PA DEP Finalizes Onerous New Drilling Regs, Industry Opposes

fireworksMajor changes are on the way for Pennsylvania’s conventional (vertical) and unconventional (shale/horizontal) drillers. In 2011 PA began a process that’s gone on way too long, to update certain regulations that apply to oil and gas drillers known as Chapter 78 of the 1984 Oil and Gas Act. Along the way the PA legislature decided there should be separate rules governing conventional and unconventional drilling–so Chapter 78 has become Chapter 78 (conventional) and 78a (unconventional). PA was close to adopting the new rules at the end of the Tom Corbett administration but then he lost his bid for re-election, throwing the process into turmoil once again with newly elected Tom Wolf and his PennFuture buddies wanting to put their own stamp on drilling regulations in the Keystone State (see PA DEP Sec Quigley Pulls a Fast One, Changes Drilling Rules). Yesterday the Dept. of Environmental Protection (DEP) released the final draft version for both Chapter 78 and 78a (copy below). Last week the group that will consider this new draft for conventional drilling, the Conventional Oil and Gas Advisory Committee (COGAC), preemptively said they would vote against adopting the draft (see PA DEP Sec Quigley’s Own Committee Appointees Turn Against Him). PennFuture DEP Sec. Quigley said, “COGAC’s opposition will not hinder the progress of the final rule, and I hope when they meet in August that they are prepared to engage with us as we finalize the rule.” In other words: “Screw you, I’ll do what I want to do anyway.” We predict fireworks at the COGAC meeting on August 27 in Harrisburg…
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MarkWest to Build $1B OH Utica Dry Gas Gathering System for Ascent

Although it seems there is no end of bad news in drilling company financials right now, here’s a spot of good news: MarkWest Energy, the premier midstream/pipeline company in the Marcellus/Utica (selling itself to Marathon Petroleum), has just announced they are investing $1 billion over the next three years to install a new gathering pipeline system in eastern Ohio–particularly in Belmont and Jefferson counties–mostly for Ascent Resources. Ascent, backed by major investor EMG, was once Aubrey McClendon’s subsidiary company called American Energy Appalachia Holdings that has since broken free of McClendon and American Energy Partners and is now its own 100% standalone company. The MarkWest/Ascent deal is to build a 250-mile pipeline system in the Utica dry gas region that will gather more than 2 billion cubic feet per day (Bcf/d) of natural gas not only from Ascent, but also from other producers in the area. Here’s the details from MarkWest…
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AG Kathleen Kane’s Defense: Dirty Old Men are Out to Get Me!

On Monday MDN told you that Kathleen Kane, Pennsylvania’s anti-drilling Attorney General, had been arrested and fingerprinted on a felony charge of perjury, plus various misdemeanor charges (see PA’s Anti-Drilling AG Kathleen Kane Arrested, Fingerprinted). We told you the charges against Kane have nothing to do with the Marcellus industry that she so zealously persecutes, but we’ll be darned if the Marcellus, in a roundabout way, hasn’t crept into this ongoing saga. Yesterday Kane held a press conference where she a) avoided responding to or commenting on the very serious charges against her, and b) instead claimed people are out to get her because of a case her office prosecuted last year in which she found, in going over old emails from before she took office, that some state employees swapped pornographic emails using government computers. That case that led to the resignation of a state Supreme Court judge and also the resignation of then-Secretary of the Dept. of Environmental Protection Chris Abruzzo (see PA DEP Sec. Chris Abruzzo Resigns Following Porn Email Scandal). Abruzzo was liked by the Marcellus industry. Kane’s performance yesterday was, frankly, sad and somewhat bizarre. It appears the pressure is causing her to self-destruct right before our eyes. Her “defense” was not a denial that she leaked privileged information to a reporter in an act of revenge against a subordinate (something a grand jury indicted her for)–but that dirty old men are mad that she snooped through their emails, and now they’re out to get her. Kane’s solution? Release the “filthy” emails to distract everyone from her own crimes…
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Eclipse Resources 2Q15: Revenue Up, Bleeding Less than Last Year

Eclipse Resources, a smaller but important Utica/Marcellus driller based in State College, PA (but mostly drilling in eastern Ohio) released an operational but not financial update at the end of July (see Eclipse Resources Releases Operations but not Financial Update). We noted at the time that typically the operations update is the “good news” and the financial update would likely be the “bad news.” Eclipse released their financial update yesterday and hey, contrary to other companies, the news is pretty good. Let’s get the bad news out of the way first: Yes, they lost money in second quarter 2015–$42.0 million. But the net loss was much less than 2Q14 when it was $112.6 million. The good news? Revenue was up 181% to $73.4 million (amidst a price collapse over the past year), net production was up 374% to 198.6 million cubic feet equivalent per day (MMcfe/d), and Eclipse increased their estimates of production for 2015 by another 5% over last year…
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EXCO Resources #1 Stockholder and his “Distressing” Investment

