Energy Companies

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    Fracking Trespass Case (Rule of Capture) Still Reverberating in PA

    Last week MDN brought you the news that the Pennsylvania Superior Court handed down a decision that has the power to greatly restrict, perhaps even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well and PA “Rule of Capture” Case has Power to Limit Marcellus Drilling). The issue, in brief, is that last week’s Superior Court decision disallows using an age-old principle called the “rule of capture” when it comes to shale drilling and fracking. It opens the door to a myriad of frivolous lawsuits claiming that a fracture, a crack created during fracking, is draining gas from a neighbor’s property without justly compensating the neighbor for the gas. Was the court’s decision a big deal? Or was is not such a big deal? We’ve seen stories appear every day since the decision, some indicating the decision is monumental in scope and impact–others saying meh, not so big after all. Which is it? We still believe the issue turns on how far cracks extend out from a wellbore during fracking–and whether you can accurately measure the distance of such fractures. If the cracks extend just a few hundred feet, the court decision is not a big deal. Most drillers stay at least 350 feet from the boundary line when drilling a well–meaning the cracks that drain gas do not extend to neighboring properties. However, if the cracks, the fractures, extend out more than a few hundred feet, say more than 300 feet, that’s a problem. Southwestern Energy responded in the lawsuit that IF their cracks had intruded (trespassed) under the boundary line, it would fall under “rule of capture”–the legal principle of he who gets there first, wins. The court ruled otherwise. We’re still haunted by the definition used (and accepted) in the lawsuit that says fracking fluid and sand can travel up to 3,000 feet…
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    More of the Same at Final DEP Hearing for Shell Ethane Pipeline

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    For three nights in a row this week the Pennsylvania Dept. of Environmental Protection (DEP) conducted hearings for Shell’s proposed Falcon ethane pipeline–a 97-mile pipeline system with two “legs” that will feed Shell’s mighty ethane cracker plant now under construction in Monaca, PA. We brought you a report from the first session, an eyewitness account from MDN friend Charlie Schliebs (see Shell Ethane Pipeline Hearing Draws Few Supporters, Many Antis). That session was predominantly populated with antis attempting to paint nightmare scenarios if the pipeline (and cracker) gets built. Last night was the third and final session–in Sewickley. Once again we have an eyewitness account, this time from MDN friend Katie Klaber, former president of the Marcellus Shale Coalition and currently managing partner at The Klaber Group and a board member of the Federal Reserve Bank of Cleveland (Pittsburgh branch). Katie is a consummate environmental professional–someone with a lifelong career in environment compliance and someone who served on the Air Quality Technical Advisory Committee of the DEP for more than a decade. She knows a thing or two about projects like the Falcon because she’s seen a thing or two (to borrow from the Farmers Insurance commercials). When the audience realized that Katie was supporting the project (the only one of the first 18 speakers to do so), the hissing started. She and the next few speakers who supported the project were hissed by bad-behaving antis in the crowd, with some Mother F…ers thrown in by an especially outspoken attendee. Nice people, those antis…
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    Monroeville Continues to Block Seismic Testing to Prevent Drilling

    Monroeville, PA (Allegheny County, suburb of Pittsburgh) is hostile toward the shale industry. In September, Monroeville Council voted to enact a super-restrictive seismic testing ordinance (see Monroeville, PA Passes Restrictive Seismic Testing Ordinance). The ordinance is meant to hassle Huntley & Huntley (H&H), which wants to conduct seismic testing in two rural areas of the municipality (for potential drilling in a neighboring municipality). In October, the contractor hired to do the seismic work for H&H, Geokinetics, took Monroeville Council to court over their punitive seismic ordinance (see Monroeville Seismic Testing Ordinance Challenged in Court). Both sides compromised and in November settled the case, which Monroeville Council voted to accept in December (see Monroeville Council Approves Seismic Testing Court Settlement). That should be the end of the story, right? Wrong. Monroeville has continued their harassment by asking a court to immediately suspend the testing because (they claim) Geokinetics did not give proper notification to residents that the testing was happening. This is nothing more than a transparent attempt to prevent future drilling by slowing, or stopping, H&H’s ability to get an accurate picture of the best places are to drill a Marcellus well. Fortunately Geokinetics just finished the testing, so Monroeville’s pathetic attempt to stop it is now moot…
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    Just What is Cabot Looking for in Ohio – NatGas, Oil or NGLs?

    Two days ago MDN revealed which rock layers Cabot Oil & Gas is targeting with new test wells in central Ohio (see New Details Emerge on Cabot’s Shale Plans in Central Ohio). Today we answer the question, What does Cabot hope to find? Cabot representative Brittany Ramos told an area newspaper that the company is looking for, “a hydrocarbon, an oil, natural gas, natural gas liquid, something, in the layers below the Utica Shale, but the only way to find that out is to actually drill a well and test.” In other words, they don’t know. They know *something* is down there, but they aren’t sure what. We suspect they’re hoping it’s either oil or NGLs. Cabot, long known for their prolific natural gas production in Susquehanna County, PA, had a previous dalliance with oil drilling in the Texas Eagle Ford shale play–assets they ended up selling in December 2017 (see Cabot O&G Sells Texas Eagle Ford Assets for $765M, Focus on Marc.). Does the company have a renewed interest in finding oil? Perhaps. If not oil, certainly NGLs. We seriously doubt they’re looking for yet another dry gas zone. Below is yet another update on Cabot’s foray into central OH. It is one of the more fair and balanced articles we’ve read. Yes, the reporter interviewed a representative from the faux “landowner group” called the Tri-County Landowners Coalition–in reality an anti-fossil fuel group controlled by elements of the Big Green movement (see Fake Ohio Landowner Groups Launch Misinformation Campaign). In this article the reporter actually asks Cabot to respond to the wild claims made by the Tri-County rep, point for point. Cabot obliterates the anti’s arguments…
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    Rex Energy Defaults on IOUs, Can’t File Annual Report on Time

    Rex Energy filed two regulatory filings with the Securities and Exchange Commission earlier this week that don’t bode well for the company. In a Form 8-K filing (a form used to notify investors of events that may be important to investors), Rex let it be known they could not make an interest payment due on senior notes, a semi-annual payment due on April 2nd. Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) have signed a temporary “forbearance” agreement that gives Rex a little breathing room–precious little. The forbearance agreement gives Rex until April 16 to pay up. Angelo, Gordon & Co. have promised not to take any action until that date. The second filing, a Form 12b-25, says that Rex will not be able to file its annual 2017 report on time. In February we reported that it looked like, at that time, that Rex was getting ready to file for bankruptcy (see Rex Energy Preparing to File for Chapter 11 Bankruptcy?). They still haven’t filed for bankruptcy, but surely a missed interest payment and pressure from a major debtholder is not a good sign…
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    EV Energy Partners Files for Chapter 11 Bankruptcy

    In the middle of March, MDN warned readers that EV Energy Partners (EVEP), a subsidiary company of EnerVest, would soon be filing for bankruptcy (see EV Energy Partners Filing for Chapter 11 Bankruptcy in Next 2 Wks). On Monday, the company succumbed and filed. At one time (in 2012), EVEP owned more than a half million acres in the Utica Shale alone (see EnerVest Puts 539,000 Utica Shale Acres on Auction Block). We couldn’t find updated statistics for the company, but we believe they still own a significant amount of Utica (and Marcellus) acreage. Here’s the EVEP announcement that the company has entered into a prepackaged bankruptcy deal…
    Read More “EV Energy Partners Files for Chapter 11 Bankruptcy”

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    PA “Rule of Capture” Case has Power to Limit Marcellus Drilling

    As we indicated in our post yesterday, the Pennsylvania Superior Court has handed down a decision that has the power to greatly restrict, even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well). This is a legal issue–and MDN is not written by a lawyer. Hence our earlier misreading of the importance and facts in the Superior Court decision. The issue, in brief, is that Monday’s court decision disallows using an age-old principle called the rule of capture, which we previously described. The rule of capture works for conventional drilling where underground deposits of oil and gas are in pools and the pool may exist underneath multiple surface property owners. Whoever gets there first and sucks the oil/gas out, wins. That’s the rule of capture in a nutshell. And it makes sense. You can’t be held responsible for oil and gas moving from one place to another as it’s extracted. And who knows how much of the pool is located under your property, or your neighbor’s property? The Superior Court justices ruled that the rule of capture doesn’t work for hydraulic fracturing because gas (and oil) trapped in shale rock does not freely move from one place to another as it does in a pool. The judges say the gas would “stay forever” where it is without fracking. In the case of Briggs v. Southwestern Energy, the Briggs family (in Susquehanna County, PA) alleges that when Southwestern drilled and fracked on the Briggs’ neighbor, the fracking was done close enough to their property that some of the gas located under their property (unleased) was released and extracted through the Southwestern well–a “trepass.” Southwestern countered that IF such a “trespass” took place, it falls under the rule of capture. The ultimate issue boils down to this: How far do fractures extend from a lateral well? An expert energy attorney told MDN off the record that Monday’s decision “could change the entire Pennsylvania shale industry” in two important ways…
    Read More “PA “Rule of Capture” Case has Power to Limit Marcellus Drilling”

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    Shell Ethane Pipeline Hearing Draws Few Supporters, Many Antis

