Marcellus & Utica Shale Story Links: Fri, Dec 6, 2013

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

New York

Cuomo’s “Just Stand There” Policy on Fracking Explained?
Natural Gas Now
Cuomo isn’t leading New York State on the fracking issue, doing something to move things forward. Rather, he has opted to just stand there. Worse, he has instructed his department heads to stand in the closet where no can see or talk to them. Anyone seen Joe Martens lately? Shah, the Health Commissioner, was last seen leaving on a jet plane to parts yonder to collect information already available from his own department’s work. The real Cuomo government is an inner circle of advisors who decide everything of importance depending upon its value in electing him again. They see no short-term value in demonstrating leadership on fracking, so it isn’t happening. Still worse, Cuomo’s closest advisors are deeply influenced by ideologues of the far left who are happy to frustrate any progress on fracking. One of those advisors, indeed the closest outside of family, is State Operations Director Howard Glaser and, as Fred Dicker reported back in May of this year, Glaser is married to Karen Hinton, whose public relations and lobbying firm has been representing a group of South Americans suing Chevron.


City Council takes stand against injection well
Athens News
Athens City Council unanimously resolved Monday night to join opposition to the state’s granting of a permit for a new oil and gas drilling waste injection well for eastern Athens County near Torch. The West Virginia-based K&H Partners submitted a permit application to the Ohio Department of Natural Resources (ODNR) in late July, seeking to open the well on a site near one of its existing injection wells. Opponents of this and other injection wells express serious concerns about the risk of air and water contamination from wastes that contain toxic chemicals. The Athens County Commissioners held a meeting last month to gather input on the proposed well, where a number of citizens spoke out in opposition. A relatively mild earthquake Nov. 20, the day after the meeting, ignited debate as to whether this seismic activity was due to drilling and injection well activity.

Ohio shale gas boom closer than many realize
Cleveland Plain Dealer
The old story that Ohio could be the Saudi Arabia of gas is beginning to look like more than just a pipe dream. The latest available drilling and production data shows that only a fraction of the horizontal wells drilling into Ohio shale are producing. Most of the wells are waiting for the completion of new pipelines and new processing facilities. In the last two years, companies building these facilities and “gathering lines” have pumped as much as $12 billion into Ohio, said Peter MacKenzie, vice president of operations for the Ohio Oil & Gas Association. MacKenzie was one of three experts to address some of the more than 1,500 people who attended the association’s annual exposition at the IX Center. The expo also drew 212 exhibitors. Using publicly available data, MacKenzie said that as of Nov. 2, the state had issued 363 new drilling permits for shale. Producers had drilled 337 wells, he said, but only 174 wells were actually producing – each well averaging 4.3 million cubic feet of gas per day and 302 barrels of oil.

Utica shale: Morgan County joins the permit list
Farm and Dairy
Morgan County is getting into the shale drilling game. According to the Ohio Department of Natural Resources, three permits were issued for horizontal drilling in the Utica shale in Morgan County in November. The permits, the first permits issued for Morgan County, went to PDC Energy Inc. for a site in Center Township.

Carroll County: How fracking changed our town
BBC News
Two years ago the American state of Ohio started to experience a boom in the shale gas drilling industry. At its heart is Carroll County where residents of a small town there explain how the process called fracking has changed the economy and lives of their community. The BBC’s Peter Marshall discovers what lessons might be learned for the people of Lancashire and Greater Manchester where a similar process could be allowed.


$720 million sale of EQT assets to People’s Natural Gas approved
Pittsburgh Post-Gazette
The $720 million deal that will end EQT Corp.’s legacy as a utility company and transfer its gas distribution business to Peoples Natural Gas is a go. The Federal Energy Regulatory Commission approved the transfer of assets in three actions this week, completing the companies’ approval process. The Pennsylvania Public Utility Commission and West Virginia regulators gave their consent earlier this year. The deal is expected to close by the end of the year. EQT will use the proceeds from the deal to grow its oil and gas exploration and production business, the company has said.

