One of the speakers at the Natural Gas Development Summit held in Binghamton on March 18th was Richard Leehr, president of Millennium Pipeline (MP), a major natural gas pipeline running from Western New York State almost to New York City. What follows are MDN’s notes from his presentation. Unfortunately Millennium has a policy against sharing their PowerPoint slides on the web (we asked and were turned down). It’s unfortunate because there were a number of good slides that would be of interest to landowners. However, MDN located two PDF maps showing the MP and its interconnect points with other pipelines, and a pipeline system map for Upstate New York and the Northern Tier of Pennsylvania (see bottom of this post for the links).
Dick Leehr started his presentation with a “thank you” to landowners for their patience and inconvenience during the recent construction of the pipeline. The MP has its home office in Pearl River, NY, almost on the border with New Jersey and not far from metro New York City. The MP is an underground steel 30-inch diameter pipeline with 1 inch thick walls. The steel is coated and should last at least 100 years.
The MP has the capacity to move 1/2 BCF (billion cubic feet) of natural gas over the entire length of the pipeline per day. On January 4th, the MP hit its current high in delivery with 714,000 dekatherms.
Mr. Leehr said to think of pipelines as Interstate Highways. Shippers contract or “reserve” capacity on the pipeline. The pipeline picks gas up at one point and delivers it to a different point specified by the customer. Pipelines are among the safest forms of energy transportation in the country according to Leehr.
Although the details are somewhat slim in the newspaper account, the known facts are that Southwestern Energy started construction on a well conductor pipe at a site in Wyalusing Township (Bradford County, PA) in early January, before the Susquehanna River Basin Commission (SRBC) had given its approval for said construction—something required by law. So the SRBC slapped them with a fine:
Under a settlement agreement between Southwestern and the commission, which was approved by both sides, Southwestern was required to make a $50,000 “payment in lieu of a penalty” to the commission.*
MDN firmly believes drilling companies need to be responsible and follow the rules, especially since the issue of drilling has been so distorted by anti-drilling propaganda. On the other hand, was this just an oversight on Southwestern’s part? Did someone not get the paperwork filed properly? Who knows. It does seem to be a case of “Simon Says” or “Mother May I?” Since the SRBC didn’t give the go-ahead, Southwestern was fined. Now that the paperwork is filed, have they gone ahead with construction at the site? Did the SRBC find any problems with the application once it was reviewed?
So, is SRBC’s action vigilant oversight of the public interest? Or a shakedown? You decide.
Last year, Susquehanna County landowner Herbert Kilmer sued ElexCo Land Services Inc. and Southwestern Energy Production to invalidate his lease. The reason? He said that by deducting drilling costs from his royalty payments, his payments fell below Pennsylvania’s law that a minimum one-eighth share of royalties are guaranteed to the landowner. A Susquehanna County judge ruled against the landowner and in favor of the energy companies. Other people started filing lawsuits, so the energy companies asked the PA Supreme Court to take up the matter. The Supremes did, and today they also ruled in favor of the energy companies:
Pennsylvania’s high court sided Wednesday with the natural gas industry in a dispute with landowners who had sought to invalidate the leases they signed before the Marcellus Shale rush intensified and drove up land values.
In a 6-0 decision, the Supreme Court upheld a Susquehanna County judge’s ruling that validated lease agreements that subtract drilling costs from the calculation of landowners’ natural gas royalties.
Justice Max Baer, who wrote the court’s decision, noted that the term “royalty” and the method of calculating a one-eighth share is not defined by the state’s Guaranteed Minimum Royalty Act. However, he cited various texts on the industry that say a royalty is paid from the net amount remaining after deduction of certain production and well development costs.*
This case will now force similar pending cases to be settled or dismissed. Landowners beware: (1) There is no such thing as a “standard” contract, and (2) Always have an attorney review a lease agreement first.
Colleges in Pennsylvania are adding programs to train workers for Marcellus Shale jobs. And a lot of workers will be required. MDN wrote about the presentation by Larry Michael (Pennsylvania College of Technology, PCT) and James Ladlee (Penn State Cooperative Extension) at the Binghamton Natural Gas Development Summit and their study that says every well drilled translates into 12 full-time jobs. Larry and James helped establish the Marcellus Shale Education & Training Center at PCT in Williamsport, where they are training students for a variety of careers:
Careers include welders, construction workers, drivers and machine operators and fabricators.Tracy Brundage, [PCT’s] managing director of the Workforce Development and Continuing Education programs, said that as the landscape of the Northern Tier changes, so too do course offerings at the college.
She said input from energy companies has been influential in the design of 21 new courses.*
In Scranton, Lackawanna College established an applied science degree in Oil and Gas Production Technology program in December 2008.
To prepare potential employees for [Marcellus-related gas] jobs, Lackawanna College offers an associate’s degree in natural gas technology and is developing an operating and maintenance degree program in compression technology that could debut next fall.
In addition, the college will soon start giving accounting students at its Towanda Center the option of customizing their degree to prepare them to work in the accounting side of the natural gas industry.
Last week, Chesapeake Energy donated $50,000 to help Lackawanna College expand its Natural Gas Technology Program at its New Milford Center campus in Susquehanna County. The college plans to use the money for capital-equipment costs in fitting out their new facilities for the program that began last fall.*
As drilling in the Marcellus Shale continues to expand in Pennsylvania (and when it finally begins in New York), many thousands of new jobs will need to be filled by local people. And those people will need to be trained. Forward-thinking colleges and technical schools are expanding now to meet the demand.