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    Last night the first of three public hearings held by the Pennsylvania Dept. of Environmental Protection for the planned Shell Falcon Ethane Pipeline project was held in Monaca (Beaver County), PA. About 100 people turned up for the hearing, which lasted an hour and a half. No signs allowed. The only people who could speak had to register first. Of the 23 who did speak, 16 of them (including out-of-town movement antis) spoke against the project, while 7 people spoke in favor. The 97-mile Falcon Ethane Pipeline system has two “legs” that will feed Shell’s mighty ethane cracker plant. Shell is not using eminent domain for any of its leases for the pipeline. Every lease is negotiated and signed with individual landowners. Antis, in large part being organized and agitated by radical groups like FracTracker Alliance, are making a concerted effort to block the pipeline, hoping they can in turn stop the multi-billion dollar cracker plant currently under construction by blocking the pipeline that feeds it…
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    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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    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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    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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    PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak

    EQT had to take their case all the way to the Pennsylvania Supreme Court, but in the end, the company was victorious over a wildly overinflated $4.53 million fine levied by the state Dept. of Environmental Protection (DEP) for a leaky wastewater impoundment in Tioga County dating back to 2014 (see PA DEP Levies Biggest Fine Ever, $4.5M Against EQT). While EQT did not say there wasn’t a problem with leaks at the site, they did say the way the DEP calculated the fine was unreasonable and arbitrary. In fact, EQT says the DEP levied the fine and took EQT to court because a few weeks prior EQT had sued the DEP over a different, unrelated matter (i.e., sour grapes on the part of the DEP). EQT appealed the fine and the case all the way to the PA Supreme Court, which heard oral arguments last November (see PA Supreme Court Hears Arguments in EQT Wastewater Leak Case). Last Wednesday the PA Supremes ruled (5-2) in favor of EQT, saying that the DEP’s levied fine was excessive and that the DEP misinterpreted language in the 1937 Clean Streams Law…
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    Antero Resources Spent $1B in WV Last Year, Another $1B This Year

    Antero Resources is seriously in love with West Virginia. Antero is headquartered in Denver, CO but is totally focused on drilling for natural gas, NGLs and oil in the Marcellus/Utica. Antero owns over 484,000 net acres in the southwestern portion of the Marcellus Shale, and over 137,000 net acres in the core of the Utica Shale. Most of their acreage is in WV. Of the $1.3 billion the company spent last year, and plans to spend again this year, around $1 billion (per year) is spent on drilling in WV–close to 80%. Over the next five years, Antero says it will invest $6 billion in the Mountain State. That’s some serious love! As the technology gets better, it takes less time to drill. Antero said it used to take 30 days to drill an 8,000-foot well. Today? They can do it in one day. One of the secrets to Antero’s success in WV is their new Clearwater facility that recycles 98% of the frack wastewater (flowback and produced water) coming from Antero’s wells. Below is an article in which Antero gushes about their love (and future plans) for WV…
    Read More “Antero Resources Spent $1B in WV Last Year, Another $1B This Year”

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    Opponents Slandering Potter Co. Wastewater Facility Legally Warned

    Is it free speech to make “false, destructive and defamatory statements” about a company and the project it proposes to build? Is it OK to pretend to be a news organization when you’re really just a shill for Big Green groups, and is your “speech” protected–when it’s false? Members of the Seneca Indian tribe and faux news outlet Public Herald have been put on notice, legally, by lawyers representing the proposed Epiphany shale wastewater recycling facility in Coudersport (Potter County, PA) and driller JKLM to “cease and desist” from their slandering, smearing false statements about the Epiphany project–statements that are misleading the public. Those served the legal notice say it’s an attempt to silence their free speech rights. What do you think?…
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    A (Very) Rough Method for Calculating Royalties on Cabot Wells

    Cabot Oil & Gas, one of our favorite Marcellus drillers, has just published a new PowerPoint slide deck presentation as part of an investor’s conference they attended earlier this week (the Scotia Howard Weil Energy Conference). Normally a new slide deck isn’t all that big a deal. However, thanks to MDN friend Chris Acker who pointed it out to us, there is some new information in the deck worthy of note. Back in December MDN brought you the news that Cabot had signed a deal to sell off their Texas Eagle Ford Shale assets in order to concentrate solely on the Marcellus (see Cabot O&G Sells Texas Eagle Ford Assets for $765M, Focus on Marc.). The slide deck notes that the Eagle Ford divestiture closed on Feb. 28th (slide #3). Also in the slide deck is a mention that Cabot plans to experiment with drilling “upper Marcellus” wells in the second half of 2018 (slide #11). Most (all?) of the wells they’ve drilled to date are “lower Marcellus.” A successful program of drilling upper Marcellus certainly bodes well for existing landowners with existing lower Marcellus wells–perhaps Cabot will revisit those pads to drill new wells? Slide #11 has some great information on it. We’ve used it to create a (very) rough royalty estimation calculator for Cabot landowners…
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