EXCO Resources, a sizable independent driller with operations in several shale plays including the Marcellus Shale, is a company in trouble. The price of EXCO’s stock has dropped 96% during the last 5 years, 71% since the beginning of this year, and 86% during the last 12 months. EXCO appeared on David Fessler’s “Death List” of oil and gas companies earlier this year (see 19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica). In April, EXCO experienced a major shake-up and saw the installation of new leadership managing the company and new members on the board of directors (see Bluescape Pulls Strings Installs New CEO, COO at EXCO Resources). The numbers for second quarter weren’t so hot (see EXCO 2Q15: Marcellus Production Down 23%; Net Income Down 1,991%), and the New York Stock Exchange has put the company on notice their stock is about to be de-listed (see More Trouble for EXCO Resources – NYSE Threatens to De-List Stock). We ran across an interesting reference to who owns the most stock in EXCO. Turns out the #1 stockholder is Wilbur L. Ross, Jr., founder of private equity firm WL Ross & Co.–someone known for investing in “distressed” companies. How much EXCO stock does Ross own and how much value has that stock lost for Ross?…
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Hilcorp Enclosing PA Compressor Station to Please the Neighbors

Hilcorp Energy is doing the right thing in Lawrence County, PA. Back in June, MDN told you the story of residents living near a compressor station owned by Hilcorp in Mahoning Township, Lawrence County (see Tackling a Tough Issue: Compressor Stations Near Populated Areas). Residents living near the compressor station said the noise level is intolerable. It took a few months, but Hilcorp has agreed to build a new structure around the compressor station lined with special noise-deadening blankets that should take care of the problem. Kudos to Hilcorp for doing the right thing for the neighbors on Baird Road…
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Summit County, OH Judge Denies NEXUS Request to Survey Properties

Last week NEXUS Pipeline filed court cases against landowners in Summit County to force them to allow NEXUS surveyors access to their property (see NEXUS Pipeline Files Lawsuits for Survey Access in Summit County). The City of Green and other municipalities have stirred up so much resentment against NEXUS that the pipeline company is forced to send armed security guards out with their surveyors, fearing for their safety (see NEXUS Pipeline Sends Armed Guards with Surveyors to Protect Them). Although NEXUS needs access to survey so they can complete their application with the Federal Energy Regulatory Commission, a Summit County judge yesterday denied the request by NEXUS, setting up a court battle in October…
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Moody’s: NatGas Will Trump Coal & Nuclear in PJM Electric Auction

Increasingly the natural gas and electricity markets are becoming bosom buddies. Why? Because natural gas is displacing coal and even nuclear power as the preferred fuel to power electric generating plants. This is a profound change happening right now–important for you to understand as it will play a key role in new markets for Marcellus/Utica Shale gas now and into the future. Lesson #1: PJM Interconnection is a regional transmission organization (RTO) coordinating the movement of wholesale electricity in all or parts of 13 states and the District of Columbia (essentially Appalachia). PJM’s electric transmission grid covers all or parts of: Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Electricity moving through those areas is coordinated by PJM–meaning new electric generating plants that get built, or existing plants that get upgraded/converted to burn other fuel sources, must go through a PJM approval process. From time to time PJM conducts capacity auctions to increase the amount of, and reliability of, electric supply for the grid. PJM is currently conducting such an auction, and according to a new research report from Moody’s Investors Service, coal and nuclear electric generating plants will likely lose out to natural gas-fired electric plants thanks to the low price of Marcellus Shale gas…
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NatGas Gensets Market Worth $147B Over Next 10 Years

Just when you think you’ve heard all of the various markets where natural gas is used, markets that will sop up the huge increase in supply we have, you hear of a new one. At least, it’s new to us. On MDN you’ve read many times about electric generating plants that burn natural gas to generate electricity (see our list of stories here). There is another, similar, market called natural gas gensets, or generator sets. Essentially gensets are smaller electric generating “plants”, from 15 kilowatts to 20 megawatts in size, used by homes, businesses and utility companies. Many times gensets are used as backup and standby generators (think backup generator at your local hospital where power interruption is literally a life or death situation). Navigant Research has just published a report that estimates the market for natural gas gensets will expand to $147 billion (yes, billion) over the next ten years. Looks like big backup generators are going natgas!…
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