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Foreign Investment in America’s Shale Gas: Is it Good or Bad?

One of the main arguments in favor of Marcellus shale gas drilling is that America can become more energy independent—less dependent on the energy (oil and gas) from other countries. It is an argument that strikes a chord with many Americans. The argument also goes that much of the gas produced in the region will stay “local” and cause natural gas prices to remain low for consumers. But what if foreign companies and foreign-backed government entities start buying leaseholds and come here and drill? Will the gas remain here, or will it be exported?

Read More “Foreign Investment in America’s Shale Gas: Is it Good or Bad?”

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Chesapeake Ordered to Stop Work on Drilling Pad in Potter County, PA Because of Erosion

Chesapeake Energy has been ordered to stop work on preparing a drilling site in north central PA because the work they’re doing at the site is causing dirt to runoff into a local stream which in turn is the water source for a local township.

Read More “Chesapeake Ordered to Stop Work on Drilling Pad in Potter County, PA Because of Erosion”

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Chesapeake and Statoil to Drill 17K Horizontal Marcellus Gas Wells, Statoil Does Deal with MarkWest for Gas Processing

Chesapeake Energy and Statoil ASA are making a major commitment to drilling in the Marcellus Shale over the next two decades:

Read More “Chesapeake and Statoil to Drill 17K Horizontal Marcellus Gas Wells, Statoil Does Deal with MarkWest for Gas Processing”

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Chesapeake Energy Invests $92 Million in Northeast PA Roads, Recycles 100 Percent of Wastewater

Chesapeake Energy is one of the largest drillers for natural gas in the Marcellus Shale, period. And they are a big driller in Bradford and other counties in Northeastern PA. With so many wells being drilled in the area, roads have been damaged. Many of the roads are what Chesapeake refers to as “pie crust” roads – nothing more than 2 inches of asphalt laid on clay or dirt – the kind of roads that don’t hold up well to any kind of traffic. Chesapeake is not only repairing the damage, but in many cases making the roads better than they originally were:

Read More “Chesapeake Energy Invests $92 Million in Northeast PA Roads, Recycles 100 Percent of Wastewater”

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Update on Well Explosion in Western PA

Chesapeake Energy was flaring three gas wells in Avella, located in Washington County, PA on Feb. 23 when tanks holding some 105,000 gallons of natural gas liquids exploded. Contrary to some reports, the explosion had nothing to do with hydraulic fracturing fluids. The cause of the explosion is still under investigation and not known at this time.

As for the three workers injured, at least one of them is still in critical condition:

Read More “Update on Well Explosion in Western PA”

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Broome County, NY Landowners Sue Energy Companies that Try to Extend Expired Leases with “Force Majeure” Clause

force majeureMany landowners in the Broome County, NY area who signed gas leases years ago are now receiving letters from the energy companies holding those leases that the landowner is “locked in” to the terms of the lease even though the original term has now expired. Why? The legal term is “force majeure,” which roughly means “due to circumstances beyond our control—the fact that New York State continues to prevent drilling—you have to stick with us for a while longer.” Because this involves contracts and interpretation of the terms of those contracts, it’s now in the hands of lawyers, or heading in that direction.

Read More “Broome County, NY Landowners Sue Energy Companies that Try to Extend Expired Leases with “Force Majeure” Clause”

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Encana’s Big Gamble in Luzerne County, PA

Will Encana Oil & Gas’ gamble in Luzerne County, Pennsylvania pay off? We’ll know soon. Encana is due to start drilling two exploratory wells in Luzerne County this week. The drilling process itself will last 65-75 days.

So why is it a gamble for Encana to drill for gas in Luzerne County? Nobody knows for sure if the Marcellus Shale gas deposits are commercially viable that far south.
Read More “Encana’s Big Gamble in Luzerne County, PA”

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Two-Thirds of Wyoming County, PA Land Now Leased, More Land being Sought by Drillers

Nearly two-thirds of the land in Wyoming County, Pennsylvania is leased by natural gas drilling companies, and recent strong gas production from wells in the northern part of the county have sparked a competition to lease even more Wyoming County land.
Read More “Two-Thirds of Wyoming County, PA Land Now Leased, More Land being Sought by Drillers”

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Chesapeake Energy has 19 Active Drilling Rigs in Northeast PA Alone

Brian Grove, corporate spokesman for Chesapeake Energy, addressed the Chamber of Business and Industry of Centre County in State College, PA today. Among his comments was this statement showing Chesapeake’s commitment to the Marcellus Shale:

“In northeastern Pennsylvania, where I’m from … we have 19 drilling rigs right now active in the northern tier. That’s as many, right now, as our company has in the Barnett Shale in Texas.”*

Grove also warned that a steep severance tax and “overly heavy” regulation will slow drilling growth in PA.

*The Centre Daily Times (June 30) – Natural Gas Rep: Drilling companies here to stay in Pennsylvania

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Forced Pooling – An Issue Coming to the Forefront in Pennsylvania

Now that a severance tax is coming to Pennsylvania, natural gas drillers will likely push for a provision called “forced pooling” in PA which makes it easier to gather gas from properties that are not leased but sit in-between other leased land.

The Marcellus Shale natural gas industry wants to see legislation attached to any severance tax adopted by the state that would force property owners who refuse leases to allow drillers to gather the gas beneath their land, an industry coalition leader said Monday.

Calling it the most economical and conservative land-use approach to drilling for gas, David Spigelmyer, Chesapeake Energy’s regional vice president for government relations, said in a Times-Shamrock newspapers editorial board meeting that “forced pooling” is a key element of any legislation the state’s Marcellus drillers could support and is actively being discussed during budget negotiations in the capital.

Such a statute would help avoid an unnecessary proliferation of wells, Spigelmyer said, but critics say it is a form of eminent domain.*

This is an unresolved and complex issue that’s about to become red hot in PA. There are strong arguments on both sides. MDN believes landowners should have the right to allow drilling on and under their land provided it does not harm nearby populations or the environment. It is the constitutional right for citizens of this country to use their land as they see fit. On the other hand, to force a landowner who does not want to lease their land into a pool with their neighbors who have leased, is also unfair. If it means a proliferation of wells and added expense, so be it. The drilling company will have to bear the cost. Citizens should not have to worry that portions of their property will be used against their will—both on the surface and under it. It’s wrong to stop drilling based on irrational fear (as is being done in New York), and it’s equally wrong for drillers to force landowners to allow drilling under their land.

What do you think about forced pooling? Leave a comment below and let us know.

*Wilkes-Barre Citizen’s Voice (June 29) – Gas industry wants access to unleased property

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Marcellus Shale Ethane Headed to the Gulf Coast in a New Plan from MarkWest and Sunoco

MarkWest Liberty Midstream is partnering with Sunoco Logistics to use existing and new pipelines in a project that will take Marcellus Shale gas liquids (ethane) from the northeast all the way to the Gulf Coast. How’s that for a change?! Ethane is primarily used in manufacturing plastics and is one of the by-products obtained from processing shale gas methane. Range Resources and Chesapeake Energy are among the major Marcellus Shale producers who are supporting the project and will sell processed ethane using the new system offered by MarkWest and Sunoco Logistics. Part of the project includes constructing a new 45-mile pipeline from Houston, PA to Delmont, PA. The ethane arriving at Delmont will then be piped to the East Coast, and from there it will go by ship to the Gulf Coast.

From the official press release:

MarkWest Liberty Midstream & Resources, LLC, a partnership between MarkWest Energy Partners, L.P. and The Energy & Minerals Group, and Sunoco Logistics Partners L.P. today announced a combined pipeline and marine project for ethane produced in the Marcellus Shale Basin. The Mariner Project is anticipated to have initial capacity to transport up to 50,000 barrels per day of ethane to Gulf Coast markets as soon as the second quarter of 2012 and could be scaled to transport higher volumes to support additional ethane production in the Marcellus region. MarkWest Liberty has been working with key producers and petrochemical consumers since late 2009 and the project is supported by key producers including Range Resources Corporation and Chesapeake Energy Corporation.

