Finally! PA DEP Issues Final Permits for Mariner East 2 Pipeline

Mariner East 2 Pipeline – click for larger version

Game, set and match. Finally, after five circuses, er, a, public hearings, and 29,000 form letter comments, the Pennsylvania Dept. of Environmental Protection (DEP) has issued the final Chp. 105 (Water Obstruction and Encroachment) and Chp. 102 (Erosion and Sediment Control) permits for the Mariner East 2 pipeline project. PA has cleared the project to begin construction–there are no more permits required from PA. However, before the bulldozers start, there is one remaining hurdle: permission from the U.S. Army Corps of Engineers (which under President Trump, is a foregone conclusion). Mariner East 2, as a reminder, is a $2.5 billion, 306-mile natural gas liquids (NGL) pipeline that will run from eastern Ohio through the state of Pennsylvania to the Marcus Hook refinery near Philadelphia. It will flow mostly ethane, but also propane and butane. There have been numerous legal battles and roadblocks thrown up by some of the townships along the route–but that’s now behind us. Oh, there’s still a few troublemakers (see Towns Near Philly Collude with CAC to Block Mariner East 2 Pipe?), but their troublemaking will go nowhere. This has been a long time coming, and a cause to celebrate…
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PennEast Pipeline Gets 401 Water Quality Certificate from PA DEP

PennEast Pipeline proposed route – click for larger version

PennEast Pipeline is reporting a major milestone in getting their project approved: the Pennsylvania Dept. of Environmental Protection last Friday awarded the pipeline a 401 Federal Clean Water Act “Water Quality Certification.” PennEast is a $1 billion, 118-mile, primarily 36-inch pipeline that will get built from Dallas (Luzerne County), PA to Transco’s pipeline interconnection near Pennington (Mercer County), NJ. Although the PA DEP’s water certificate is certainly good news, it comes not long after a continuing cloud over the project–yet another delay by the Federal Energy Regulatory Commission (see FERC Delays PennEast Pipeline Final Review – Again). FERC was supposed to issue a final environmental assessment for PennEast last August. Then it got changed to December. Then it got changed to this month, February. There will almost certainly be a fourth delay as there are now not enough FERC Commissioners to vote on the assessment (since Norman Bay quit in a huff, see FERC Commissioner Resigns Threatening Major M-U Pipeline Projects). However, for now, let’s revel in the current good news for the project…
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Noble Energy 2017: Even with 363K Acres, No New Marcellus Drilling

Noble Energy, a driller with a significant presence in the Marcellus but with a bigger presence in other shale plays, (and operations in other countries and offshore), announced in February that of the four shale plays they operate in onshore in the U.S.–the DJ Basin, Eagle Ford, Delaware and Marcellus–in 2016 they plan to focus on the first three and scale back in the Marcellus, limiting their Marcellus activity to completing previously drilled wells (see Noble Energy Loses $2.4B in 2015; Marcellus Scale-Back in 2016). They followed through on that promise. In November 2016 Noble ended its joint venture deal with CONSOL Energy, with Noble getting 363,000 Marcellus Shale acres in the divorce settlement (see Divorce: CONSOL & Noble Dissolve M-U Joint Venture). Yesterday Noble issued their fourth quarter and full year 2016 update, along with a preview for 2017. What we learned can be summed up as this: No new Marcellus drilling in 2016, and none planned for 2017. However, Noble does plan to complete previously drilled but uncompleted (DUC) wells it has in inventory in the Marcellus…
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EIA Feb Drilling Rpt: Gas Prod. to Hit New Record High in March

Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR). The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month. For the past four reports, estimating production for November, December, January, and February, Marcellus natgas has increased. The trend continues in this latest report, which forecasts production for the coming month of March. In fact, EIA says natgas production for six of the seven major shale plays will go up–by a lot. In fact, if the numbers prove to be true, the combined natural gas production for the seven major plays will hit a new record high of 49.1 billion cubic feet per day (Bcf/d) in March. Two months ago the EIA predicted natgas production in the Marcellus would zoom up by 160 million cubic feet per day (MMcf/d). Last month EIA predicted Marcellus production would go up another huge 188 MMcf/d. This month, it’s even higher: March production will go up 192 MMcf/d! The other big story (for us) is just how much natgas production is rising in the Texas Permian Basin–up another 129 MMcf/d. But wait, the Permian is an oil play, right? Correct. However, more than just oil comes out of the ground–plenty of “associated” natural gas also comes out, along with the oil. The Permian is seeing white hot levels of new drilling. The more oil drilling, the more associated natural gas that comes along with it. Below we have the latest report, long with some analysis…
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PA Lawmakers Push Back Against DEP’s Draft Methane Regs

In December the Pennsylvania Dept. of Environmental Protection (DEP) unveiled new regulations to clamp down on methane emissions and other other air pollution that allegedly comes from shale drilling sites (see PA DEP Releases New Regs re Methane & Air Pollution at Drill Sites). The onerous new regulations, not in effect yet, were originally prompted by bullying from the federal Environmental Protection Agency. Even though EPA pressure is likely to disappear under President Trump, PA Gov. Wolf still intends to push forward with these regulations. After some final tweaks, the DEP released draft versions of the new permits (i.e. regulations) last week, opening them up for public comment over the next 45 days. However, chairman of the Pennsylvania House State Government Committee, Rep. Daryl Metcalfe, sent a letter to the DEP (full copy below) to let the DEP know they have overstepped their bounds in issuing the draft permits. Metcalfe accuses the DEP of “lack of transparency, accountability and judicious use of regulatory authority.” In other words, cease and desist. Another PA legislator, Sen. Guy Reschenthaler, introduced a bill in January that would prohibit PA from adopting regulations that are stricter than federal standards. It seems the DEP has a fight on its hands–from the PA legislature…
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10% of PA Farms Received Avg $154K in Lease/Royalties in 2014

Some farms not only produce products like milk, meat, eggs and/or crops–some farms produce energy. Would it surprise you to learn that in 2014 (the most recent year with stats available), energy companies paid farmers a staggering $2.9 billion for the energy extracted from private farms? The U.S. Dept. of Agriculture posted a brief blurb from their Amber Waves magazine yesterday, recounting stats from a report released last November. The report, “Trends in U.S. Agriculture’s Consumption and Production of Energy: Renewable Power, Shale Energy, and Cellulosic Biomass” (full copy below) points out it’s not just oil and gas extraction that farmers receive income from. Some farmers lease their land for solar and wind generation. Some biomass. However, it was one particular chart and stat that caught our attention: About 9.6% of Pennsylvania farms received energy income in 2014. The average amount received, per farm? $157,000! Almost all of that revenue came from the Marcellus Shale…
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Gulfport Energy’s 2016 Financial Update – Lost Nearly $1B

Gulfport Energy, an Oklahoma City-based independent oil and natural gas exploration and production company (“driller”) that is a “top 5” driller in the Ohio Utica Shale, released their fourth quarter 2016 and full year 2016 operational update in mid-January (see Gulfport Energy 2016 Operational Update – Production Up 31%). Gulfport is part of the growing trend to drop one shoe first, then the other. The first shoe is almost always production and operational information (the good news). That doesn’t mean that the financial information is bad news–but sometimes that’s the case. Gulfport dropped the second shoe yesterday, issuing a full report for fourth quarter and full year 2016–operational and financial. On the financial front, Gulfport lost $980 million in 2016, versus losing $1.2 billion in 2015. So the loss was less, but not by much. In addition to looking back, Gulfport issued some forecasts for 2017, including a drilling budget of $1-$1.1 billion…
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Seventy Seven Energy 2016: Still Bleeding, Just Not as Much

