MSC Corrects/Clarifies Article Touting HB 1391 Royalty Bill

rebuttalYesterday MDN ran a story reporting that a landowner rebellion against post-production cost deductions from royalties is spreading beyond just Bradford County in northeastern Pennsylvania–to counties in southwestern PA (see PA Royalty Unrest Spreads from Bradford County to Western PA). We picked up part of an article run by the Washington, PA Observer-Reporter. The Marcellus Shale Coalition sent along an email rebuttal of that article, to “correct/clarify several issues in the article” that they believe either mischaracterize the situation, or statements that are outright wrong. Here is the MSC’s rebuttal…
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Guest Post: HB 1391 Will Restore What Bradford Landowners are Owed

guest postLast Friday MDN ran a guest post from an executive who works for a Pennsylvania exploration and production company (E&P, what we call a “driller” here on MDN). In the post, titled Why PA HB 1391 Bill is Bad for the Marcellus, MDN invited those with an opposing view to send us a guest post on the other side of the issue. A landowner from Bradford County has done just that (read it below). We also include a recent AP article highlighting other landowners in Bradford who have been wronged by Chesapeake Energy (according to the landowners interviewed). With the highest amount of respect to the Bradford landowner writing the guest post, we must point out that in a way his post “makes the case” for the industry’s view as posted last Friday, a case *against* HB 1391. How?…
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Guest Post: Why PA HB 1391 Bill is Bad for the Marcellus

guest postWe don’t mind telling you that the royalty issue in Pennsylvania, specifically passage of House Bill (HB) 1391 to ensure landowners are guaranteed 12.5% royalty checks regardless of post-production costs, is a thorny issue for MDN. We can see both sides of the issue, but tend to favor the landowner side–slightly. The drilling industry knows that there is no bigger booster for them than MDN. So our periodic coverage and editorializing in favor of 1391 is a bone of contention. Drillers are not happy with your faithful editor. A long-time MDN subscriber and friend who works for a sizable driller in PA recently wrote us an email that (a) lays out the case for not tampering with existing, signed contracts, and (b) gently chides MDN for taking the landowners side in this issue. We asked for and received permission to bring you his email. As we responded to our friend, we are interested in getting this issue settled quickly. It breaks our heart to see allies divided. We all need to be firing at the other side, not within our own ranks. MDN is happy to run guest posts and views on this issue (or any issue). This letter writer does a good job, and makes a compelling case, for NOT passing HB 1391. Does he change your mind on the issue?…
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Twitter Fight Over PA HB 1391 Royalty Bill

tweetmeChanneling our inner Joan Rivers: Can we talk? It hurts when a good friend publicly criticizes you. It feels like you’ve been stabbed in the back. Perhaps a case of public criticism is one of the reasons for the developing rancor (we call it a civil war) between landowners and the Marcellus industry in Pennsylvania. Landowners are upset that their royalty checks are, in some cases, pennies–as in less than one dollar. Drillers claim that super low prices they receive for the gas are to blame–that nobody is making money right now. Landowners say that drillers (e.g. Chesapeake Energy) are deducting post-production costs that they shouldn’t be allowed to deduct, resulting in worthless royalty checks. For a number of years landowners in Pennsylvania have supported legislation to force drillers to pay a minimum 12.5% royalty, which is stipulated under a 1979 law. Drillers say post-production costs are written into many contracts and if it’s there, landowners must live by the contract. It’s turning into a mess. We’ve covered it extensively (see our articles on HB 1391). When we write about it, it’s from the perspective of a broken heart that we have a civil war brewing. When mainstream media writes about it, it’s typically with some degree of glee and happiness that “the other side” has infighting going on. An article appearing in today’s Pittsburgh Post-Gazette does a good job of summarizing what we’ve previously posted on the issue. However, the Post-Gazette article adds one new bit of information we didn’t know about: earlier this summer there was a Twitter fight/dust-up between PA-NARO (National Association of Royalty Owners) and the MSC (Marcellus Shale Coalition)…
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PA Landowners, Drillers Fight over HB 1391 Minimum Royalty Bill

Garth Everett
Rep. Garth Everett

It appears that legislation in the Pennsylvania House of Representatives, House Bill (HB) 1391 that would fix the issue of landowners getting shorted in royalty payments, is about to die. It’s not the first time a bill meant to ensure landowners get a minimum of 12.5% in royalties has died in the PA legislature. Bradford County Commissioners chairman Doug McLinko is blaming the Marcellus Shale Coalition and other drilling industry groups. And he’s not a happy camper. Last June MDN told you about a renewed effort by Pennsylvania State legislators to pass a minimum royalty bill that will guarantee PA’s landowners get at least 12.5% royalties (see New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties). HB 1391 is was introduced by State Rep. Garth Everett, a Republican from Lycoming County, PA. Everett said in June the new bill was “narrowed” in focus from a previous bill (that had failed) and because the more narrowed focus, he hoped the Marcellus industry would not oppose it this time around. Everett was dead wrong. As we reported in June, the rift between landowners and drillers on the matter of minimum royalties continues (see Rift Continues Between Drillers & Landowners re Royalty Bill). Due to some hard work by Everett, the bill finally moved out of committee where it had been stalled, and on to the full House for a vote (see Progress: PA Minimum Royalty Bill Heads to Full House for Vote). But now the bill is stalled in the full House and it appears there will not be a vote by the end of the fall session, due to close in another two weeks…
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New Effort to Pass HB 1391 Minimum Royalty Bill in PA

