Last month MDN released Volume 3 of the Marcellus and Utica Shale Databook. We predicted something in the ‘Drilling Update’ section that Databook readers have now known for a month—that Pennsylvania would hit the 2 trillion cubic feet of natural gas production milestone for 2012. The exact quote from the Databook, published at the end of January: “Pennsylvania, which just passed 1 trillion cubic feet of shale natural gas production in 2011, will double that and hit 2 trillion cubic feet of production for 2012. In addition, we believe Ohio’s Utica Shale will achieve 67 billion cubic feet of production for 2012.” We also predicted: “WV will likely double production again, so we’re estimating they will show an increase to 455 bcf for 2012.” (Databook Volume 3, page 10)
We don’t yet have 2012 final numbers for OH and WV, but our prediction for PA was spot on and is now verified by the latest reports just released by the PA Dept. of Environmental Protection:
The deal by CONSOL Energy to lease 9,000 acres owned by Pittsburgh International Airport for shale gas drilling is a done deal. Yesterday the Allegheny County Council voted to accept the deal. A few nut job protesters turned up in gas masks (as is their way). The vote was 9-4 in favor of the deal. Once County Executive Rich Fitzgerald signs it, the Airport Authority will receive a check for $50 million.
Politicians in Brunswick, OH (near Cleveland) are about to learn a lesson the hard way. The Brunswick City Council intends to pass a resolution that calls shale gas drilling “risky” and asks the state legislature to allow local municipalities to ban it—the implication being they want to ban it in Brunswick. The resolution is outright anti-drilling and hostile to the drilling industry. If it passes, a large local company that’s been located in the city for 100 years says they’ll leave and take a huge chunk of tax revenue with them.
Philpott Rubber held a press conference to discuss their very serious threat. Philpott provides “environmentally friendly” products and services for shale drillers through their subsidiary Philpott Energy & Transportation Company. Philpott is planning a major expansion of their business due to an increase in drilling. If Brunswick persists in passing the resolution, Philpott will build a new wholesale operation outside the city, denying the city a boatload of tax money.
Have an extra $400 million to spare? Rice Energy is looking for investors to help it develop their “significant holdings” in the Utica Shale. Rice Energy was founded by Dan Rice, the single most successful mutual fund manager in the United States over the past 10 years. Because the company he worked for, BlackRock, screwed up and didn’t tell investors about Dan’s extra circular activities with Rice Energy, they fired him last summer (see BlackRock’s Screw-up with Dan Rice & Rice Energy). Nice company.
Here’s the story about Rice Energy’s hunt for new investors for the Utica:
Pennsylvania State Rep. Jesse White (Democrat from Cecil, PA) held a hearing yesterday in Washington, PA that took aim at practices by the state Dept. of Environmental Protection (DEP) over how they test (or don’t test) and report (or don’t report) on water supplies near active shale drilling locations. The DEP was invited to attend their own roasting but declined, calling White’s hearing political theater, unproductive, unprofessional and a waste of time (see PA DEP Not Attending Hearing on Water Testing Near Shale Drilling).
With representatives from anti-drilling organizations like Earthworks and PennFuture scheduled to testify at the hearing, it’s not surprising the DEP declined to show up just to be bullied. The session was apparently a 2 1/2 hour dump-on-the-DEP-fest:
In Ohio, whether or not a state university like Kent State wants to allow drilling for natural gas on or under their land is up to the administrators of that university. Kent State owns over one thousand of acres of land. The main campus, in Portage County, OH, is over 900 acres by itself. Kent State owns eight campuses, a golf course and an airport—all in the Utica Shale region.
Although there is no official position (yet) coming from Kent on whether they want to lease their land for gas drilling, the administration has said there are “no plans to initiate drilling” on the Kent State campus.
NiSource Inc., parent company and operator of the Columbia Gas Transmission pipeline which runs throughout the northeast including Ohio, Pennsylvania, West Virginia, New York and New Jersey, released their 2012 financial and operating statement yesterday. The update and investor phone call (see presentations below) also provides updates on future plans. Among the interesting highlights: NiSource will spend $1.8 billion on pipeline improvements through 2017.
NiSource is not only pipelining natural gas in the Utica and Marcellus, they’re drilling wells too…
In December, MDN told you about a complex 3-way deal in which Chesapeake Energy sold off its remaining midstream subsidiary (pipelines, compressor stations and processing plants), including midstream assets in the Marcellus and Utica Shale, to Access Midstream Partners. Access immediately turned around and sold 50% of itself to Williams. In essence, Chesapeake sold its midstream assets to Williams using Access as an intermediary (see Chesapeake, Access & Williams in Complex 3-Way Midstream Deal). No doubt there are certain tax advantages to structuring the deal the way they did. The Chesapeake acquisition netted an additional 1 billion cubic feet of natural gas per day for Access.
Access issued its fourth quarter and full year 2012 report yesterday. They spent $735 million and made $478 million in revenue for 2012. Access predicts capital spending in 2013 will be $1.6-$1.7 billion and they expect to make around $850 million in revenue. They predict the revenue number will grow to over $1 billion by the end of 2014, more than doubling revenue from 2012 (in just two years).
West Virginia has a phenomenally complicated taxation structure when it comes to, well, everything—but especially for oil and gas wells. The severance tax is 5%—that’s pretty easy. But WV also has an ad valorem (property) tax for both drillers and mineral rights owners. The way WV calculates the value of income-producing properties takes a tax attorney to figure out. In Marshall County, tax attorney John Mairs represents both Chesapeake Energy and Chevron. Chesapeake has 29 wells in the county and Chevron has 19.
Mairs was successful in getting Chesapeake’s property assessments on their 29 wells reduced by nearly $60 million, but Chevron’s assessment was reduced by only $20 million and that was due to a clerical error at the state level. Here’s the story on how and why the property assessments were modified in Marshall County for these two drillers: