Industrywide Issues

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    Shale Drillers Using Less Frac Sand as Prices Soar

    Necessity is the mother of invention. Over the past year or so we’ve chronicled the dramatic increase in the amount of sand used in fracking. Recently we told you that Chesapeake Energy drilled what we believe to be the highest-producing Marcellus well (so far), with an initial production of 61 million cubic feet per day of gas (see Chesapeake 2Q17: “Rambo” Marcellus Well Produces Record 61 MMcf/d). Chessy’s “Rambo” well used 32 million pounds of frac sand. The trend has been to increase the use of frac sand. The more sand, the better the result. Except now that’s changing. Frac sand prices have been skyrocketing. Sand is some 12% of the cost of drilling and fracking a well. Shale drillers are beginning to innovate ways to achieve the same high yield results, but using less sand. What are they using instead? Some use “chemical diverters” to spread the sand slurry more evenly. Some reduce the distance between fractures–“tight spacing.” The point is shale drillers are doing what they have to do (innovating) to stay profitable and keep drilling. And if that means using less sand in fracking, so be it…
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    Frivolous Lawsuit Delays H&H Drilling in Westmoreland County, PA

    Huntley & Huntley has plans to drill shale wells in Upper Burrell Township (Westmoreland County), PA. As MDN reported in June, a landowner in Upper Burrell filed an appeal against Upper Burrell’s zoning ordinance that allows drilling in rural, agricultural districts (see Westmoreland Zoning Challenge Heads to Court, Delays H&H Drilling). H&H plans to drill a well near where the woman lives, and she’s arguing such drilling will violate the state’s environmental rights clause and “devalue her property.” The case was supposed to go to township’s Zoning Hearing Board, but all of the (many) lawyers involved agreed to instead move it to county court, making the process faster and less expensive. Last month the judge said he would make a decision in the case “next month” (meaning in August) about whether or not the town can issue conditional use in agricultural-residential zoning district (see Westmoreland Zoning Challenge re H&H Wells Closer to Resolution). But on Monday, the judge put the case on pause again because the landowner has sued the town claiming the town’s very right to issue conditional use permits in agricultural-residential districts is unconstitutional. A hearing on that charge will happen in October. H&H is in a holding pattern, thanks to a frivolous lawsuit…
    Read More “Frivolous Lawsuit Delays H&H Drilling in Westmoreland County, PA”

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    Ground Broken for Lawrence County, PA NatGas-Fired Electric Plant?

    It was only two days ago MDN told you that a Marcellus gas-fired electric plant planned for Lawrence County, PA appears to be active and moving forward once again (see Signs of Life in Lawrence County, PA NatGas-Fired Electric Plant). Tyr Energy, a subsidiary of ITOCHU Corporation, purchased the Hickory Run Energy project in 2016 from LS Power Development. The news we brought you earlier this week is that South Korea’s KB Asset Management just announced they are investing $150 million in the project, which we said is “a sure sign that the pieces are now coming together for construction to begin.” Little did we know how prophetic those words were. Another report in the Korean Investors publication reports that French banking giant BNP Paribas has originated $460 million worth of loans for the project–of which the KB Asset Management investment is part. Not only that, the article also reports, “Ground has been broken for the plant.” We don’t know for sure whether or not that is true, but if ground has not yet been broken, we expect it will happen soon…
    Read More “Ground Broken for Lawrence County, PA NatGas-Fired Electric Plant?”

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    Progress in Building $9M Natgas Valve Manuf Plant in WV

    In January MDN told you that Italian company Pietro Fiorentini had signed paperwork to buy land to build a $9 million factory in Weirton, WV (see Italian Co. Building $9M Natgas Valve Manufacturing Plant in WV). The company will manufacture pressure regulators and valves for the natural gas industry at the site. One big problem: The site is a former surface coal mine and before they can build, they first must be cleaned up (“remediated”) to prevent exposure to metals in groundwater. Pietro Fiorentini and the Business Development Corporation of the Northern Panhandle (BDC) filed a cleanup plan. That plan has been accepted by the Office of Environmental Remediation (OER) at the West Virginia Department of Environmental Protection (WVDEP). After the site is cleaned up, construction will begin on the new manufacturing plant…
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    Mountain Valley Pipe Pushes Back Against ‘Emasculate FERC’ Lawsuit