Garth Everett
Garth Everett

Last June MDN told you about a renewed effort by Pennsylvania State legislators to pass a minimum royalty bill that will guarantee PA’s landowners get at least 12.5% royalties (see New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties). House Bill (HB) 1391 is was introduced by State Rep. Garth Everett, Republican from Lycoming County, PA. Everett said in June the new bill was “narrowed” in focus from a previous bill (that had failed) and because the more narrowed focus, he hopes the Marcellus industry will not oppose it this time around. The issue of guaranteeing minimum royalties is one of those rare issues that has divided the drilling industry and landowners. Everett said he hasn’t (until now) pushed the bill because of the budget stalemate, but now that the budget impasse is mostly over, he’s going to make a renewed effort to get HB 1391 passed…
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New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties

Last week MDN told you that a new royalty bill would be introduced in the Pennsylvania legislature to guarantee landowners get a minimum 12.5% royalty (see New Bill Pushes 12.5% Guaranteed Minimum Royalty for PA Landowners). The new bill, House Bill (HB) 1391 is, according to the bill’s main sponsor State Rep. Garth Everett, more narrowly focused than the previous bill introduced in 2013 (HB 1684). Gareth and a group of supporters from the PA chapter of the National Association of Royalty Owners gathered in the Capitol Rotunda in Harrisburg on Tuesday in a bill launch rally. We don’t (yet) have the language of the new bill, but we do have Everett’s description of what’s in the bill, a brief video interview of Everett from Tuesday’s launch rally, and a newspaper write-up from the event…
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NY DEC Will “Fight” FERC over Constitution Pipeline Decision

You can’t say we didn’t see this one coming. Last week the Federal Energy Regulatory Commission (FERC) ruled that the New York Dept. of Environmental Conservation (DEC) took too long to deny a federal Clean Water Act “Section 401” water crossing permit for the Williams Constitution Pipeline project (see Victory! FERC Overrules NY DEC to Allow Constitution Pipeline). Meaning the project is now back on, approved by FERC itself. As we predicted, the DEC, thoroughly corrupted and politicized by Cuomo himself, says it will “fight” FERC’s ruling.
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Energy Stories of Interest: Wed, Jun 5, 2019

OTHER U.S. REGIONS: Cheniere Energy inks deals to support two expansion projects; NATIONAL: Ethane exports on the rise, but hemmed in by its uniqueness; U.S. hydrocarbon gas liquids production reaches 5 million barrels per day in 2018; Many 2020 Democrats favor banning fracking, fossil fuel exports. That’s millions of jobs; INTERNATIONAL: Shell sets out oil, gas growth case despite fossil fuel qualms; Natural gas and efficiencies feature as national oil companies respond to climate-change initiatives; Australia remains divided on roaring LNG sector.
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Range 3Q18: Record High Production, Swings to Profit

Range Resources released its third quarter 2018 update earlier this week. The company shows making a $48.5 million profit for the quarter, verses losing $127.7 million in 3Q17. Quite a swing into the black! Some of the credit goes to Rover Pipeline. Range has reserved 400 million cubic feet per day (MMcf/d) on Rover, which is now up and running. Range is ramping up production and expects to use all of their 400 MMcf/d capacity by the end of 2018. Production in 3Q18 averaged a record high of 2.267 billion cubic feet equivalent per day (Bcfe/d), an increase of 14% compared to 3Q17.
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Blue Ridge Mountain Res. Forms JV to Raise $92M for Drilling in OH

In December 2015 Marcellus/Utica driller Magnum Hunter Resources filed for bankruptcy (see Sad Day: Magnum Hunter Files for Chapter 11 Bankruptcy). Five short months later, in May 2016, Magnum Hunter emerged from bankruptcy–without CEO Gary Evans (see Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone). Apparently the new owners of the company (the former debt holders converted into equity holders) didn’t want Evans running the company. So Evans departed to start a new drilling company not focused on the M-U. In January 2017, just one year ago, Magnum Hunter changed its name to Blue Ridge Mountain Resources (see Magnum Hunter Changes Its Name, Leaves the Bankrupt Past Behind). Since that time the only news we’ve heard about the former Magnum Hunter is that they sold their interest in Eureka Midstream (see Eureka Midstream Confirms MDN Article on New Ownership). That is, until now. Earlier this week, Blue Ridge announced it sold a “non-operating interest” in 21,000 undeveloped Marcellus/Utica acres to an undisclosed investor for $56 million, AND got the undisclosed investor to pony up another $36 million (total deal of $92 million) which Blue Ridge will use to fund an ongoing 2-rig drilling program in southeastern Ohio…
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PA DEP Tries to Convince Landowners/Drillers to Plug Orphan Wells

