Utica Wells Producing 420% More Today than Just 3 Years Ago

Naysayers and peak oil & gas theorists always ignore the 800 pound gorilla in the room when they make their pessimistic predictions that “any day now” oil and gas production from shale will decline into oblivion. The 800 pound gorilla? Shale drillers keep getting better at what they do. Technology is changing. Techniques change. And drillers get more out of the holes they drill today than they did last year, and the year before that, and the year before that. Across all American shale plays, wells in January 2017 produced an average of three times more gas and oil than they did in January 2014. Let us put that another way: Today’s wells are producing 300% more than wells drilled just three years ago! Here’s another startling fact: the shale play with the most improvement in production is the Utica. Wells in the Utica are producing, on average, 4.2 times (420%) more today than they did three years ago…
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PA Gov Wolf’s 6.5% Severance Tax Proposal a Hot, Stinking Mess

As politicians and analysts begin to dig into one of the centerpieces of Pennsylvania Gov. Tom Wolf’s proposed 2017 budget–a 6.5% severance tax on Marcellus/Utica drilling–new details begin to emerge. Like this: Most lease contracts contain a provision that says any taxes paid, including severance taxes, are a post-production expense and deducted from landowner royalties. So if Wolf’s severance tax were to pass, the people paying it will be landowners. That’s $200 million or so coming out of farmers’ pockets. Wolf & co. knew that situation would not earn them any votes, so they include a provision in the budget disallowing severance taxes to be deducted from royalties. Overturning existing contracts is illegal and sure to be challenged in court, but if somehow that provision gets upheld and the tax passes, it’s easy to predict Marcellus drilling will mostly cease. Wolf’s proposed 6.5% severance tax would put the state at, or near the top of, all states in severance tax rates. Some of the biggest drillers in the state have recently leased acreage in other plays and have no problem with shutting down new drilling in the Marcellus, moving on to other plays where the economics make more sense. Let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions not being allowed, and win. Landowners then fund the severance tax out of their pockets (the drillers are the “bad guys” and Wolf says “don’t look at me”). Now let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions and lose. Drillers simply walk away from PA. Either way, the Wolf severance tax proposal is a hot, stinking mess…
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One Year Later PA Pipeline Task Force Report Gathers Dust on Shelf

This is one of those stories that illustrates so beautifully how liberals always operate: all talk, no action. Form a committee, say lots of things, bluster, argue, look like you’re addressing a really important issue–and then do nothing. In this case that’s a good thing! We’re talking about the pomp and circumstance surrounding then newly-minted Pennsylvania Gov. Tom Wolf and his so-called Pipeline Infrastructure Task Force. In May 2015, Wolf and his underling Dept. of Environmental Protection (DEP) Secretary John Quigley (who has since been fired) created a “Task Force on Pipeline Infrastructure Development” (see Disaster on the Horizon: PA Gov Wolf Creates Pipeline Task Force). The purpose of the group was “to identify best practices for pipeline siting, permitting and safety.” That is, to hamstring the process of building new gathering pipelines to shale wells. We won’t recount all of the twists and turns–of how the Task Force was packed with government employees beholden to Wolf, etc. Along the way antis tried to protest and derail the meetings held by the Task Force (see PA DEP Sec. Quigley Calls Pipeline Protesters “Badly Misinformed”). In February 2016, Quigley released the Task Force’s Final Report, all 658 pages of it with 184 recommendations (see PA Pipeline Task Force Report: 658 Pages, 184 “Recommendations”). Around the same time, MDN noted “Looks like we worried for nothing,” and that a Task Force member predicted nothing would come from the recommendations (see PA Pipeline Task Force Wraps Up – Did We Worry for Nothing?). It’s now a year later–and the libs at StateImpact are calling attention to the fact that precisely nothing has happened–the report sits on a shelf gathering dust…
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Fake Research Study from Duke U on O&G Spills in PA, Elsewhere

For some reason Duke University seems to have a fascination with the Marcellus Shale and seeks to denigrate it with fake research reports. Of course there’s big money in research grants, which is why Duke keeps issuing bogus studies. In fact, last year Duke was exposed for doctoring research data in a scheme to grab $200 million in grant money (see Duke University Exposed for Scientific Grant Fraud). Being exposed as fraudsters hasn’t slowed them down. Yesterday another faux research “study” was published analyzing oil and gas-related spills in four states, one of them Pennsylvania. It’s not until you dig into the report that you find the largest spill recorded, according to the research, is fresh water! Yes, water without chemicals of any kind. Water that you can put in a glass and drink. This sham study jumps up and down and screams to call attention–without pointing out the fact that some of the biggest spills are simple fresh water. And of the spills that happened with water “laced” with chemicals, or flowback, etc., the “vast majority of spills are contained on the well pad and never impact the environment.” Here’s the latest on the waste emanating from Duke University…
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Chesapeake Energy Turns Corner After Wild Ride in 2016

wild ride

Last year was a wild ride for Chesapeake Energy, with respect to the company’s finances. At one point early in the year, betting money said Chessy would have to declare bankruptcy (see Chesapeake Energy: We’re Not Filing for Bankruptcy…Yet). However, as the year wore on, Chesapeake CEO Doug “the ax” Lawler not only continued selling assets here and there as he could, he also figured out how to refinance major portions of the company’s debt–pushing out repayment into the far future, giving the company breathing room. Although Chesapeake doesn’t release it’s fourth quarter and full year 2016 numbers until later this week, one analyst predicts the company is now out of the woods and once again on firm footing. Unfortunately (for the northeast) Chesapeake’s new direction involves less drilling in the Marcellus/Utica and more drilling elsewhere…
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Crestwood Building Rail-to-Truck NGL Terminal in Orange County, NY

