OH Supreme Court: Royalty Deductions Decided Case-by-Case

Gavel-falling.jpgLast year the Ohio Supreme Court accepted a case that will sound familiar to readers of MDN. The case, known as Lutz v. Chesapeake Appalachia, is about whether or not drillers (Chesapeake in this case) is allowed to deduct certain post-production costs from landowner royalty checks. That debate currently rages in Bradford County, PA–as well as other locations across the country. In the Ohio case, the high court was asked to decide whether Ohio follows the “at the well” rule, which permits the deduction of post-production costs, or if the state follows the “marketable product” rule, which limits the deduction of post-production costs under certain circumstances. Drillers and landowners have a lot riding on the decision. The Supremes came down off Mount Olympus yesterday to render their verdict (full copy of the decision below). The court said in so many words, “We’re not deciding.” In other words, each royalty case should be litigated individually, case-by-case, in a trial court. There is no one-size-fits-all with respect to deducting expenses from royalty checks. Each case will depend on how the contract is written, and the success of lawyers litigating it…
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Spectra Energy Changes Strategy re New England Pipeline

MAP-Access-Northeast-V1-02-11-2015
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Spectra Energy’s Access Northeast Pipeline project, a roughly $3 billion project to connect four existing pipeline systems (with enhancements): Texas Eastern, Algonquin Gas Transmission, Iroquois and Maritimes & Northeast, has suffered a string of setbacks. Spectra’s original strategy was to bring natural gas to New England by cutting deals with electric companies who need the gas to produce cheaper electricity at their natgas-fired power generation plants. However, the green environmental Nazis came out in force against the plan, (sadly) aided and abetted by Spectra’s competitors, and those plans are now in ruins with three states blocking any such plans (see MA Supreme Court Ruling Endangers New England Gas Pipelines; NH Regulators Veto Access Northeast Pipeline Contract; and CT Latest New England State to Give Up on NatGas Cooperation). Spectra is not yet ready to give up. They’re changing strategies. Spectra says there are still some electric power generators on board (those that don’t need regulatory approval), and to make up the difference, Spectra is now targeting local natural gas distribution companies (LDCs) as potential customers. Spectra needs customers to sign on the dotted line–committing to long-term contracts–before they can raise the funding and build the project. This change in strategy means the project now won’t go online until 2019. Will the change in strategy actually work?…
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Primus Green Energy’s WV Methanol Plant Online in 2018

Primus Green EnergyIn March MDN brought you the news that Primus Green Energy, a gas-to-liquids (GTL) technology company announced they would build a 160 metric tons per day (MT/day) methanol plant using the company’s proprietary technology at “a manufacturing site in the Marcellus shale region” in 2017 (see Primus Building GTL Methanol Plant in Marcellus Region in 2017). The plant will convert abundant and cheap Marcellus Shale gas into methanol. In May MDN told you the main customer buying the methanol from the plant will be Tauber Oil (see Customer Announced for Primus Green Energy’s GTL Methanol Plant). We have an update on the Primus methanol plant. MDN reader and friend Charles Winslow, owner of The Wells Inn in Sistersville, WV, has written an update indicating where the plant will be built, and providing a status report on progress with the plant…
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Panda Power Raises $710M to Fund 3rd Marcellus Power Plant

Panda Power FundsLast week saw a flurry of activity for the official ribbon-cutting at Panda Power’s very first built-from-scratch Marcellus gas-powered electric plant going online in Bradford County (see First NatGas Power Plant in Marcellus, Panda Liberty, Goes Online). We were so distracted with that momentous event, we almost missed another important Panda announcement: Panda finished securing $710 million worth of investments to fund its third Marcellus gas-fired plant–a huge plant (bigger than Panda Liberty), located in Snyder County, PA. We previously wrote about “Panda Hummel,” a 1,124 megawatt power station that will convert a former coal-fired plant to burn natural gas (see Update on Panda Power’s Huge Marcellus-Powered PA Electric Plant). Hummel will generate enough electricity to power 1 million homes! You can have all the great plans and ideas in the world, but they don’t get built without money. Panda has now raised the money to build Hummel, by selling debt to do it…
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Rice Energy 3Q16: Everything’s Up (That Should Be)