Earlier this week MDN told you about a new bill that passed the Ohio legislature and now awaits Gov. John Kasich’s signature called House Bill 225, which triples the amount of money set aside to cap orphan wells in the Buckeye State (see OH Orphan Well Bill Wins Praise from Both Drillers & Enviros). The bill also “creates a more streamlined and efficient process for identifying and plugging” orphan wells. The amazing thing about the bill is this: both Big Green groups and the drilling industry support it! So-called orphan wells are old conventional oil and gas wells that have been abandoned (for decades). They are hazards for shale drillers who stumble across them when drilling new wells. If you drill horizontally and clip an old/abandoned well, it becomes like an elevator pumping fluids and gas to the surface. Ohio has an estimated 600 orphan wells. In Pennsylvania, it’s a whole other story. PA has some 200,000 orphan wells! The main issue in PA has been who will pay to cap them? Most of PA’s orphan wells are not mapped or known. Yet some of them are known–by the landowners on whose land they sit. A second (very important) issue in PA is that if a landowner or driller tries to cap an orphan well they come across, the party doing the work may be liable if there are any environmental impacts from the effort. Let’s see, nobody to pay for it–and if you assume all the legal risk. It’s a recipe for “Don’t touch that orphan well with a 10 foot pole!” In what is too coincidental to be a coincidence, the PA Dept. of Environmental Protection has just launched a program “encouraging private-sector partners to become Good Samaritans, by participating in a program that helps cap dangerous abandoned oil and gas wells statewide.” Was the DEP goaded into doing something about orphan wells after seeing the success Ohio is having? Whether coincidence or not, the DEP is telling landowners and drillers: If you pay for it and plug it yourself, first getting the DEP’s “mother may I?” permission, you will not be on the hook legally (i.e. can’t be sued) later on if “this old well” ends up harming the environment…
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WV Gov Justice Says China Investment Specifics are “Confidential”

We are STILL shaking our head in disbelief at the news from early November that China has signed a “memorandum of understanding” (MOU) to invest $83.7 billion (with a “b”) in a single U.S. state–West Virginia (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). Since the signing ceremony in China, part of President Trump’s Asian trade mission, we have not had many specifics about where, when and how that money will get spent in the Mountain State. We have read rumors that a pair of natural gas-fired electric plants may be among the first projects, and that some of those billions may help fund a natural gas liquids (ethane) storage hub, and maybe even a cracker plant (see More on that Massive $83.7B Chinese Investment in WV Shale/Petchem). But since that time, very few details have been shared. During a press conference yesterday WV Gov. Jim Justice talked about the deal. Perhaps responding to those who still disbelieve, Justice said the Chinese are “deathly serious” about the deal and investing in WV. He even said they may invest more than the promised $83.7 billion! Justice also said he can’t reveal details about where/when/how the money will get invested because of a “confidentiality agreement,” which we find rather odd. We understand not tipping your hand too early with specifics, but this situation of a virtual information blackout about where a single penny of the money will get spent smacks of China’s well-earned reputation for secrecy. It’s unfortunate we don’t know more about the deal and what will get funded. It leads some to maintain a healthy skepticism that the promised funds will indeed get invested in WV…
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Dominion Asks FERC to Allow Feed Gas for Testing at Cove Point LNG

Fantastic news to report! Dominion has asked the Federal Energy Regulatory Commission (FERC) for permission to begin flowing feed gas (for testing purposes) to parts of the Cove Point LNG export facility. We are now getting close to startup at the facility, which is supposed to go online in the fourth quarter of this year. Cove Point sits along the coast of Maryland. Dominion began work on the $3.5 billion plant in 2015. When complete, the plant will liquefy and export 1.8 billion cubic feet per day (Bcf/d) of Marcellus/Utica Shale gas to India and Japan. Currently there is only one export facility in the U.S. in operation, along the coast of Louisiana (Cheniere Energy’s Sabine Pass). That one facility has fundamentally changed the economics of LNG (liquefied natural gas) here at home and around the world. Just imagine what another 1.8 Bcf/d will do! And it’s ALL from our region. Here’s more about the good news that Cove Point is ready to begin testing…
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PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time

Third time’s the charm? The Pennsylvania General Assembly convenes for two-year sessions. Almost six years ago during the 2013-2014 session of the General Assembly, PA Rep. Garth Everett introduced “minimum royalty” legislation that would guarantee PA landowners would get minimum royalty payments of 12.5%–regardless of any kind of post-production expenses. It was called House Bill (HB) 1684 and it failed to even come to the floor for a vote (see PA Royalty Bill 1684 Off the Agenda, Likely for Rest of 2014). Everett re-introduced it during the 2015-2016 session, renamed HB 1391. Once again, near the end of the term, it failed to get a full vote (see PA Royalty Bill Dead for Another Year – Supporters Vow to Fight On). Everett is not giving up. Last Friday he re-introduced the bill for the third time, this time called HB 557. Does it stand a chance?…
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