Crestwood concept drawing for rail terminal in Orange County, NY – click for larger version

As MDN was reading through the latest quarterly/full year 2016 update for Crestwood Equity Partners (formerly known as Crestwood Midstream), we discovered something fairly innocuous, but in our book, a big deal. Crestwood said the company is “developing a greenfield rail-to-truck NGL terminal in Montgomery, NY that will increase propane supply reliability across the Northeast markets. The terminal, which is expected to be placed into service in the summer of 2017, will be supported by product controlled by Crestwood from multiple producers in the Marcellus and Utica regions.” What?! How did that one slip by? Crestwood is in the process of building, and will open, a terminal to distribute propane–in Orange County, NY (not far from New York City). This is good news indeed–and we wonder how and why the antis haven’t been bleating about this project, the way they have been about Crestwood’s long-delayed propane storage facility along the shoreline of Seneca Lake (near Watkins Glen). No matter–we’ll take our small victories where and when we can get them. Disappointingly Crestwood makes no mention of the Finger Lakes LPG storage facility in their update. But the Marcellus does get a few mentions. Below are what we gleaned from the latest update on Crestwood’s Marcellus operations, along with more background on the forthcoming propane terminal in Orange County…
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DOE’s 2016 LNG Year in Review – Sabine Pass Exports 184 Bcf!

The U.S. Department of Energy’s Office of Fossil Energy has just released a full report of LNG (liquefied natural gas) imports and exports for all of 2016. The history books will look back at 2016 as the year when the world of LNG changed. Although it seemed like it took forever, in February 2016 Cheniere Energy shipped its first LNG export cargo from its Sabine Pass facility in southern Louisiana (see Cheniere Finally Ships First Sabine Pass LNG Export – to Brazil //marcellusdrilling.com/2016/02/cheniere-finally-ships-first-sabine-pass-lng-export-to-brazil/). From February through the end of December, Sabine Pass, which (we believe) included some Marcellus/Utica gas, exported an astounding 60 cargoes of LNG, moving nearly 184 billion cubic feet (Bcf) of American-made natural gas to other countries. Prices ranged from $3.72 to $6.21 per thousand cubic feet (Mcf). Cheniere (and others) are just getting started! Below is the full report from the DOE Office of Fossil Energy…
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Scott Pruitt Addresses 15K Employees of EPA (Transcript)

Yesterday the Environmental Protection Agency’s new Administrator, Scott Pruitt, addressed the 15,000 employees of the EPA–many of them seething leftists who need to be fired. He was far more gracious in his remarks than we would have been. But then, that’s why he’s there and we’re here. 🙂 Pruitt was introduced by Acting Administrator Catherine McCabe and began his remarks with this: “You don’t know me very well. In fact, you don’t know me hardly at all other than what you’ve read in the newspaper and seen on the news. I look forward to sharing the rest of the story with you as we spend time together. This is a beginning. It’s a beginning for us to spend time and discuss certain principles by which I think this agency should conduct itself.” Reflecting on the time he spent earlier in the day greeting EPA career staff in his office, Pruitt said, “It was an honor and a joy to meet and spend time with the career people at EPA who are clearly very dedicated to their work.” Although Pruitt is a gentleman, he’s no shrinking violet. He put the staffers on notice that he believes federalism and the rule of law matters, and those concepts will guide the policies and decisions coming from the EPA from now on. In other words, the swamp is getting drained on DAY ONE. Below is a transcript of Pruitt’s remarks…
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CO Bill Compensates Landowners, Drillers in Towns with Frack Bans

Over the years MDN chronicled the long, sad battle in New York State over both a statewide moratorium on fracking, and on the issue of whether towns can ban fracking. The statewide moratorium, under Gov. Andrew Cuomo, continues. However, lawsuits filed against townships that enacted bans went all the way to New York’s highest court, the Court of Appeals–and in June 2014 we lost (see Shale Drilling in NY is Over – High Court Upholds Town Bans). There have long been rumors and talks among New York landowners about launching a “takings” lawsuit–in which landowners would get compensation from the state because the state has “taken” their right to lease land and allow drilling. If the state runs a highway over your land, they have to pay you fair market value for it. Same principle. But so far, a takings lawsuit has not materialized in New York. Perhaps we can look to the west–to Colorado–to see how we still might prevail. A Colorado legislator has introduced a bill in Colorado that would allow landowners (and drillers) to sue local towns in the state that pass fracking bans–using the principle of takings. Should we consider such legislation in New York?…
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Marcellus & Utica Shale Story Links: Wed, Feb 22, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Rover asks FERC for immediate permission to clear more trees; new natgas processing on the way in Marcellus/Utica; Mariner East 2 shows PA open for business; the shale revolution is a made-in-America story; predicting the price of oil based on the price of gold; gas prices get crushed, again; Trump to sign exec orders next week impacting EPA rules; Aramco IPO doubtful; and more!
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