Riding the Fracking Wave All the Way to China
National Journal
Flush with new production thanks to the fracking revolution, the natural gas industry is hoping to send some of its supplies overseas, and bring back some cash back to America’s shores in the process. But if the industry is to move exports beyond the current trickle, it will have to overcome some formidable political and regulatory hurdles—and do it quickly. But getting natural gas from Pennsylvania to the Pacific Rim is no easy trick. To be moved overseas, it has to be converted to a liquid form and loaded onto oceangoing tankers. That process requires building liquefied-natural-gas terminals that are expensive, controversial, and difficult to get approved. Constructing an export facility costs about $5 billion, McGill said, and it requires navigating a complicated permitting process. To get approval for a terminal, a company needs permission from a pair of formidable federal bodies: the Energy Department and Federal Energy Regulatory Commission.

Minimum Gas Royalties Not Divisible In Pennsylvania
The Pennsylvania Superior Court recently held in Southwestern Energy Production Company, et al. v. Forest Resources, LLC, et al. that an “assignment back” clause that results in a lessor’s net royalty being less than one-eighth violates the Pennsylvania Guaranteed Minimum Royalty Act (GMRA). The GMRA requires oil and gas leases to provide a minimum one-eighth royalty. Under the terms of a lease, the lessor in Southwestern Energy was to receive the statutory minimum one-eighth royalty. The parties subsequently amended the lease, modifying the royalty provision so that the lessor retained 50% of the royalty and assigned the remaining 50% of the royalty to the lessee to pay for marketing costs. Although the court found little authority regarding the technical requirements for compliance with the GMRA, it found that the intent of the statute was to clearly protect the lessor. It reasoned that the GMRA applies to both leases and other agreements, including amendments, and that it compels a “guarantee” of at least a one-eighth royalty. Accordingly, it concluded that a lease that contains an assignment back clause that does not guarantee the statutory minimum royalty violates the GMRA.


1 Sign Chesapeake is Serious About Financial Discipline
The Motley Fool
Energy exploration and production companies hedge their oil and gas production for a few main reasons. First, hedging allows an effective way of mitigating commodity price risk by locking in the future prices of oil or gas. Given the high degree of volatility in commodity prices, most companies choose to hedge a portion of their oil and gas production for at least the current year, and usually longer. Second, hedging is often used to stabilize a company’s cash flow in order to ensure it can cover its fixed operating expenses. In Chesapeake’s case, this is crucial because of its tight financing situation. Indeed, one of the company’s biggest priorities is balancing its capital expenditures with cash flow from operations, while also reducing financial risk and complexity.

Shale gas multiplier: Benefits abound for plastics makers
American Chemistry MATTERS
The plastics industry will harvest an abundance of economic advantages from robust and inexpensive supplies of shale gas, including a reduced dependence on foreign energy and a manufacturing resurgence in the United States. These were just several of the upbeat messages from speakers at the inaugural SPI/IHS Global Plastics Summit recently held in Chicago. “One clear benefit is jobs,” Greg Jozwiak, North America commercial vice president, Dow Packaging and Specialty Plastics, said. The “shale gale” could produce 485,000 petrochemicals-related construction jobs as well as 55,000 resin production jobs.

A Good Couple of Weeks for America’s Oil & Gas Industry
In California, a tiny cadre (less than 2 dozen) of radical anti-Fracking protesters has taken to following Governor Jerry Brown around to speaking engagements and other public appearances and shouting catchy slogans and displaying goofy signs. Ok, that really isn’t ‘news’ per se, since that is, after all, essentially all these people know to do. No, the ‘news’ here is that the news media in California appear to be catching onto the gag, as evidenced by this editorial run by the Fresno Bee on December 3. Rather than just run the typical report on the fact that the protesters were there, with the obligatory accompanying photo that is carefully cropped in order to avoid showing readers just how tiny this group really is, The Bee instead examined what exactly these folks want to do, and analyzed how utterly absurd their views are. Thus, the title of the piece is “Call for fracking moratorium is sheer nonsense”, which is likely the nicest thing the editors of the Bee could think to say about it.