    Mountain Valley Pipeline (MVP) is not taking a ludicrous, outrageous lawsuit by anti-pipeline residents from West Virginia and Virginia lying down. They are fighting mad as recent court filings show. MVP is a $3.5 billion, 301-mile pipeline that will run from Wetzel County, WV to the Transco Pipeline in Pittsylvania County, VA. A lawsuit was filed in federal court at the end of July to block the MVP project (see New Lawsuit Against Mountain Valley Pipe Seeks to Emasculate FERC). The lawsuit, filed in U.S. District Court in Roanoke, VA, seeks to block the Federal Energy Regulatory Commission (FERC) from doing its job by issuing a certificate to approve MVP. The plaintiffs claim FERC would be violating the U.S. Constitution by approving a private project that “takes” private land without just compensation. The plaintiffs maintain that according to the Constitution, land can only be taken for “public use” and that the pipeline is for private use, not for the public good. That’s the claim. As we said at the time, “If these virulent antis win this case, it would emasculate FERC–take away its authority to approve major interstate pipeline projects.” MVP in a court filing last Friday (full copy below) said pretty much the same thing. MVP says in their filing the lawsuit asks the court to invalidate the Natural Gas Act–the law of the land–which would have the effect of stopping all pipeline projects being built. The outcome of this lawsuit is already preordained. The lawsuit will get tossed. The only question is, how fast?…
    Read More “Mountain Valley Pipe Pushes Back Against ‘Emasculate FERC’ Lawsuit”

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    Fed Court Exonerates Anadarko in PA Wrongful Death Lawsuit

    In May 2012 a water truck driver delivering water to an Anadarko Marcellus Shale well pad in Clinton County, PA missed a turnoff for the road he was supposed to take, at 2:30 am in the morning. A couple of miles later he crashed and tragically died because the road he was on was not marked well and not conducive to the truck he was driving. There was a sign warning the driver not to go beyond a certain point. The driver had previously–that night–already delivered to the well pad and successfully turned onto the road he was supposed to take. Why did he miss it the second time? His widow maintains that even though he worked for a subcontractor, Anadarko was the company in charge and should have had a light illuminating the “No Anadarko Traffic Beyond This Point” sign. So she sued Anadarko, and the subcontractor, for wrongful death. Lower courts threw out the lawsuit but a federal appeals court reinstated a civil suit against Anadarko (see Fed Court Rules PA Wrongful Death Lawsuit Against Anadarko Proceeds). The federal court has just ruled. The judge found that Anadarko is not at fault in this tragic accident…
    Read More “Fed Court Exonerates Anadarko in PA Wrongful Death Lawsuit”

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    Trump Signs Exec Order to Speed Up Pipelines, Infrastructure Work

    Pipeline companies face enormous governmental roadblocks when it comes to building new pipelines. “Red tape” doesn’t begin to describe the hassles they face in going from government agency to government agency in order to build an interstate pipeline. Yesterday, with the stroke of a pen, President Trump helped correct that situation. Trump signed a new executive order that will speed up approvals of permits for highways, bridges, pipelines and other major building efforts by shortening the time for environmental reviews. Trump’s executive order (full copy below) revokes an idiotic Obama executive order aimed at reducing exposure to flooding, sea level rise and other consequences of mythical climate change. Obama intentionally screwed things up and created long delays. Trump is fixing it. The American Petroleum Institute and business groups applauded the new EO and said it will directly translate into more jobs…
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    Recent Drilling Downturn Created “The A-Team” of Rig Fleets

    According to a recent column on WorldOil.com, you can thank the recent downturn in oil and gas prices with producing the lean, mean drilling machines we have today. Because of the downturn, only the “most mechanically sharp, efficient and best-equipped drilling rigs and crews were left operating in the downturn.” The result? It created “the A-Team.” The rigs and crews operating now drill twice as fast at half the cost of just a few years ago. According to Chesapeake CEO Doug “the ax” Lawler, “We don’t need to run 175 rigs anymore. Forty or 50 rigs can deliver the same volume today.” Our point: Today we have far fewer rigs operating, but they’re producing far more oil and gas than they ever have. Welcome to the world shale created…
    Read More “Recent Drilling Downturn Created “The A-Team” of Rig Fleets”

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    PA Rep. Ortitay Intros Watered-Down Minimum Royalty Bill

