CNX Midstream Sues Contractor for Walking Away from Pipe Project
On Monday, CNX Midstream sued West Virginia contractor Ronald Lane Inc. claiming the contractor “without warning or justification ceased work on the Project and abandoned the Project,” the Project being a package of water and gas pipelines in Greene and Washington counties in PA. And that, “Lane informed [CNX] that Lane intended to redirect all of its forces and efforts to other projects that Lane considered to be more profitable than the Project. Lane made it clear to [CNX] that Lane had no intention to perform any more work on the Project.” Lane was the winning bidder for the Project in late 2017 at a total cost of $7.1 million. According to the lawsuit, CNX claims Lane began construction in March and abandoned the Project in June.
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CNX Resources, formerly CONSOL Energy, issued its third quarter 2018 update yesterday. The company reports producing an average of 1.3 billion cubic feet equivalent per day (Bcfe/d) of gas, NGLs and oil, up 18% from 3Q17. They made $35 million in profit, up from a loss of $41 million for the same period last year. CNX drilled 23 Marcellus/Utica wells in 3Q18 using four rigs, and brought 35 wells online. Three frac crews completed 27 wells during the quarter. The 23 wells drilled over the past three months included: 15 Marcellus wells in Greene County, PA; 3 dry Utica wells in Westmoreland County, PA; 3 dry Utica wells in Monroe County, OH; and 2 Marcellus wells in Tyler County, WV. The company expects to produce close to 500 Bcfe for all of 2018. CEO Nick DeIuliis boasts, “the team is firing on all cylinders.”
An important court case was decided on Friday in Pennsylvania Commonwealth Court that potentially impacts all shale drilling in the state. You will recall that seven selfish towns sued the state over the 2012 Act 13 law and it’s provision that would substitute a statewide, uniform and fair set of zoning ordinances for drilling in place of a patchwork, crazy quilt system of local ordinances for oil and gas drilling. Seven selfish towns (including Robinson Township) wanted their own ordinances and sued, ultimately winning at the Supreme Court (see 
The expert analysts at RBN Energy have just published their “fourth and final” in a series of posts looking in detail at E&Ps (exploration & production companies, or “drillers”). One of the groups of E&Ps they examine are “gas-weighted” E&Ps–or drillers who mostly extract natural gas. In looking through the list, you immediately realize every one of them has operations in the Marcellus and/or Utica Shale region. Yes, a few also have operations in other plays, but they all have at least some operations here. The real value in the article is an accompanying spreadsheet comparing various financial metrics (apples to apples)–things like total revenue, lifting costs, production costs, and “pre-tax income,” meaning profitability. How do our drillers compare with each other?
Yesterday the Pennsylvania Department of Environmental Protection (DEP) issued administrative orders requiring three oil and gas companies–Alliance Petroleum Corporation (a subsidiary of Diversified Gas & Oil), XTO Energy, and CNX Resources–to plug 1,058 abandoned oil and gas wells across Pennsylvania. Alliance has 638 wells, CNX has 327, and XTO has 93. In a quick scan of the list of wells to be plugged, we didn’t spot a single shale well. All 1,058 wells are conventional/vertical wells. So why is this news for MDN? Because all three drillers (but in particular CNX and XTO) drill shale wells, and plugging old conventional wells takes time and money–time and money that could be spent on drilling shale wells. It takes anywhere from $10,000 to $100,000 to plug an abandoned conventional oil/gas well. Most of the wells are located in the southwestern part of the state. CNX responded that in reviewing the list, some 190 of the wells in their list (out of 327) were part of a recent asset sale. Here’s the details on where, and how long these companies have, to plug old/abandoned oil and gas wells…
In late June Ascent Resources, a company founded by Aubrey McClendon after he left Chesapeake Energy, announced it is buying 113,400 Utica Shale acres along with 93 operating wells located in eastern Ohio for $1.5 billion (see 
CNX Resources was installing a pipeline in Indiana County, PA and apparently didn’t, according to the PA Dept. of Environmental Protection (DEP), properly construct erosion barriers for the project. It rained, hard, and sediment-laden water went over the erosion barriers and got into an unnamed stream, which empties into Mudlick Run, a “high quality water” creek. In other words, a tiny creek got muddy, and some of that muddy water *may have* entered a slightly bigger creek. And for that violation, CNX is going to pay a whopping $250,000 fine. The DEP says following an inspection in March, the DEP ordered CNX to fix the problem by April 3, but as of May 16 the problem had still not been fixed. CNX disputes that they violated their permits and has told the DEP they’ve quit building that particular pipeline. In order to make it all go away, CNX is paying the DEP a $250K negotiated shakedown, PLUS pay to fix the “problem”…
As is so often the case, radical Big Green groups, like PennFuture, attempt to intimidate (i.e. bully) by using threats of legal action, those who dare to use and (gasp) enjoy the monetary benefits of shale drilling. In early 2013 the Pittsburgh International Airport and Allegheny County, PA signed a deal with CONSOL Energy (now CNX Resources) to lease 9,000 acres surrounding the airport for natural gas drilling (see 
Last Thursday, Ascent Resources, a company founded by Aubrey McClendon after he left Chesapeake Energy, announced it is buying 113,400 Utica Shale acres along with 93 operating wells located in eastern Ohio for $1.5 billion. The new acreage tips Ascent over the 300,000 Utica acre line and catapults the company into one of the largest privately owned drillers (exploration and production) in the U.S. The companies doing the selling are CNX Resources and Hess (selling a joint venture they co-owned, each selling their share for $400 million each, for a total of $800 million), Utica Minerals Development (a subsidiary of First Reserve, a private equity firm headquartered in Greenwich, CT, and EMG), and a fourth, unnamed mystery seller. The CNX/Hess acreage (78,000 net acres of the 113,400 acres) is located in the wet gas window of Belmont, Guernsey, Harrison and Noble counties. We’re not sure about the location of the other acreage. The CNX/Hess jv sale marks Hess’ total exit from the Utica Shale. So how will Ascent pay for all of their new shiny new assets? 