The Mariner Project includes MarkWest Liberty making minor modifications to its processing facilities to recover sufficient ethane to allow the residue gas to meet interstate gas pipeline specifications and installing additional facilities at its Houston, Pennsylvania processing and fractionation complex to separate the ethane for delivery to downstream Mariner Project facilities. MarkWest Liberty will also construct a 45-mile pipeline from the Houston complex to an interconnection with an existing Sunoco Logistics pipeline at Delmont, Pennsylvania. The ethane will be transported to an existing East Coast facility where Sunoco Logistics will construct refrigerated ethane storage facilities. The ethane will then be transported via marine vessel to premium markets in the Gulf Coast. In addition, the existing Sunoco Logistics pipeline crosses many of the large pipelines transporting natural gas into the northeast, which will provide multiple ethane blending options.

“We are excited to be able to participate in the Mariner Project and we are especially pleased to partner with MarkWest Liberty due to their extensive experience in the Marcellus Shale Basin,” said Deborah M. Fretz, President and Chief Executive Officer of Sunoco Logistics. “Our existing Pennsylvania active and idle pipeline infrastructure is well-positioned to provide an efficient solution for producers to move ethane across Pennsylvania to a Delaware River marine port to access multiple markets. The combination of MarkWest Liberty’s fractionation complex and Sunoco Logistics’ transportation system offers producers a higher value for their natural gas liquids by transporting only the ethane portion of the liquids and allowing the heavier liquids to remain in the northeast marketplace.”

Frank M. Semple, Chairman, President and Chief Executive Officer of MarkWest stated, “We have been working with Sunoco Logistics and our producer customers for a number of months and we believe the Mariner Project provides the most efficient solution to maximize the value of Marcellus ethane, supports the development of more than 2 BCF per day of Marcellus rich gas, and significantly accelerates the in-service date to transport ethane compared to other pipeline projects. MarkWest and The Energy & Minerals Group are very pleased to partner with Sunoco Logistics because of their strong set of assets and significant experience in the storage and transportation of liquefied petroleum gas.”

*Businesswire (June 1) – MarkWest Liberty Midstream & Resources and Sunoco Logistics Announce New Marcellus Ethane Pipeline and Marine Project

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Chesapeake Energy’s Marcellus Shale Strategy Changes – 20% of Their Leases Now For Sale

Seems there’s been a strategy change at Chesapeake Energy with respect to Marcellus Shale drilling. Chesapeake is the largest player in the Marcellus with some 1.5 million net acres under lease. As recently as last week (see this MDN story) they boasted of having 24 drilling rigs (expanding this year to 31) in operation, and plans to drill 170 Marcellus shale gas wells in 2010. But that was last week. This week they’re looking to sell off 20 percent of their Marcellus leases to help raise $5 billion to pay down debt and invest in other ventures. No, they certainly aren’t abandoning the Marcellus—not by a long shot. But it is quite a strategy shift from upper management. From their recent press release:

Chesapeake Energy Corporation today announced a strategic and financial plan designed to increase shareholder value, reduce debt and ultimately achieve an investment grade rating for the company’s debt securities. Through a series of transactions over the next 24 months, including the preferred stock placement announced today, the company is planning to raise up to $5.0 billion in order to repay up to $3.5 billion of senior indebtedness and increase its investment in liquids-rich plays by up to $1.5 billion. Chesapeake is in various stages of implementing its strategic and financial plan, several steps of which are outlined below.