    Pennsylvania Rep. Jason Ortitay, Republican from South Fayette (Washington & Allegheny Counties), PA who replaced Jesse White in January 2015 (see Pro-Driller Ortitay Replaces Anti-Driller White in PA House) has introduced a new bill in the PA House to bridge the gap between landowners who want a guaranteed minimum royalty of 12.5% regardless of post-production costs, and drillers who adamantly oppose a guaranteed minimum royalty. Rep. Garth Everett, Republican from Lycoming County, has been the champion of landowners and their quest to stop what they see as an abuse of the contracts they signed by implementing a state-mandated 12.5% minimum royalty–even if post-production costs eat into it (see PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time). Landowners and groups representing them, like the National Association of Royalty Owners (NARO), point to abuses by companies like Chesapeake Energy and claim some drillers cook up deals with pipeline/processing companies to overcharge, deducting it from royalty checks, and then getting the money back from those pipeline companies via investments. Kind of a kick-back scheme. Drillers maintain you can’t upend legal contracts in response to one or two rotten apples in the barrel. Ortitay believes he can navigate the middle ground, proposing a bill that will require drillers to itemize the deductions made from royalty checks, and prevent drillers from sending landowners a bill, which is beyond-words offensive. Can you imagine any landowner signing a lease that requires the landowner to pay the driller when prices go low? It’s ludicrous, and Ortitay’s bill, House Bill (HB) 1708 aims to fix it…
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    WVONGA Makes Plans to Push Forced Pooling Lite in 2018

    The West Virginia Oil & Natural Gas Association (WVONGA) plans to push, once again, for what MDN calls forced pooling lite in the next session of the legislature scheduled for early 2018. Forced pooling legislation in West Virginia has been put forward five times in the past seven years–and each time it has failed to win enough votes in the WV legislature. This year, WVONGA changed tactics and renamed forced pooling as co-tenancy and joint development (see WV Won’t Push Forced Pooling, Will Push Joint Dev. & Co-Tenancy). Co-tenancy says a majority of rights owners can vote to accept a lease for drilling. It corrects a situation in which multiple rights owners are listed for a property–and sometimes (often?) it’s difficult to track them all down and get them to sign on the dotted line. Joint development is a bit more nuanced. Currently there are a number of existing old leases, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line, until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. WVONGA came close this year to getting co-tenancy and joint development passed–Senate Bill 576 (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). However, like other forced pooling bills before it, SB 576 didn’t get passed. So WVONGA has signaled it will push once again next year, this time renaming (euphemizing) forced pooling lite as “mineral efficiency”…
    Read More “WVONGA Makes Plans to Push Forced Pooling Lite in 2018”

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    More Evidence PA House Repubs Beginning to Cave on Severance Tax

    We continue to read articles about the ongoing effort by Pennsylvania Democrats and some squishy Republicans to slap a severance tax on top of an existing impact tax on natural gas drilling in the Keystone State. As we pointed out yesterday, Philadelphia teacher’s unions are in the forefront of a plan to grab money from drillers and funnel it into the pockets of their members (see Drumbeat Continues: Tax PA Shale & Give Money to Teacher’s Unions). The PA Senate cooked up a horrible plan to implement a “modest” severance tax, along with a gross receipts tax that will tax natural gas again, at the consumer level (see Traitorous PA Senate Republicans Pass Severance Tax Bill). The PA House has stood firm, thus far, against the plan. But then we read PA House Majority Leader Dave Reed is beginning to cave (see PA House Beginning to Cave on Severance Tax? Maybe…). We’re now reading about other members, people we long thought solid, like Rep. Garth Everett (Lycoming County) who now says “The new tax on drilling remains an option.” REALLY disappointing, Rep. Everett. The way the conversation is now going, the House doesn’t have the stomach to slap a gross receipts tax (GRT) on natural gas, phones and electric–but they are A.OK with a severance tax. Since the GRT, under the traitorous Senate Republican plan, is supposed to provide around $400 million in revenue and the severance tax $100 million, what happens without the GRT? Will House Republicans ratchet up the severance tax even more? It’s rapidly turning into a mess. Below is the latest chatter we’ve found, along with a new letter from the Marcellus Shale Coalition to the House leadership warning of the precarious situation a new severance tax will create for future job and economic growth in PA…
    Read More “More Evidence PA House Repubs Beginning to Cave on Severance Tax”

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    Big Green Groups Stage Walkout at PA DEP Atlantic Sunrise Hearing

    Last night the Pennsylvania Dept. of Environmental Protection (DEP) held one final public hearing for the Williams Atlantic Sunrise Pipeline project–in Lancaster. As we previously reported, anti-fossil fuel nutters planned to gather prior to the meeting so they could choreograph a “walkout” of the meeting, as a form of protest (see PA DEP to Hold Final Atlantic Sunrise Hearing, Antis Plan Walkout). Indeed that is just what happened. A group of petulant babies got up during the meeting, theatrically put on surgical masks, and walked out. They then held their own meeting outside, to regurgitate the same lies and smears they’ve been spreading for months. Meanwhile, inside the meeting, the adults who remained spoke up about legitimate concerns with the project, which is why the meeting was held in the first place…
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    EIA Makes Big Changes to Monthly Drilling Report, Combines M-U

    MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), has just made big changes to 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. Until now, the EIA has always treated the Marcellus (primarily drilling in PA and WV) and the Utica (primarily in OH) as two separate shale plays. Beginning with this month’s report, they are combined into “Appalachia.” The stated reason for the change: “With the increasing number of wells in Pennsylvania being drilled into the Utica formation and some wells in Ohio producing from the Marcellus shale, the previous regional definitions based on surface boundaries are becoming less meaningful, especially where the two plays overlap. Furthermore, combining the relatively small number of active rigs across the broader Appalachia region should improve the precision of our productivity estimates.” That’s not the only big change. EIA also added a new shale play to the list–the Anadarko Basin (found mostly in Oklahoma, with a few counties in Texas). Because of the addition of the Anadarko, natural gas production is predicted to jump from last month’s predicted 52 billion cubic feet per day (Bcf/d) for August, to a whopping projected 59 Bcf/d in September. The newly combined Marcellus/Utica is projected to go from 24.3 Bcf/d in August to 24.6 Bcf/d in September, up 350 million cubic feet per day. Yikes! Combining the two regions really puts it in a different light…
    Read More “EIA Makes Big Changes to Monthly Drilling Report, Combines M-U”

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    Perverse Corporate Raider Calls EQT Plan to Buy Rice “Perverse”

    Barry Rosenstein – JANA Partners

    Corporate raiders buy just enough shares of stock in a company so they can put one or two members on the board of directors and control the company. Once a raider gains control, he fires a bunch of people, sells a bunch of assets, declares the company “healthier” and the stock price goes up. Once the stock price jumps, the raider then sells his shares at a profit and moves on to the next victim. That’s how disgusting, PERVERSE corporate raiders work. So imagine our outrage at reading comments by corporate raider Barry Rosenstein, of JANA Partners, who is trying to stop the merger/buyout of Rice Energy by EQT. Rosenstein calls the deal “perverse,” nothing more than a way for corporate executives to boost their own salaries. Kind of like the pot calling the kettle black, don’t you think?…
    Read More “Perverse Corporate Raider Calls EQT Plan to Buy Rice “Perverse””

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    Update on MarkWest Processing Plant Proposal for Smith Twp

    MarkWest facilities – click for larger version

    The MarkWest Harmon Creek Complex planned for Washington County, PA continues to make progress. Last fall NGI’s Shale Daily reported that MarkWest planned to build a new processing plant to process natural gas for Range Resources (see MarkWest Building New Processing Plant in Washington County, PA). But following the initial announcement, all went quiet and the project went on “indefinite hold.” In May of this year, the project restarted when MarkWest officials attended a Smith Township planning commission meeting (the town where it will get built) to discuss the project (see MarkWest’s Washington, PA Processing Plant Plans Reactivated). According to MarkWest, plans call for initially building one cryogenic plant and one de-ethanizer. Eventually MarkWest wants to build four cryogenic plants and two de-ethanizers at the Harmon Creek Complex. MarkWest reps were back before Smith Township supervisors on August 2nd to discuss more about their plans. The town must grant a “conditional use” permit before the project can get built. Before that happens, the town wants certain things in writing…
    Read More “Update on MarkWest Processing Plant Proposal for Smith Twp”

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    Michigan County Tells FERC NEXUS Won’t Clean Up After Itself

    The Washtenaw County (Michigan) Road Commission has written a letter to the Federal Energy Regulatory Commission (FERC), requesting FERC deny a certificate to build the NEXUS Pipeline because (they claim) NEXUS has bullied them. It seems the Road Commission has been working with NEXUS over the past year to prepare for the pipeline. The Road Commission wants NEXUS to jump through all sorts of hoops, do handstands, backflips, and in general, dance to the Road Commission’s tune. And because NEXUS isn’t willing to bend all the over backwards, the Road Commission is miffed. The Road Commission is the lord of their domain, and no outsider is going to do anything without their permission. So the Road Commission has run to mommy (FERC) and started bawling that NEXUS are meanies and they won’t pick up after themselves and they’re just BULLIES. So FERC should just go ahead and shut the whole $2 billion, 255-mile interstate pipeline project down (that will run from Ohio through Michigan)–because of one whiny Road Commission in one county…
    Read More “Michigan County Tells FERC NEXUS Won’t Clean Up After Itself”