EIA Aug ’18 Drilling Report: Gas Prod. Jumps 1 Bcf/d, Again!

Records continue to be shattered. On Monday our 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. The Marcellus/Utica region (called Appalachia in the report) continues to see production go through the roof. As has been happening for the past 6 months or so, production in the Marcellus/Utica region will grow another roughly 1/3 billion cubic feet (Bcf) in the coming month. If you add up new gas production for all seven major plays, the U.S. will produce an additional 1 Bcf/d in September, same as was added in August. That’s 1 Bcf more in September than we produced in August, or 2 Bcf/d more in September than what we produced in July. Mind blowing! No less impressive is U.S. oil production from shale. This month oil production will grow another 93,000 barrels per day, hitting a new all-time high of 7.5 million barrels per day of production–just from shale (not from offshore). Once again, new records for gas (and oil) will be shattered in September…
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Mountain Valley Pipe Asks FERC to Lift Stop Work Order

EQT Midstream and its partners in the Mountain Valley Pipeline (MVP) project are trying to convince the Federal Energy Regulatory Commission (FERC) to lighten up and reconsider lifting most of a stop-work order for the entire 303-mile pipeline project. In a 7-page letter to FERC yesterday, Matthew Eggerding, EQT Midstream’s top lawyer, outlined his company’s case for allowing them to restart work on most of the pipeline. Two weeks ago FERC ordered MVP to shut down all construction for the entire project following a court case that overturned permits for a tiny, 3.5-mile section of the project as it runs through the Jefferson National Forest (see FERC Shuts Down ALL Work on Mountain Valley Pipeline in WV, VA). In delivering its stop-work order, FERC said while it expects the two federal agencies involved (U.S. Forest Service and Bureau of Land Management) to quickly rework and reissue the permits overturned by the court, they (FERC) don’t know when that will happen and so in the meantime, just shut it all down. MVP is asking them to reconsider. What happens if FERC doesn’t reconsider and MVP stays shut down until the court gives the OK for reissued permits? According to EQT’s incoming CEO Rob McNally, “that would certainly put the first-quarter [2019] timing in jeopardy.” Meaning all bets are off…
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Cabot, Seneca, Chief Ramp Up Production for Atlantic Sunrise

According to a report from BTU Analytics, the top three shippers who will soon flow natural gas along Williams’ Atlantic Sunrise Pipeline (ASP)–Cabot Oil & Gas, Seneca Resources and Chief Oil & Gas–have “nearly doubled” their rig counts over the past few months leading up to the imminent startup of ASP. The pipeline is due to go online any day now–by the end of August (see Genscape Confirms Atlantic Sunrise Pipe Ready to Flow in August). Cabot has reserved 1 billion cubic feet per day (Bcf/d) of the 1.7 Bcf/d capacity of the new ASP. One third of Cabot’s 1 Bcf/d (350 million cubic feet per day, MMcf/d) will flow to Dominion’s Cove Point LNG export plant in Maryland–heading for Japan. Another 500 MMcf/d of Cabot’s gas will go to Washington Gas via ASP–meaning northeast PA Marcellus molecules will help heat, cool and power D.C. swamp dwellers. Joy. Here’s the great news that a single pipeline is stirring up a lot more drilling in northeastern PA…
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MSC Calls PA 250% Hike in Shale Permit Fees “Excessive”

Industry trade associations are not impressed with a proposed 250% hike in shale permit fees in Pennsylvania and they’re saying so. PA Gov. Tom Wolf’s Dept. of Environmental Protection (DEP), the agency charged with overseeing oil and gas drilling in the state, blindsided the shale industry in February with a proposal to hike the fee required when submitting an application to drill a new shale well (see PA DEP Plans to Raise Marcellus Well Permit Fee by 250%). The current fee is $5,000. The proposed new fee is $12,500–or 2.5 times (250%) higher. Yes, the DEP has fewer people working there than it once did, and needs to hire more help. However, the DEP wants to slap this insanely high fee on shale drillers to (in part) cover the expenses associated with non-shale activities! The shale permit fees will, “fund the broad scope of the [DEP] office’s operations, including its oversight of traditional [i.e. conventional] oil and gas wells, gas storage wells, abandoned wells and earthmoving activities.” How is it, in any sense, fair to hike the fees of shale drillers so DEP agents can better keep an eye on non-shale wells? The DEP is trying to steamroller the increase through. DEP’s own Environmental Quality Board has already approved the increase and published an official notice in the Pennsylvania Bulletin (see PA Seeks Comments on Boosting Shale Permit Fees 250%). Publication in the Bulletin triggered a 30-day public comment period which just ended. Among those commenting on the plan were the Marcellus Shale Coalition (MSC) and the Pennsylvania Independent Oil & Gas Association (PIOGA). Neither had good things to say about the dramatic increase. MSC’s David Spigelmyer called it “excessive and not proportional to the costs incurred by the oil and gas program to oversee the unconventional natural gas industry.” Making the same point we’ve made: It’s not fair for shale drillers to fund the whole darned program that includes conventional and other aspects of the oil and gas program not related to shale…
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Shell to Remediate PA Swamp in Return for Falcon Pipe Permit