MDN exclusively brought you the news, on June 19, that Diversified Gas & Oil had purchased EQT’s Huron Shale assets in Kentucky, Virginia and West Virginia for $575 million (see 
Another interesting story coming from this week’s DUG East Conference in Pittsburgh. CNX Resources (formerly CONSOL Energy), is beginning to use a new strategy of mixing together the natural gas produced from two different rock layers–the Marcellus and Utica. Why do that? The “gas” CNX gets from their Marcellus wells is “damp”–which is a new term for us. Everyone else would call it “wet”–as in there are extra hydrocarbons in the gas, like ethane, propane, butane, etc. In other words, NGLs (natural gas liquids). Interestingly, the Utica wells CNX is drilling in southwestern PA are “dry”–meaning relatively little if any NGLs coming out of the ground along with the methane. By mixing the two together, damp and dry, CNX dilutes the mixture enough that it’s pipeline ready and goes directly to market. That is, the gas doesn’t have to be transported via pipeline (which costs money) to a gas processing plant to remove the extra hydrocarbons (which costs more money). Typically if you can get a good price for those other hydrocarbons, it’s worth the extra transportation and processing costs. But with NGL prices low, and with few markets for ethane (the primary NGL extracted) right now, other than exporting it out of the area, CNX’s “blending” strategy lowers their costs and gets the gas to market quicker. Here’s the beauty of it: CNX can drill both Marcellus and Utica wells on the very same pad, and blend the gas together right at the pad. Less cost and faster to market sounds like a good strategy to us…
CNX Resources announced Tuesday that the company has signed a long-term contract with Evolution Well Services to use Evolution’s 100% natural gas-fueled electric pressure pumping equipment. That is, CNX will use electric fracking equipment, with the electricity generated by burning natural gas (instead of diesel). According to Evolution, their “next generation” equipment saves drillers “up to 95 percent on fuel costs.” Whoa! If that claim is true (we have no reason to disbelieve it), it certainly changes the economics of fracking. Using natgas to generate the electricity, instead of diesel, also has the benefit of cleaner air. And here’s the coolest part: The natural gas used to power the electric generator comes from other other CNX wells in the area, i.e. “field gas.” Look ma, no more endless truck deliveries of diesel fuel! Here’s the exciting news that CNX is a “first-mover” on this new technology…
In 2011, the Municipal Authority of Westmoreland County, PA began a new water testing and monitoring program for the Beaver Run Reservoir which supplies water to about 150,000 residents (see 
The average worker who works for producers (i.e. drillers) in the Pennsylvania Marcellus makes among the highest average salaries of any industry in the state. Looking at six of the state’s top Marcellus drillers, the average worker made $113,610 last year! That’s an average taken from workers at CNX Resources, Range Resources, Chesapeake Energy, Southwestern Energy, EQT and Cabot Oil & Gas. We hasten to add not “all workers” but “average” or “median” workers–meaning there are people who make below that number and people who make well above that number. It also means the majority of Marcellus workers in those companies made at least $100,000 per year. Those working for oilfield services (OFS) companies like Halliburton, Baker Hughes and others didn’t fare quite as well, making an average of $52,000-$80,000 per year. Still, hey, it ain’t bad money! Here’s a look at the average wage for top Marcellus drillers and the OFS companies that serve them…