New Details Emerge on Cabot’s Shale Plans in Central Ohio

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Cabot Oil & Gas director of external affairs, George Stark, recently spoke to the Ashland Times-Gazette about the company’s plans to drill test wells in and around Ashland County, OH. As MDN previously reported, Cabot is sniffing around central Ohio, looking for “what’s next” after the Marcellus Shale. Last December we told you that Cabot has leased acreage in Ashland County (see Cabot O&G Considers Drilling in Ashland County, OH). Two weeks ago we told you that Cabot has filed for its first permit to drill a test well (see Cabot Files for Permit to Drill Below the Utica in Ashland, OH). Stark revealed, in his interview, that Cabot geologists “see something in Ohio” and that Cabot “wants to go touch it.” What, exactly, does Cabot want to touch? We originally thought it was the Utica, but Stark told MDN no, it’s not the Utica–but a layer “lower than the Utica.” However, Stark won’t say specifically which layer or layers. We now think we know. We also learn (from the article) that Cabot has acreage not only in Ashland, but in four neighboring counties too…
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PA Superior Court Overturns “Rule of Capture” for Marcellus Well

STOP PRESS: Shortly after this post was published, a MDN reader (an energy attorney) called us to alert us that our initial take on this case is not right. The case is NOT about a company stretching a lateral too far so that it trespasses under an adjoining property. Instead, the case is about the “zone of fracking”–that is, that fracking, by its nature, creates cracks that may open up and drain some of the gas under a neighboring property–even though the fracking was done properly within the boundaries of the leased property. The case (ominously) says that fracking itself can cause a trespass. Our attorney friend said this case has the potential to negatively affect Marcellus drilling in PA–in a BIG way. We will write another post on this issue tomorrow. In the meantime, just be aware that our initial take below is not correct. – Jim Willis, Editor

The Pennsylvania Superior Court handed down an important decision yesterday that impacts both Marcellus landowners and drillers. The decision removes “rule of capture” as a way for shale drillers to drill under adjoining neighbors who haven’t specifically leased their property for drilling. The rule of capture came about with conventional (vertical only) drilling, cases in which a pool of oil or natural gas exists that runs underneath the property owned by multiple surface owners (see the image to the left). The rule of capture principle says “the first person to capture a natural resource owns that resource.” If you put a well or two or three on your property to extract the oil/gas, if it flows from the neighbor’s side to your side and up the well, it’s yours. Same for your neighbor. He/she can grab the oil and gas under your property if the pool exists under both. The principle originated in England (it’s a very old principle). However, Southwestern Energy tried to use the rule of capture principle to drill under property not leased for drilling that sits next to property that is leased–claiming the rule of capture. The molecules in shale are a whole other story than molecules sitting in a common pool. That’s what the Superiors ruled. Southwestern (and by extension, other Marcellus drillers) can’t simply extend a lateral well a few hundred feet under an un-leased neighbor, which certainly makes sense to us…
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Cyber Attack Hits Pipeline Computer System, Rover Pipe Affected

We’ve read warnings about the potential for cyber (computer) attacks on the U.S. energy industry for several months. We understand how such an attack might affect a nuclear plant, or perhaps the electric grid. Screw up the computers managing and running a nuke plant or a significant portion of the electric grid and you have a class-one serious situation on your hands. However, we didn’t really think about pipelines. Did you know that pipeline networks, like electric grids, are monitored and controlled by computers and those computers can be compromised? We have to admit it was not on our radar screen. But that has now happened–and it affects not only pipeline systems in other parts of the country, but right here in the Marcellus/Utica. Energy Transfer Partners uses a third party service called Energy Services Group to manage all of its pipelines–a massive nationwide network. Energy Services provides EDI (electronic data interchange) services that reportedly cut costs and increases the speed with which companies exchange documents that used to be paper-based. Documents like those used in buying and selling natural gas at various trading hubs along major pipelines. On Monday, Energy Services was attacked electronically, knocking the service out of commission until further notice. Note that gas flowing through pipelines has not been affected. The affected computers don’t turn valves on and off. However, the ability to know who’s gas is flowing through the pipeline (who bought and who sold) has been slowed–on all of ET’s pipelines, including the newly-minted Rover Pipeline…
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Blue Ridge Mountain Res. Jazzed by Utica Wells in Washington, OH

