ODNR Ticks Off Anti-Drilling Sierra Club with Drilling PR Plan

memoIn August of 2012 staffers at the Ohio Dept. of Natural Resources (ODNR) made a boo-boo. They put into writing (in the form of a 13-page memo, embedded below) a draft plan to promote Utica Shale drilling under (not on) Sunfish Creek State Forest (in Monroe County), under (not on) Barkcamp State Park (in Belmont County), and under (not on) Wolf Run State Park (Noble County). The memo begins by saying there will be a communications problem to solve: “An initiative to proactively open state park and forest land to horizontal drilling/hydraulic fracturing will be met with zealous resistance by environmental activist opponents, who are skilled propagandists. Neutral parties in particular — such as ordinary citizens concerned about their families’ health — will be vulnerable to messaging by opponents that the initiative represents dangerous and radical state policy by Gov. Kasich.” (emphasis original) The memo states later on that, “Anti-fracking activists will attempt to legally and physically disrupt or halt the drilling projects, including staging dangerous protests on state lands. (This will require sustained legal countermeasures and crisis readiness by ODNR.)”

May we translate? Groups like the Sierra Club lie to people about the drilling issue–and they sometimes engage in bullying (and violent) behavior. Of course the Sierra Club liars are just a bit miffed at being called out as liars and bullies–by no less than a state agency charged with regulating oil and gas. So they are on the offensive. The first thing the Sierra Club and similar groups will do (are doing) is to get their buddies in the slavishly devoted mainstream media to pick up their “ODNR are scumbags” meme and run with it. The second thing is they will use the ODNR memo in fundraising letters, which is really what the shale drilling issue is for them–a big, fat fundraiser…
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OOGA Actually Surprised at Double-cross in Severance Tax Deal

This one is really kind of funny. The Ohio Oil & Gas Association (OOGA) made nicey nice with Ohio’s Republicans in Name Only (RINOs), and supported a small, modest, ever-so-tiny severance tax increase (that we lambasted here: OOGA Caves, Endorses New Higher Tax on OH Utica Shale).

Even before the ink was dry and before the proposed law is brought up for a vote, those same slimy RINO politicians have done a double-cross and raised the tax rate in the bill. And OOGA is actually surprised! We hate to say we told you so (but we did)…
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New Wastewater Injection Well Approved in Clearfield County, PA

The federal Environmental Protection Agency has approved a new injection well in Clearfield County, PA. Windfall Oil and Gas received the permit allowing them to build an injection well in Brady Township that will pump wastewater from oil and gas drilling, including shale drilling, some 7,300 feet down for permanent disposal. (Self-serving advertisement: For a complete list of existing PA injection wells used by Marcellus drillers, see the just-published Marcellus and Utica Shale Databook, Volume 3.)

Clearfield County is located roughly in the center of the state, so it’s a good location for both northeastern and southwestern shale drillers. Here’s the details about this newest injection well coming to PA:
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Do PA Drillers have Law on Their Side in Royalty Debate?

A sharp MDN reader, John S., emailed MDN to remind us of how PA landowners ended up in the quagmire they are now in with regard to royalties with drillers (like Chesapeake) deducting post-production expenses from what they pay to landowners. We had forgotten about the Kilmer v ElexCo Land Services case from March 2010 in which the PA Supreme Court ruled that drillers could indeed deduct certain post-production expenses without violating the law that says landowners must be paid a 12.5% minimum royalty (see Breaking News: PA Supreme Court Rules Against Landowner Seeking to Invalidate Lease).

PA Gov. Tom Corbett wrote a letter to Doug “the ax” Lawler at Chesapeake telling him the company’s royalty calculations were unfair at best, and perhaps illegal. Doug just has to point to the 2010 PA Supreme Court case. Here’s more information about the 2010 case and what the decision means, and doesn’t mean:
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EQT 2013 Year in Review: Proved Reserves Up 38% from 2012

EQT became the latest driller to announce huge volumes of proved reserves in the Marcellus and northeast shale plays–8.3 trillion cubic feet equivalent, to be exact. That’s up 2.3 Tcfe (or 38%) from just a year ago. Total proved, probable and possible (3P) reserves by end of 2013 stood at 36.4 Tcfe, an increase of 10.5 Tcfe, or 40%, over the 2012. They also doubled net income during 4Q13 over 4Q12. Clearly this is a company on the grow–particularly in the Marcellus.