Call for fracking moratorium is sheer nonsense (Editorial)
Fresno Bee
It appears that some environmentalists won’t be satisfied until every Californian is standing in the unemployment line. We say this because of the continued call by environmentalists for a moratorium on hydraulic fracturing — more commonly known as fracking — in California. Fracking is the process of injecting water and chemicals into the ground to break up rock and pull out oil. With the Monterey Shale Formation, much of which is in the San Joaquin Valley, our state is thought to have the largest shale oil deposits in the United States. The U.S. Department of Energy estimates that the Monterey Shale could yield 15 billion barrels of oil — or more.

Weld County, Colorado: Ground Zero In The Anti-Fracking Battle
In the last election, four Colorado cities voted to ban hydraulic fracking: Boulder, Broomfield, Loveland, and Fort Collins. Anti-fracking proponents promise to take their campaign statewide. Self-described ‘fractivist’ Shawn Davis stated “This is not an anti-fracking fight anymore, it’s a civil rights movement. Our civil rights to safety and protection have been taken away from us.” Davis represents organizations like Sierra Club, which oppose all fossil fuels, including natural gas. Anti-fracking bans have been enacted in New Jersey, New York, and Vermont, and in 400 cities around the country. The battle is between groups who would ban fracking and those who support state regulation of the industry. Six states have enacted regulation of hydraulic fracking: California, Colorado, Ohio, Pennsylvania, Utah, and Wyoming. A seventh state, Alaska, will consider the legislation in the current session.

MAPI Report: Surprising Turnaround for Oil and Natural Gas
Manufacturers Alliance for Productivity and Innovation (MAPI)
According to a new report from the Manufacturers Alliance for Productivity and Innovation (MAPI) prospects are bright for the U.S. oil and natural gas sectors. In “Breaking Good: The Outlook for Oil and Natural Gas,” MAPI Senior Economist Don Norman notes a number of factors involved in an optimistic forecast. “The surprising turnaround in the U.S. energy outlook is due in large part to the coupling of hydraulic fracturing with directional drilling as well as declined petroleum consumption resulting from increased energy and automobile efficiency,” Norman wrote in the report. “Renewable energy in the form of wind, solar, and biofuels has also contributed to the improved energy outlook, although the importance of renewable energy will become more apparent over time.”

GE CEO says no plans to buy oil or natural gas producer
General Electric Co has no plans to buy an oil or natural gas producer, Chief Executive Jeff Immelt told Reuters on Thursday. Ever since the conglomerate bought oil pump maker Lufkin earlier this year for nearly $5 billion, speculation has swirled on Wall Street that Immelt was itching to buy an energy producer amid the fast-paced growth of the North American shale boom. “No, no plans to at all,” Immelt said in an interview on Thursday after a forum hosted by Esquire magazine in New York. During the forum, Immelt said that with a hypothetical $10 billion, he would pursue several growth projects, including “buying an oil and gas company.” When asked to clarify, Immelt said he would prefer buying energy-related companies that expand GE’s portfolio of pumps, jacks and other products, and melding them with new technology to allow energy companies to extract more oil and natural gas.


Opec losing control of oil prices due to US fracking
BBC News
Until recently, there were concerns the world would run out of oil and gas – but the development of hydraulic fracking has diminished those fears. The US is producing more oil than it imports and this is seriously denting oil-producing countries’ export earnings. For many years, the Opec cartel was able to manipulate prices through their grip on supply – however, many forecasts now suggest that in Europe the price of Brent crude may soon fall below $100 a barrel. Nigel Cassidy reports…

U.K. won’t turn back on shale gas
British Chancellor of the Exchequer George Osborne said during an economic address Thursday his government shouldn’t turn away from shale natural gas. Osborne delivered his so-called Autumn Statement, offering his latest assessment of the state of the British economy. He said the British economy is expected to grow by 2.4 percent next year, compared with the current rate of 1.8 percent. On energy issues, the chancellor said he was proposing a new tax allowance to encourage investments in the country’s emerging shale natural gas sector. “The country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy like shale gas because it’s all too difficult,” he said in his address. The British government in 2012 lifted a ban on hydraulic fracturing, a controversial practice known also as fracking. A ban was enacted after small tremors were reported during fracking operations.