Seventy Seven Energy (SSE) is the former Chesapeake Oilfield Operating company, the oilfield services subsidiary of Chesapeake Energy that Chessy spun out into its own company in July 2014 after it couldn’t find anyone to buy it (see Long Labor & Delivery: Seventy Seven Energy Born Yesterday). It was an ill-fated venture from the beginning. SSE never turned a profit after becoming its own company. In June 2016, SSE, which has major operations in the Marcellus/Utica, filed for bankruptcy, then emerged from bankruptcy two months later borrowing $100 million (see Seventy Seven Energy Pops Out of Chapter 11 Bankruptcy in 2 Mos.). In the third quarter of last year, the red ink continued to flow, with SSE losing $36.5 million. SSE finally had enough and threw in the towel. In December, Patterson-UTI Energy, another oilfield services company with major operations in the northeast, cut a deal to buy out and merge in SSE in an all-stock deal worth $1.76 billion (see Seventy Seven Energy Throws in the Towel, Sells to Paterson-UTI). However, that deal is not yet done and won’t be until mid-year this year. In the meantime, SSE has just released its fourth quarter and full year 2016 update. And yes, the red ink continued to flow, although not was fast as it was…
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WVU Program Converts Stranded Shale Gas into “Valuable Products”

West Virginia University (WVU) has joined a national effort to “turn natural gas into valuable products and do it at the well.” There are many locations in the Marcellus (and Utica) where pipelines don’t yet connect. Wells drilled but not hooked up to production. WVU has joined the newest branch of the U.S. Department of Energy’s National Network of Manufacturing Institutes. Called Rapid Advancement in Process Intensification Deployment institute, or RAPID, the institute “will focus on using advanced manufacturing to develop breakthrough technologies to boost the productivity and efficiency of some of industrial processes by 20 percent in the next five years.” That is, they plan to design modular reactors–think of them as teeny tiny crackers–that can be carted around well site to well site, converting methane, ethane and other hydrocarbons into new chemical products. It’s a very exciting concept. WV in particular has a lot of hilly terrain that makes installing pipelines difficult. This is a potential solution to that problem…
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LNG Co Tellurian Merges With, Takes Over Magellan Petroleum

As we pointed out to you last December, evil corporate raider Carl Icahn (invests in companies so he can fire a bunch of people, boost the stock and pocket the profit) had fired Cheniere Energy CEO Charif Souki (see Evil Corporate Raider Carl Icahn Claims Another CEO Scalp). Souki hasn’t let it slow him down. He started a new LNG export company, Tellurian, to compete with his old company (see Revenge: Fired Cheniere CEO Starts Competing LNG Company). We kind of had (past tense) a soft spot for Souki, getting tossed from the company he started. But then we read comments he made about Donald Trump, saying if Trump won, he would reconsider his American citizenship (see Will Charif Souki Renounce His American Citizenship?). We’re still waiting for Souki to move back to Egypt. Since forming Tellurian, he’s moved fast to finance the company and its coming Driftwood LNG export facility, essentially by selling off large chunks of it, $25 million from GE Oil & Gas (see GE Oil & Gas Invests $25 Million in LNG Co Tellurian), and $207 million from Total (see French Supermajor Total Buys 23% Stake in Tellurian LNG). Until now, Tellurian has been a private company, no publicly traded shares of stock. That changed last Friday when Tellurian merged with/took over Magellan Petroleum Corporation and began trading stock in the newly merged company on the NASDAQ stock exchange…
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Marcellus & Utica Shale Story Links: Tue, Feb 14, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: M-U pipeline capacity could overwhelm supply–someday; more M-U pipelines will lower Henry Hub price in the future; NY AG Schneiderman colluded with enviro activitists before launching Exxon “probe”; Cuomo’s risky solar jobs bet backfiring; Utica rig count drops; what’s going on with the DUC count; Wall Street pouring money into o&g; Mexico & Middle East buying “record amounts” of US natgas; and more!
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