The company is planning to sell up to a 20% equity interest in its subsidiary, Chesapeake Appalachia, L.L.C., which includes its Marcellus Shale operations, to private and/or public investors within the next 3-12 months. Chesapeake is one of the largest producers, the largest leasehold owner with 1.5 million net acres and the most active driller with 24 operated rigs in the Marcellus Shale play.*

*Chesapeake Press Release (May 10) – Chesapeake Energy Corporation Announces Strategic and Financial Plan to Increase Shareholder Value and Reduce Debt

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Chesapeake on Track to Drill 170 Wells and Operate 31 Drilling Rigs in Marcellus Shale in 2010

This bit of information about Chesapeake’s Marcellus Shale activities from a recent operational update:

With approximately 1.5 million net acres, Chesapeake is the largest leasehold owner in the Marcellus Shale play that spans from northern West Virginia across much of Pennsylvania into southern New York. On its Marcellus leasehold, Chesapeake estimates it has approximately 26 tcfe of risked unproved resources and 66 tcfe of unrisked unproved resources.

During the 2010 first quarter, Chesapeake’s average daily net production of 65 mmcfe in the Marcellus increased approximately 40% over the 2009 fourth quarter and approximately 815% over the 2009 first quarter. Chesapeake is currently producing approximately 100 mmcfe net per day from the Marcellus. Chesapeake is currently drilling with 24 operated rigs in the Marcellus and anticipates operating an average of approximately 31 rigs in 2010 to drill approximately 170 net wells. During the 2010 first quarter, approximately $90 million of Chesapeake’s drilling costs in the Marcellus were paid for by its joint venture partner Statoil. From April 2010 through 2012, 75% of Chesapeake’s drilling costs in the Marcellus, or approximately $1.9 billion, will be paid for by Statoil.

Three notable recent wells completed by Chesapeake in the Marcellus are as follows:

  • The James Barrett 2H in Bradford County, PA achieved a peak 24-hour rate of 12.7 million cubic feet of natural gas (mmcf) per day;
  • The James Barrett 1H in Bradford County, PA achieved a peak 24-hour rate of 11.8 mmcf per day; and
  • The Strom 1H in Bradford County, PA achieved a peak 24-hour rate of 8.2 mmcf per day.

*Business Wire (May 3) – Chesapeake Energy Corporation Provides Quarterly Operational Update

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Chesapeake Energy’s Permit to Use State Route 1007 in Bradford County Revoked Until Damage is Repaired

Bradford-County-SR-1007 Chesapeake Energy’s permit to use a PA State Route in Bradford County has been revoked—now a second time—by the Pennsylvania Department of Transportation (PennDOT).

From the PennDOT press release:

HARRISBURG, Pa., April 15 — A road use permit issued to Chesapeake Energy Corporation for moving its drilling trucks and other equipment over State Route 1007 in Bradford County was revoked because of the company’s failure to deal with severe damage to the roadway, Transportation Secretary Allen D. Biehler, P.E., announced today.

Chesapeake was granted a permit to put heavy trucks and equipment on the road, known locally as Spring Hill Road in Tuscarora and Stevens townships. The road normally has a 10-ton weight restriction, and Chesapeake’s permit carried the understanding the company would be responsible for repairs.

“Chesapeake may not use this route until it makes the required repairs,” Biehler said. “We understand the importance of Marcellus Shale drilling to the region’s economy, but we will remain vigilant in requiring action to keep the roads safe and properly maintained for public use.”

PennDOT revoked the permit after Chesapeake failed to respond to two notices of unsafe conditions on the roadway. Under the terms of the permit, Chesapeake is to proactively monitor pavement conditions and immediately begin repairs as needed to keep the road safe.

On March 1, PennDOT revoked Chesapeake’s permit for State Route 1001 in Bradford County for the same reasons. The permit was restored after the road was closed for about one week and the company made the required repairs.

*PR Newswire (Apr 15) – PennDOT Revokes Road Use Permit for Chesapeake Energy Corporation on State Route 1007 in Bradford County Until Repairs Are Made