Rice EnergyYesterday one of our favorite drillers in both the Utica and Marcellus, Rice Energy, released their third quarter 2016 update. It can be summarized in one, short phrase: “Everything that should be up is up.” Production is up for the quarter–by a big 23%. Net income is up, by 40%. The company’s line of credit is up to $1 billion (was $875 million). In addition, during 3Q16 Rice floated new stock to help them buy Vantage Energy, for a whopping $2.7 billion. Also during 3Q16 Rice drilled and completed 10 new Marcellus wells, along with drilling and completing 2 Utica wells. In addition they brought another 11 Utica wells online. There’s lots happening at Rice Energy. Here’s the update…
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TransCanada Raising Big $ to Complete Buyout of Columbia Pipeline

TransCanadaTransCanada wants all of Columbia Pipeline–and they want it real bad. Canadian-based TransCanada, famously known for wanting to build the Keystone XL oil pipeline from Canada to the Gulf Coast, didn’t want to be left out of the most important midstream story of the century, so they bought Columbia Pipeline Group–closing on the sale in July (see TransCanada and Columbia Pipeline Tie the Knot Today). At least, that’s what everyone thought. Little known fact: third party investors still own a piece of Columbia. In September TransCanada made an offer to those third party investors to buy them out–so TransCanada can own 100% of the Columbia (see TransCanada Makes Play to Buy “the Rest” of Columbia Pipeline). The original deal cost TransCanada $10 billion (U.S. dollars). The offer made to the investors to buy out the rest was for $848 million U.S. The offer to buy out the third party investors has gone up–to $915 million. In order to pay for everything, both the original purchase and buying out the rest of Columbia, TransCanada announced on Tuesday the company would float another $3.2 billion (Canadian) in new stock and sell off their electric power assets in New England (mostly hydropower) for $3.7 billion (U.S.). TransCanada also announced they now intend to keep full ownership of their Mexico pipelines…
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EXCO 3Q16: Turns a Profit! Marcellus Production Continues to Fall

EXCO.jpgEXCO Resources was once a sizable player in the Marcellus. They still have 145,000 net acres in the Marcellus, with 124 horizontal Marcellus wells drilled and in production. However, EXCO, as we pointed out in March, has pretty much abandoned the Marcellus at this point (see EXCO: No Marcellus Drilling in 2015/2016, NYSE Threatens Delisting). The company was able to slow the bleeding in 2Q16 (see EXCO Still Hammering Midstreamers re Contracts, Bleeding Slowed). What about 3Q16? EXCO finally turned a profit, going from losing $355 million in 3Q15 to making $51 million in 3Q16. Really, an astonishing turnaround for a company razor close to bankruptcy. However, EXCO’s Marcellus/Utica operations are essentially nil. They still produce from their wells, but because they haven’t drilled any new wells, production is steadily declining in the northeast–just 33 million cubic feet per day (MMcf/d), down 23% from 2Q16 and down 30% from 3Q15…
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Stalking Horse – Blue Wolf Hunts Extreme Plastics in Bankruptcy

blue-wolfBlue Wolf Capital Partners is on the hunt to find bargains and believes they’ve found one with Extreme Plastics Plus (EPP). Headquartered in West Virginia, EPP provides oilfield environmental containment services in the Marcellus Shale, Utica Shale, Eagle Ford, Permian Basin and other Mid-Continent sites. EPP specializes in environmental lining, above ground storage tanks, composite rig mats, secondary steel wall containment systems and rig vac systems. EPP has a problem–they are in bankruptcy. Blue Wolf has been selected as the “stalking horse” bidder to buy the company and put it back on its feet…
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31 States Ask Court to Dump Obama WOTUS Rule as Unconstitutional

lawsuitIn May 2015 the Obama rogue Environmental Protection Agency (EPA) along with the Obama U.S. Army Corps of Engineers (USACE) released a finalized rule clarifying what “Waters of the United States” (WOTUS) means vis a vis what can be regulated under the federal Clean Water Act (see EPA Power Grab: Redefines Waters of the U.S. to Include Everything). Essentially the rule change redefines everything down to muddle puddles (we’re not exaggerating) as subject to the federal Clean Water Act. In October 2015 a federal judge stopped WOTUS from going into effect, while it’s litigated (see Sixth Circuit Court Stops EPA from Implementing WOTUS Anywhere). It’s taken a year, but earlier this week 31 states along with other entities filed briefs with the 6th U.S. Circuit Court of Appeals opposing the rule…
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Marcellus & Utica Shale Story Links: Thu, Nov 3, 2016

best of the restThe “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Cove Point LNG to begin exports in 2017; green billionaire Tom Steyer still trying to buy PA elections; New England screws itself re gas access; Dakota Access Pipeline criminal trespassers get pepper sprayed; pipeline woes in Marcellus give the Haynesville an opening; and more!
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