Traitorous PA Senate Republicans Pass Severance Tax Bill

Yesterday the Pennsylvania Senate voted 26-24 to pass a so-called compromise budget bill that adopts a Marcellus-killing severance tax. What’s most distressing about the situation is the betrayal of Senators like Gene Yaw, of northeastern PA. The bill not only raises taxes on drillers, slapping a severance tax on top of the existing impact fee, it also slaps a 5.7% gross receipt tax (GRT, or “usage tax”) on natural gas used by homes and businesses, meaning PA gas bills will go up starting August 1st (if the bill passes the House). What happens next? The bill has gone to the PA House for consideration. The pressure on the House, and Speaker Mike Turzai, is intense. The Senate has done a big disservice to the House by not getting agreement ahead of time. But we deal with the cards in our hand. What’s going to happen now?…

Note: The original introduction to this story (paragraph above) has been revised to omit incorrect information. A previous version incorrectly claimed that natural gas-powered electric plants would be subject to the 5.7% gross receipts tax in the proposed Senate bill. A few days after publication, when the error was pointed out by readers, MDN prominently corrected it. However, one PA Senator objected to the correction disclaimer as not strong enough. Therefore we have revised the intro to omit the incorrect information altogether. As we previously stated (and still maintain): Our error over the issue of a GRT on power plants does not lessen the betrayal by the PA Republican senators who voted for the severance tax.
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PA Senate’s “Olive Branch” of “Relaxed Regulations” for Drillers

As part of the horrible severance tax bill the Pennsylvania Senate passed yesterday (see today’s companion story), Republican Senators placed into the bill what they hope is “an olive branch” (more like a withered twig) by including reforms to the regulatory process they say the drilling industry has been asking for. Senators included a provision to have third party contractors (people outside of the Dept. of Environmental Protection) review applications at the DEP, including permits for oil and gas drilling, when the DEP can’t review those applications in a timely manner. There’s also a provision that certain permits, like those granted to drillers for sediment and erosion, will automatically be granted if the DEP drags its feet and doesn’t grant the permit by the current, specified deadline (45 days, with a possible 15 day extension). Those permits are currently taking up to 200 days to be granted. Enough. If the DEP can’t get it done, the permit gets granted automatically or goes to someone on the outside who can get it done. There are other provisions in the severance tax bill as well. Of course these proposed changes have antis in an uproar. You see, “compromise” for antis and Democrats means “you do it all our way, and we give you nothing in return.” That Republicans actually want something in return for voting for a horrible tax bill is beyond belief for antis, who are now squealing like stuck pigs. Here’s what we’ve been able to find out about the proposed changes, the “olive branch” offered by traitorous Republicans, as part of the newly passed severance tax bill…
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Fracking Comes to Kentucky – Encore Drills First Horizontal Oil Wells

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Kentucky is an interesting state with respect to the oil and gas industry. Historically there has been a fair amount of conventional (vertical only) drilling for oil and gas in the state. Over the past few years there have been a number of gas and petrochemical projects in the state (see our Kentucky stories here). However, the state also has a liberal tilt, at least when it comes to fracking and pipelines. A few years ago Kentucky pretty much single-handedly axed the Bluegrass NGL (natural gas liquids) pipeline, a $1.5 billion project that would have stretched from the Utica/Marcellus all the way to Gulf Coast (see Kentucky House Votes to End Eminent Domain for Bluegrass Pipeline). As for fracking, in 2015 the Kentucky Oil and Gas Conservation Commission, a group that “rarely meets” (previous meeting was in 2006) held a meeting to consider granting Kentucky’s very first deep horizontal natural gas drilling permit (see Kentucky Fracking One Step Closer: Commission Considers 1st Permit). The permit under consideration was to drill in the Rogerville Shale, by an affiliate of EQT. So when we spotted a press release/article about Encore Energy currently drilling its first (of four) horizontal oil wells in the Berea in Kentucky, wells that will be fracked…that’s big news! No, it’s not the Marcellus/Utica, but it’s close to us, and it’s in the Appalachian region. And it’s fracking a horizontal well in a state that has not been overly friendly in approving such activities. Here’s the low down on Encore…
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New Lawsuit Against Mountain Valley Pipe Seeks to Emasculate FERC