Blue Ridge Mountain Resources is jazzed about a pair of Utica wells originally drilled in 2014, but completed this past December, located in Washington County, OH. Blue Ridge is the renamed remnant of Magnum Hunter Resources. Magnum Hunter filed for bankruptcy in December 2015, emerging from bankruptcy in May 2016 minus CEO Gary Evans (see Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone). Looking to shed the image of the past, the company renamed itself as Blue Ridge in January 2017 (see Magnum Hunter Changes Its Name, Leaves the Bankrupt Past Behind). Blue Ridge is 100% focused on the Marcellus and Utica Shale plays. The company’s current production is 100 million cubic feet equivalent per day (MMcfe/d). They own 119,000 acres of leases with huge potential–96% of their acreage is not yet developed (i.e. undrilled). In 2014 Magnum Hunter drilled two Utica wells in Washington County, OH but never completed them. In December Blue Ridge completed those wells. The early production results from the two wells is very encouraging and has allowed Blue Ridge to “de-risk” 6,700 surrounding acres that will support another 40-50 new wells. Translation: Washington County landowners signed with Blue Ridge can expect drilling activity soon…
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Offer to Relocate Families Near ME2 Sinkholes; ME1 Down Until May?

Sinkhole in Chester County, PA

Sunoco Logistics Partners (aka Energy Transfer Parnters) has had its challenges in constructing the twin Mariner East 2 (ME2) pipelines across Pennsylvania. In March, MDN told you that underground horizontal directional drilling (HDD) work in Chester County had led to a third sinkhole developing in that area (see 3rd Sinkhole Appears Near ME2 Construction in Chester County, PA). For most of its length, ME2 is being built next to the existing ME1 (Mariner East 1), a liquids pipeline originally built in 1931. The third sinkhole in Chester County exposed a portion of ME1, leading to the state Public Utility Commission “temporarily” shutting down ME1 on March 7 (see PA PUC Shuts Down Mariner 1 Pipeline Due to Mariner 2 Sinkhole). ME1 would be, according to Sunoco, out of commission for “10 to 14 days.” Nearly a month later it’s still not running and until the state Dept. of Environmental Protection gets solid answers about the sinkholes, it won’t restart. It now looks like ME1 won’t be operational again until May. ME1’s closure has put several shippers, primarily Range Resources, in a bind (see Range, CNX Look for Alternatives to ME1 Pipe Following Shutdown). Sunoco needs to conduct geotechnical studies near the sinkholes to get answers that will allow it to resume work. So, Sunoco has offered to temporarily relocate five families living near the three sinkholes–for up to six weeks–while it conducts tests of the area…
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Ascent Resources Marcellus Exits Chapter 11 Bankruptcy

In February, MDN brought you the news that Ascent Resources Marcellus, a company founded by Aubrey McClendon after he left Chesapeake Energy, had filed for Chapter 11 bankruptcy (see Ascent Resources’ Marcellus Unit Files for Chapter 11 Bankruptcy). Ascent Marcellus is one of several companies using the Ascent name. The Ascent Marcellus piece of the pie owns 43,000 of leases and has drilled some 547 wells in West Virginia. Big operation. The good news (if there’s ever good news in bankruptcy), is that 75% of the debtholders signed onto a prepackaged bankruptcy plan. The plan worked. On March 30 Ascent announced it has officially emerged from bankruptcy with a new board of directors and the same management team as before…
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Will Trade War with China Affect $83.7B Investment in WV Shale?

Chinese moo goo gai pan

Last November President Trump and assorted state officials, including West Virginia State Commerce Secretary Woody Thrasher, visited China as part of a trade delegation. On that trip, China agreed to invest a total of $250 billion in American (mostly energy) projects, $83.7B of which (a full third!) will go to investments in West Virginia (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). It was all sunshine and flowers and butterflies. But now there’s a big, black cloud on the horizon (perhaps we always knew it was too good to be true). Following a seven month investigation into Chinese theft of American intellectual property, last week President Trump told the U.S. trade representative to levy tariffs on $50 billion worth of Chinese imports. China is threatening to impose tariffs on U.S. products in return. A good, old-fashioned trade war. The question has been raised, What about that promised $250 billion of Chinese investment in Uncle Sam? Will China move forward with those investments, or perhaps withhold them? According to one global energy expert, “The Chinese are going to see these things [the promised investments] as bargaining chips.” Which points out the problem with relying on an enemy’s investments…
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Other Energy Stories of Interest: Tue, Apr 3, 2018

The “best of the rest”–stories that caught MDN’s eye that you may be interested in reading: Fed grant helps buy 4 CNG buses for NEPA; son of fractivist trial lawyer harasses CAMA in Potter County; WV Gov. Justice signs co-tenancy bill into law; two crackers could yield big dividends in Ohio Valley; Unimim & Fairmount Santrol announce management team post-merger; Duke Energy gas-fired plant in Florida nears startup; LNG protesters on Pacific Coast illegally block PSE HQ; natgas storage capacity expanded, slightly, in 2017; China plans to double LNG capacity; Japan sees LNG as opportunity; and more!
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