Shell is proposing to remediate a swamp in Mercer County as a way to “offset” the “impacts” of building an ethane pipeline to feed it’s mighty cracker plant under construction in Beaver County. Oops. Sorry. Instead of calling it a swamp, the PC term is “wetland.” Shell will make a swampy portion of Neshannock Creek in Mercer County swampier, in return for permission to build the Falcon ethane pipeline elsewhere. Apparently it’s not the first time Shell has proposed such a swap. Shell is in the middle of remediating a swamp in Washington County in return for “local impacts” (i.e. “damage” to the environment) they’re causing by building the cracker plant itself. This is not an uncommon practice–across the country. We happen to think it’s silly. Either a project is worthwhile–worth “damaging” some of our precious environment, because of the greater good it will bring–or not. Playing this game of “I’ll spoil this area here, so I’ll un-spoil that area over there” is senseless, in our humble opinion. But hey, if that’s the game we must play to get it built…
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WV Supreme Court Crisis – House Votes to Impeach Sitting Judges

What in the world is going on in West Virginia? Last Friday in our “best of the rest” list of energy stories, we ran a brief piece about a WV House panel voting to impeach the remaining four (of five) sitting WV Supreme Court justices, claiming the justices had abused taxpayer funds (see Energy Stories of Interest: Fri, Aug 10, 2018). We didn’t think much of it at the time, partially because it was a CNN story–a known source of fake news. Yet the news, in this case, was not fake. On Monday the full WV House voted to impeach all of the sitting justices. One them (a Democrat) promptly resigned her position so that Gov. Jim Justice could not replace her with his own pick. Instead, her office will go on the ballot this November. The Wall Street Journal ran an article yesterday outlining in more detail what the alleged charges are (bordering on embezzlement), and speculating on what happens now. We’re interested in this story because earlier this year it was this group of justices that reversed itself in a highly unusual practice to allow EQT to deduct post-production expenses from flat rate leases (see WV Supreme Court Reverses Itself, Post-Production Deductions OK). That sparked a rebellion in the WV legislature which led to a new law reversing the Supreme Court’s ruling (see WV Gov Justice Signs Bill to Guarantee 12.5% Minimum Royalty). There are other oil and gas cases that may be impacted by a wholesale change in the court as well. Here’s the latest on this developing situation in WV…
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Antis Still Can’t Come to Terms They Lost NY AIM Pipe Case

Big Green antis thought they could stop the Algonquin Incremental Market (AIM) pipeline project–an expansion of the existing Algonquin pipeline system designed to carry 342 million cubic feet of natural gas per day to New England states that badly need the gas. On March 3, 2015 the Federal Energy Regulatory Commission (FERC) issued a final approval for the project. Construction began in 2015 and, following extreme opposition from New York State over a small portion of the project near the Indian Point nuclear plant (which will shut down in a few years anyway), AIM finally went online in late 2016. In what has become a typical pattern, Big Green groups asked FERC to rehear their decision to approve AIM, FERC refused, and Big Green then filed a lawsuit in federal court. But two weeks ago the federal court told the antis “no,” crushing their efforts to roll back the expanded pipeline (see DC Circuit Court Denies Anti Request to Rehear AIM Pipe Approval). That should be the end of the matter. There’s no place left to go, court-wise, except maybe (one in a million odds) to the U.S. Supreme Court. Yet the antis, still disbelieving they’ve lost, are threatening to pursue it legally. Some unstable people just can’t let go…
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Energy Stories of Interest: Wed, Aug 15, 2018

The “best of the rest”–stories that caught MDN’s eye that you may be interested in reading: Monaca gets $3M for new gateway project to ethane cracker; Philadelphia Energy Solutions quietly installs new board & CEO; well plugging economics for Diversified; shale boom removes natgas price volatility; delays in Mexico pipes limite US natgas pipeline exports; Europe is getting serious about buying US LNG; and more!
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