In June, a group of radical “environmental” organizations filed a lawsuit in the U.S. Court of Appeals for the Fourth Circuit against the West Virginia Dept. of Environmental Protection–for doing their job (see Radicals File Lawsuit Against WV DEP for Approving MV Pipeline). Sierra Club, West Virginia Rivers Coalition, Indian Creek Watershed Association, Appalachian Voices and Chesapeake Climate Action Network sued the DEP because the department had the audacity to conduct a thorough review, and then issue a stream and water-crossing permit (demanded under federal law) for the Mountain Valley Pipeline (MVP). MVP is a $3.5 billion, 301-mile pipeline that will run from Wetzel County, WV to the Transco Pipeline in Pittsylvania County, VA. A second lawsuit has now been filed in federal court to block the MVP project–this time from anti-pipeline residents from West Virginia and Virginia. This second lawsuit is even more insidious than the first. The new lawsuit, filed in U.S. District Court in Roanoke, VA (full copy below), seeks to block the Federal Energy Regulatory Commission (FERC) from doing its job by issuing a certificate to approve MVP. The suers claim FERC would be violating the U.S. Constitution by approving a private project that “takes” private land without just compensation. The suers maintain that according to the Constitution, land can only be taken for “public use” and that the pipeline is for private use, not for the public good. That’s the claim. If these virulent antis win this case, it would emasculate FERC–take away its authority to approve major interstate pipeline projects. We don’t give the case much of a chance, but hey, one never knows…
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EQT 2Q17: Ends Utica Drilling for Now, Merger with Rice on Track

My how times change. Just last October EQT indicated that in the not-too-distant future the company would be primarily a Utica Shale driller (see EQT 3Q16: Company will Soon be Primarily a Utica Driller). The company had experimented with Utica wells in Greene County, PA and Wetzel County, WV–with good results. Earlier this month a couple of EQT reps giving a talk to the Monongahela Area Chamber of Commerce said EQT would drill seven Utica wells in the Mon Valley–THIS YEAR (see EQT Update on Mon Valley Drilling – 7 Utica Wells Coming This Yr). Yesterday EQT held a conference call and issued their second quarter financial and operational results. Buried in the update was this statement: “In anticipation of the merger with Rice Energy, EQT has suspended its Utica test program as improved returns on Marcellus wells resulting from longer laterals made possible by the Rice acquisition are higher than the return expected on the average Utica well today.” No more Utica drilling–at least for now. My how times change. Also of keen interest, on the conference call, EQT CEO Steve Schlotterbeck said the board is working on a comprehensive review of the company, post-merger with Rice, and one of the options will be “splitting the companies” (upstream/drilling and midstream/pipelines), as corporate raider Jana Partners has been pressuring them to do…
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Patterson-UTI 2Q17: Moving Rigs from Marcellus/Utica to W Texas

Each month MDN tracks how many rigs oilfield services company Patterson-UTI Energy reports operating–as a proxy for when/if the drop in rig counts for the Marcellus/Utica turns around. Patterson operates a number of rigs in the northeast, as well as other areas of the continental United States (and Canada). Patterson’s rig count kept sinking month by month until June 2016 when things finally turned around. Since last June, Patterson has reactived and began running new rigs (a higher rig count) in each successive month. In April, Patterson completed a merger/buyout of Seventy Seven Energy, the new name for the former Chesapeake Oilfield Operating company (see Patterson-UTI Energy Completes Merger with Seventy Seven Energy). Yesterday Patterson issued its second quarter 2017 update–the first mostly-full quarter of operation since acquiring the sinking SSE. The company lost $92.2 million in 2Q17, versus losing $85.9 million in 2Q16. That’s not so hot. However, even after acquiring SSE, Patterson “only” lost $156 million for the first six months of 2017, verses losing the same amount last year. So at least they aren’t slipping any further into the hole. The one that that caught our eye in reading a transcript of a conference call held yesterday is that Patterson is upgrading and moving seven rigs out of the Marcellus/Utica region to West Texas–to use them for oil drilling. There’s still plenty of rigs left in our region, but still, it indicates where Patterson’s priorities lie–in the super hot drilling of the Permian Basin…
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Sunoco LP’s Generous Deal to Chester Co. Residents with Water Issues