Here’s a look back at EQT’s stellar 2013, by the numbers…
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Marcellus Gas Production for Norwegian Statoil Now 660 Mmcf/d

A semi-retired engineer who dabbles with investing wrote an interesting article appearing yesterday on the Seeking Alpha investor’s website about Statoil, a Norwegian multinational oil and gas company. One of the “short-term catalysts” mentioned in the article is Statoil’s investment and activity in the Marcellus and Utica Shale. We found his quick-take (and charts) on Statoil’s northeast activity an interesting and useful update on what the company is doing here in our neck of the woods. The Marcellus/Utica is growing in size and importance for Statoil.

Here’s a quick update on Statoil’s activity in the northeast:
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KY Natgas Pipeline Explosion Used to Fight Bluegrass NGL Pipeline

Last Thursday a section of the Columbia Gulf Transmission Line 200 30-inch natural gas pipeline exploded in rural northern Kentucky (Adair County). These kinds of things unfortunately do happen from time to time. Two people were slightly injured (treated and released). Two nearby houses were destroyed. Emergency shut-off procedures worked. The cause is still not known and nearly a week later the story has all but disappeared from the news.

Although an accident and tragedy, the real damage (potentially) is for the Bluegrass NGL pipeline that Williams is trying to build through Kentucky. The Bluegrass is already facing stiff opposition, as we’ve written about a number of times (see Bluegrass NGL Pipeline Hits Brick Wall in the Bluegrass State). Williams felt it necessary to invoke eminent domain because of the problems they’ve faced in Kentucky, a decision that’s still tied up in court (see Bluegrass NGL Pipeline’s Eminent Domain Challenged in KY Court). Those opposed to drilling and the Bluegrass pipeline will no doubt shamelessly use the Columbia pipeline explosion as fuel for their cause…
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The Complex Issue of Ethane – Pipelines, Cracker Plants & Exports

Ethane–a natural gas liquid (NGL)–is bountiful in parts of the Marcellus and Utica Shale. So bountiful, it’s causing problems. Until very recently, ethane was considered a waste product. You either had to burn it (increasingly hard to do because of regulations), or blend it with methane. It has been a cost center when in fact ethane is normally a profit center–something that makes drillers money. But you can only make money on it if you can get it to market.

Enter several ethane-specific, and coming soon, NGL pipelines that can carry ethane (and other NGLs) to the Gulf Coast, Canada or Philadelphia for processing and sale. The problem is, if you don’t have a long-term contract on one of those pipelines, you’re hosed. Your competitors are making money on ethane while you’re still spending money on it. That, in a nutshell, is why two regional ethane cracker plants are so desperately needed (Shell’s cracker plant in Beaver County, PA and Odebrecht’s cracker in Parkersburg, WV). The Pittsburgh Tribune-Review took an in-depth look at “the ethane issue” last Friday. It’s a good article providing us with insights into the complex issue of what drillers can/should/are doing with ethane:
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Cleveland Suburb’s Socialist Model for Restricting Utica Drilling

Is Utica Shale drilling on the way to the Cleveland, OH area? It is if you listen to the mayor of the Cleveland uppity suburb of Gates Mills. Mayor Shawn Reilly wants landowners in Gates Mills to lock themselves into restrictive land trust deals–you know, to “manage” all that nasty, evil drilling if/when it gets there–in an estimated 10-12 years. This is not your typical landowner coalition being suggested. The good mayor wants landowners to sign over their mineral rights (via deed) to a “trust” managed by people appointed by the village (copy of the proposal embedded below). MDN’s advice to landowners in Gates Mills–run! Absolutely do not assign your mineral rights to a socialist organization that will not have your best interests at heart.

Here’s an article full of errors–like it takes 200 acres for a horizontal drill pad, when it actually takes about 20 acres…
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MDN Quoted in Bloomberg News Article on Dan Rice & Rice Energy

You may think by reading MDN for any length of time that it’s primary writer, Jim Willis, is a bit of a braggart–a show-off–given that he writes exactly what he thinks, even when he knows it may not be popular or what a majority of others think. He doesn’t do it purposely to be controversial, and Lord knows he doesn’t seek the limelight or attention. Jim simply wants to get the truth out about shale drilling in the northeast and combat the untruth he perceives is rampant on the vital issue of Marcellus and Utica drilling. He likes to think of himself as a humble guy (don’t laugh!). So he feels a bit uncomfortable bringing you this news, but figures if he doesn’t share it, no one else will.

Last Monday, Feb. 10, Jim was called by Bloomberg News reporter Brendan Coffey to ask about MDN’s articles and knowledge on Rice Energy and Dan Rice III. Jim happily accommodated Mr. Coffey and chatted with him for about 20 minutes. Mr. Coffey mentioned that he may quote MDN in the article. Whereupon Jim pretty much forgot about it. But then last Thursday, Feb. 13, Coffey’s article turned up on the Bloomberg wire and low and behold, MDN (and Jim) were mentioned pretty high up in the article. Here is that article:
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