale drilling began, that prevent drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a single drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. It is a form of theft. We’re happy to see WVONGA leave joint development behind. This year WVOGNA and legislators are laser-focused on co-tenancy, which we think is a good thing…
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Finalists Announced for 2018 Northeast & 2018 Texas Oil & Gas Awards

Once again Marcellus Drilling News is happy to partner with and support the Oil & Gas Awards, for 2018. The Awards boys have just released two lists of finalists–one for the Northeast Awards, being held March 1 in Pittsburgh; and one for the Texas Awards, being held March 7 in Houston. This year six of the entrants for the awards contracted with MDN editor Jim Willis to help them prepare their entries (both Northeast and Texas). It was a blast for Jim to dig in and understand more about the companies submitting an application for the awards–and to help them craft what we hope are winning entries! Jim worked with some true professionals from the companies entering the awards–it was a pleasure. Below is a list of the finalists in each region. Good luck!…
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