MDN previously reported about problems experienced in Chester County, PA (suburb of Philadelphia) with underground horizontal directional drilling (HDD) by Sunoco Logistics Partners for its Mariner East 2 Pipeline project (see ME2 Pipe Work in Chester County Creates Water Well Issue for Some). Sunoco accepted the blame for fouling a dozen private water wells in West Whiteland Township with drilling mud. The short-term fix was to provide hotel rooms from some of the families most affected–and to provide bottled water for all of them. Sunoco didn’t waste any time with a long-term fix. Sunoco worked on a deal to extend a municipal water pipeline to some 30 homes in the area (see Sunoco Extending Public Water to Homes Affected by ME2 Drilling). The long-term fix is going to cost plenty. How much? Sunoco proposes to pay to connect each homeowner, plus $60,000 to cover the cost of water bills over the next 20 years. If homeowners want to stay on their private water wells instead of hooking up to municipal water, Sunoco will pay them $11,000. Some of the homeowners are pleased with the offer, others are greedy and want more…
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Antis Oppose Tiny Pipeline Thru Scrub Pines in N NJ at Hearing

In January 2016, MDN told you about a $130 million, 30-mile natural gas pipeline proposed by New Jersey Natural Gas (NJNG) to connect NJNG’s distribution system serving customers in Ocean, Burlington and Monmouth counties (in NJ) and the interstate pipeline system adjacent to the New Jersey Turnpike. The idea came about after Superstorm Sandy. How can NJNG create reliable natgas service in the region, preventing major disruptions like that which happened after Sandy? The “Southern Reliability Link” pipeline project was the result, and in January the NJ Board of Public Utilities (BPU) approved it 5-0 (see Southern NJ NatGas Pipeline Approved by State BPU). Because its natural gas and because the Sierra Club has an irrational hatred of all fossil fuels (and loads of money to burn), the nutjobs from the Sierra Club threatened to sue to stop it. Stop 30 miles of pipeline that would improve the lives of hundreds of thousands of people. They made good on their threat in April 2016 (see Radical Sierra Club Sues NJ to Stop Much-Needed NatGas Pipeline). A fair bit has happened since that time. A state appellate court told the Pinelands Commission, which oversees a protected area of pine trees stretching from northern to southern NJ, that the Commission would have to have public participation (i.e. a public hearing) before the Commission could approve the pipeline plan. So the Pinelands Commission held a hearing this past Wednesday, with a predictable result. Sierra Clubbers and other virulent anti-fossil fuel freaks turned out in droves to badmouth the project. Over some 15 miles of pipeline that would pass through a stand of scrub pines…
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PwC Report: Marcellus Dominates O&G M&A Deals in 2Q17

According to one of the top accounting/consulting firms in the world, PricewaterhouseCoopers (PwC), mergers & acquisitions (M&A) activity in the oil and gas sector in the U.S. went from being red hot in 1Q17 ($73.04 billion) to just hot in 2Q17 ($37.01 billion). While some in the financial (and oil/gas community) may view the weaker M&A numbers as “cause for alarm,” PwC says to calm down. “Place that number in a longer-term historical context and it’s clear that the market is still robust. The $37.01 billion of deals in the second quarter is the third highest second quarter during the past eight years. Additionally, with over $110 billion in announced deals during the first half of the year, 2017 is off to the strongest start in the past eight years.” If you rank the number of deals done, the Permian comes out on top in 2Q17, with $4.49 billion worth of deals. However, the might Marcellus trumps that. With only four deals (one of them the huge EQT/Rice Energy deal), the Marcellus saw $10.22 billion worth of M&A deals in 2Q17–top dog. Here’s the latest quarterly M&A in the oil and gas sector update from PwC…
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Marcellus & Utica Shale Story Links: Fri, Jul 28, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Youngstown spent $187K so far on 6 failed anti-fracking ballot measures; PA mystery – where’s the fracking pollution?; outside interest in Wheeling WV picks up, thx to shale; battle rages for Atlantic Coast Pipeline in Virginia; pipeline approvals pile up at FERC; drillers begin to slash drilling budgets; US fracking “devastates” Canada; and more!
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